Blog Article 12 Oct 2020
Leo Clancy, Head of Technology, Consumer and Business Services at IDA Ireland
Leo Clancy, Head of Technology, Consumer and Business Services at IDA Ireland

Ireland at the Heart of the Digital Economy

 
We spend increasingly large parts of our daily lives online. Data underpins the digital economy and data centres organize this data to help us connect, discover, communicate, work, and learn with ever greater efficiency and impact.
 
This has never been more true than in the recent months of dealing with COVID-19. We have all depended on global technology platforms more so than ever and will continue to do so once the crisis ends.
 
This “data industry” matured in the late 1990s and early 2000s and is now the fastest growing economic sector in the world, serving billions of people daily. It replaced earlier industries focused on processing data in files, on CDs and other media.
 
Data needs to be stored and be processed to provide digital products that make our lives better. In the data economy that role is filled by “the cloud” and data centres are the physical locations, the 21st century infrastructure that make up that cloud.
 
To make a simple analogy, data centres can be thought of as the factories of the digital services age. Those companies that invest in data centres here don’t operate big factories full of people on assembly lines. They do however employ tens of thousands of people in Ireland who engage with the products from other locations.
 

Huge Investment, Global Leaders

 
In Ireland, recognising the growth potential of the emerging cloud industry, we worked hard to win some of the first European data centre investments from the leading players in the world. Key to Ireland’s pitch for this business was a visionary Government investment in telecommunications and a long-standing quality of our electricity grid, not to mention huge IDA efforts to win a position in a growing market. That we were first in Europe and continue to be is not an accident.
 
These were essential wins for Ireland. Marquee names like Microsoft, Google and Amazon Web Services all invested in data centres here in the 2000s, when this industry was much smaller scale, followed by Facebook in 2015. The investments now made are huge and high-impact.
 
For example, Facebook’s data centre investment in Cloneei spent €229 million per annum on average over 4 years on construction from 2015 to 2018. According to a studyii IDA conducted in 2018, data centres contributed over €1bn of economic activity per annum in Ireland over the previous 7 years, direct and indirect. This just through building and operating the facilities themselves. This number has likely grown significantly since.
 
In addition to this direct impact, from IDA’s latest figuresiii, we can see that around 20,000 direct jobs in the Irish economy are supported by those who also operate very large data centre infrastructure here. The national impact in terms of salaries alone is very substantial, for what are very high-quality jobs. Job levels at these companies continue to grow. In July 2020 Amazon announced 1,000 new jobs in Ireland, 18 months after Facebook said it was adding 1,000 jobs and coming on top of many other announcements of new jobs and scaling activity in recent years by leading companies.
 
This growth could not have happened at this scale without Ireland winning and building out the data centres that accompany the business. We would not have centres of excellence in Ireland without these facilities.
 
To quote Brad Smith, President of Microsoft:
 

“Today we have data centres in other countries across Europe, but none is as large as our data centre campus in Ireland. It fills two square miles. Together with the large data centres run by Amazon, Google and Facebook, it has helped turn Ireland from a small island into a data superpower.”iv

 
Furthermore, in this emerging data economy, companies follow the success of others. As a result of large tech investment, Ireland is always “on the list” for digital investments by companies across all sectors. Technology is pervading everything from pharma to food to cars to services and our credibility in this space puts us at the heart of that conversation as far as Europe is concerned.
 
This is a high-growth industry where we have a real advantage. In comparative terms, Germany’s automotive industry employs 1% of populationv and has a huge footprint of factories. It is also an industry at risk of competitive shocks and decline. We have an industry that, in relative terms, employs around half that proportion of our population on a fulltime basis (and many more for construction and services) but that is growing faster and is more secure than almost most other industries.
 
Many countries would be glad to have our base of leading companies and related economic activity.
 

Benefit for Irish Companies

 
The impact has been much wider than the billions of direct investments in Ireland and tens of thousands of multinational jobs.
 
Local Irish companies have won significant contracts outside the country. Around 80 Irish companies offer services in this space, not counting many companies who only supply local services, and Enterprise Ireland estimates that Irish firm exports annually are around €2 billion in the data centre market across all suppliers. This would not have happened without the presence of foreign direct investment in Ireland.
 
The Construction Industry Federation estimated in 2016 alone that Irish construction firms had €2.2
billion of contracts for data centres outside Irelandvi.
 
