The Irish operations of Slovenian software group Hermes SoftLab grew 28 per cent last year and recorded sales revenues of €5.4 million. Ireland was the fastest-growing market for the software developer, which had group revenues of €41.63 million in 2006.

Both the Irish and group operations exceeded the revenue guidance they provided during the year, which was €5 million and €38.6 million respectively.

Hermes SoftLab operates a "nearshoring" business model in which a large portion of the development work is carried out in Slovenia and other eastern European locations.

Kevin Maher, managing director of Hermes in Ireland, said 2006 was a great year for the group and its Irish unit.

Corporate clients in Ireland were attracted by the nearshoring model for a number of reasons, he said. "The market is near full employment, there is a strong growth in wages, difficulty in sourcing and retaining staff and it's also a buoyant market . . . As a result, you need the flexibility in your workforce that nearshoring provides."

Hermes has carried out a number of contracts for Vodafone and O2 and recently engaged with BT. Mr Maher said he is also talking to Meteor and Eircom, but is waiting for a "suitable development project".

He expects the business to expand beyond telecoms this year into the public sector and financial services. It is partnering with two large systems integrators on two public sector contracts, which are near conclusion.

Last year, the company made some headway on its plans to sell development services into the British market from its Irish office, particularly in the online gaming area.

It won a contract with the Inspired Gaming Group, which supplies gaming machines to William Hill and Gala Coral Group.