by Alan McGlinchey, Vice President of Technology, IDA Ireland
Europe is a vast, lucrative market and having a local tech operation in place to support it makes sense. But there are also solid economic reasons for a company to expand its engineering program to Europe. Europe offers a marketplace of 550 million people and is seen by many US tech companies as the gateway to EMEA region.
Once the decision has been made to launch a European engineering office, there are many locations to choose from. The UK,Germany are developing successful hubs for tech teams but Ireland has emerged in recent years as a location that’s proving hard to beat. In fact, one company every three weeks has expanded into Ireland, with firms such as Zendesk, Pivotal and Workday building engineering teams there to support their growth back home.
Ireland seems to be a common choice for an overseas technical staff. In the software industry alone, Ireland employs 105,000 people, includes nine of the world's top 10 tech firms and generates $17.8 billion in annual exports. Apple now employs 6,000 people in Ireland, Google's Irish operation has the same number and Microsoft employs close to 2,000 workers in the emerald isle which include technical and non technical staff.
For American companies considering where to put their European engineering office, what are some of the other key factors that drive the location decision and how does Ireland measure up? Helping U.S. companies identify the optimal location for their engineering R&D team was the goal of the National Academies of Sciences, Engineering & Medicine, which conducted a survey of more than 200 multinational companies to identify the most important factors influencing their decision. Here’s the questions they asked. We have answered them thinking about Ireland.
According to Ireland's Central Statistics Office, at the end of 2016 there were 124,000 people working directly in the multinational technology sector in Ireland. This helped Ireland remain as the country with the fastest-growing economy in the EU according to the World Economic Forum.
Ireland also benefits from having the youngest population in Europe, with one third under age 25, which guarantees a steady supply of workers to fuel the economy. In addition, Ireland will be the only English-speaking country in the EU after the impact of Brexit, which is an attractive factor to American technology companies.
Ireland has been investing in its educational system for years, with more than 30% of students enrolled in science, technology, engineering and math-related subjects. Happily for U.S. tech firms, potential employees are involved in many areas of cutting-edge tech areas. HPE or Hewlett Packard Enterprise has about 250 engineers in Galway with many devoted to cloud technology. Data science and machine learning are going on at the Irish operations of companies like Xilinx, Veritas, IBM and others, while intensive mobile and infrastructure work is taking place at Zendesk's Irish center, which is approaching 60, going to 100 engineers at present. Fellow U.S. firm Workday 450 engineers is like Zendesk in that it launched its Irish operation with an engineering focus but has been expanding in supporting areas like sales, finance and more.
There are 10,800 graduates in the computer science and broad engineering categories from all colleges in the Republic of Ireland. Ireland continues to invest in education - a new masters in artificial intelligence (AI) program was recently developed by industry, academia and government. and Another key the flexible labor laws in Ireland mean no cap on the equivalent of H-1B visas with Ireland being the eight progressive for Immigration laws by the IMD World Competitiveness Index 2016. The bottom line is that there is a strong supply of talent.
Ireland is known for the level of collaboration between industry, academia, state agencies and regulatory authorities, supported by highly pro-business government policies. A world-class research environment designed to work with and for the benefit of industry is being further developed via an unprecedented investment of €8.2 billion under the Irish government’s strategy for science technology and innovation. Research centers actively get involved with industry with over 700 companies working with them and academic institutions.
What about the expertise of homegrown research staffs and how might this benefit companies?
One effort that has helped attract foreign investment in Ireland is the development of clusters of compatible industries in technology areas that involve intense collaboration with local universities and institutions. Just as thriving tech communities have sprung up in the United States around renowned universities such as Stanford and MIT, the equivalent in Ireland has provided companies with ready access to leading-edge university-based R&D and provides a solid base for future growth and development.
Ireland is notable for its open, transparent approach to taxation, offering a 12.5% corporate tax, an extensive tax-treaty network and, of course, the 25% R&D tax credit. The tax rate applies to all Irish corporate trading profits. This rate is the lowest in Western Europe and is 10 percentage points below the EU average according to KPMG. When factoring in the favorable tax rates and tax credits along with lower labor, housing and other costs, a common belief among U.S. tech firms operating in Ireland is that two engineers can be hired there for the price of one in the Silicon Valley, with higher multiples for some engineering specialties.
Ireland's thriving technology environment attracts both domestic and foreign tech workers, who tend to stay put in their jobs compared to other countries. The low turnover is partly driven by an attractive lifestyle in the Irish cities that have emerged as technology hubs. For example, a neighborhood in Dublin has been nicknamed Silicon Docks after Facebook, Google, Twitter and other U.S. tech companies set up glossy offices close to the River Liffey.
Dozens of other American tech stars are now located in Silicon Docks, from e-commerce giants like Amazon and Etsy to big enterprise firms such as Intel, Siemens, Dell and Microsoft, as well as the kings in areas like gaming and cloud services. Meanwhile, other hubs such as Sligo, Galway, Waterford, Cork and Limerick are seeing similar trends. These hubs have their own excel in some sectors and have talent on in areas from embedded & application, infrastructure & cloud , cyber security , machine learning & data science through to front-front end, mobile test & quality assurance
There are other advantages Ireland has taken pains to offer its foreign tech community that have helped it flourish. These include few regulatory and research restrictions and a tech environment that supports production for export as well as supporting sales to foreign customers. As has been pointed out by many experts including professor Tsedal Neely at the Harvard Business School, succeeding in today's global economy relies on a geographically dispersed workforce because these teams "offer the best functional expertise from around the world, combined with deep, local knowledge of the most promising markets. They draw on the benefits of international diversity, bringing together people from many cultures with varied work experiences and different perspectives on strategic and organizational challenges."
The many U.S. companies that have built engineering teams in Ireland are doing so as a key element in their strategy to compete and win on a global basis.
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