Compare this to €13 billion of food and drink exports (our longest established industry) and it’s evident
this is an industry of growing scale for Ireland less than 20 years on from its starting point.
 
My data centre clients tell me that wherever they go in Europe, they hear Irish accents on site. As Irish firms built the first world class data centres in Europe, here in Ireland, they continue to win an outsize share of business elsewhere based on experience and reputation.
 
This is one of a few areas where Ireland can claim a world-leading position that is important to a global leading industry. It has provided a global market for great Irish companies and good jobs for their people.
 

Sustainability

 
Data centres are often mentioned in the same breath as growth in Ireland’s energy or water demand, frequently in a very negative context. EirGrid has published figures which show different scenarios for growth in the coming years and data centre load is certainly a large componentvii. Technology related energy growth is a global phenomenon, primarily driven by those digitised products that we increasingly need.

 
Ireland has set some of the most ambitious targets in the world for renewable electricity, aiming to reach 70% of supply from renewables by 2030viii. This plan was created with a full awareness of data centre loads. It will be challenging to achieve, but I believe that data centres are already contributing positively. Operators of these facilities intend to achieve the highest possible standards on all measures of sustainability and hold themselves to high account for both their own sake and the demands of their customers.
 
In line with this all the “hyperscale” data centre operators have committed to becoming 100% renewably powered by 2025 globally, a more ambitious target than that we have set for ourselves in our Irish plan. We can harness that intent to assist us with achieving our Irish targets.
 
Amazon provides an excellent example of what’s possible here, purchasing power from three projects in Donegal, Cork and Galway totalling around 230 MW of power outputix. Crucially these projects are not subsidised by the Public Service Obligation (PSO) levy. Facebook announced a similar project during August in Tipperary. This can certainly continue and have impact if the right conditions exist in Ireland as data centre companies continue to invest in sustainability to achieve ambitious renewable energy goals.
 
Some commentators have mentioned future costs of renewables related to data centres. What is often missed is that some commentaries have included the full cost of new renewable projects such as wind and solar farms. These are not direct State investments but private ones that are paid for by the people who buy the energy. They also represent jobs and investment in the communities where they are built.
 
That said, any industry worth having requires investment and robust, sustainable infrastructure, be that water, electricity, roads or land and buildings. The costs of these infrastructure are recovered by regulated rates from users including data centres. Investment generates jobs and future prosperity – it is important to weigh up the benefits as well as the costs of an industry for the infrastructure it requires and to understand the full context for it including economic and societal benefits.
 

Summary

 
Ireland’s network of datacentres and cloud providers is an infrastructure that enables a large part of Ireland’s and Europe’s digital economy. It is one of the reasons why an island on the edge of Europe is such an attractive place for skilled people to develop a career or establish a business in technology.
 
At IDA we aim to go above and beyond to win the next big thing in global markets. Because of Ireland’s great talent and capability and years of hard work, we were fortunate enough to get in on the ground floor of the cloud and data centre industry. That digital industry is driving towards a sustainable future.
 
The incredible companies that invested here have, through their faith in Ireland, built a base that is envied on a global basis. Irish companies and people have benefited from exports and high value jobs.
 
This industry is one the fastest growing in the world and has recently become even more fundamental to all our lives.
 
The best is yet to come.

 

i https://tech.fb.com/wp-content/uploads/2019/12/The-economic-contribution-of-Facebook-EU-data-centres- with-cover-image_final.pdf

ii https://www.idaireland.com/newsroom/publications/ida-ireland-economic-benefits-of-data-centre-inves

iii https://www.idaireland.com/getmedia/f83d12d8-d955-43fe-8d5e-1b8192e9a737/IDA_AR_2019-
Final.pdf.aspx

iv https://www.independent.ie/business/technology/microsoft-leaders-new-world-outlook-38520386.html

v https://www.gtai.de/resource/blob/64100/817a53ea3398a88b83173d5b800123f9/industry-overview- automotive-industry-en-data.pdf

vi https://www.idaireland.com/newsroom/publications/ida-ireland-economic-benefits-of-data-centre-inves

vii http://www.eirgridgroup.com/site-files/library/EirGrid/All-Island-Generation-Capacity-Statement-2020- 2029.pdf

viii https://www.rte.ie/news/ireland/2019/0325/1038381-energy-electric-bruton-2030/

ix https://blog.aboutamazon.eu/sustainability/how-were-delivering-renewable-energy-to-power-amazon-and- millions-of-aws-customers

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