Featured Article 11 Jun 2012

June 11th 2012

With so many of the top tech companies with bases in Dublin the case for more to set up in the city gets stronger, writes ADAM MAGUIRE 

STANDING IN THE shadow of the derelict Bolands Flour Mill on Dublin’s Ringsend Road, there is little to suggest that this is a hub of ICT activity. Turn onto Barrow Street, however, and things change very quickly. Along that narrow road – punctuated by a row of old cottages that run half way up one side – sit companies like Google, Populis and DogPatch Labs.

Head over MacMahon Bridge and you will find Facebook tucked into discreet offices on Hanover Quay.

Follow Grand Canal south and you pass Accenture and BT Ireland as well as LinkedIn and the Gilt Groupe.

Cut across towards Ballsbridge and you will see online games company Zynga.

Perhaps unwittingly, this area of the capital has become an IT cluster, something that has already earned it a range of nicknames including “Dublin’s Silicon Square Mile”, the “Silicon Dock” and the “Binary Triangle”.

IDA chief executive Barry O’Leary said that the “sheer magnitude” of Google – which has around 2,000 employees in Barrow Street – has played a big role in making this part of the capital an area of interest to other technology players.

Perhaps contrary to some people’s assumptions, he said that companies have something to gain from being physically close to their rivals and competitors.

“The pull of a cluster is pretty powerful because it gives you an established track record of companies investing in Ireland and an ever-growing skills pool,” said O’Leary. “It’s part of our sales pitch to them , the fact that there are so many companies here.”

This is echoed by economist Ronan Lyons, who said that workers and companies both benefit when close competitors are nearby.

“When prospective employees go and do research they see that in that area they’ve got a number of companies so they’ve got career prospects,” he said. “That’s a key part of it when these things take off as both firms and workers enjoy the benefits of a thick and rich marketplace.”

For example, a change in career can be made more attractive if there is minimum disruption to the employee – like having to move house or commute longer distances.

Facebook knows that many of Google’s current employees would have the kind of skills they are interested in and so it helps them sell themselves if they are within walking distance of the search giant – and vice versa.

Other companies may choose to locate themselves near big players like Google for precisely the opposite reason, of course.

As a major producer of online content, Populis needs to be tuned in to search engine optimisation and online trends as a matter of course. With its offices facing Google’s, the company has much better access for meetings than it might otherwise.

However, according to Luca Ascani, co-founder and chairman of the company, there are broader benefits to being there.

“It’s a very nice area to meet clients and to have lunch,” he said. “Because we are pushing more and more to hire Irish people it’s important for us to be in an attractive area too.”

Of course when a lot of activity is concentrated in a small part of a city like this, there is the potential for negative or unforeseen consequences.

“There could be a congestion effect, where an area becomes a bit crowded, but that’s less of an issue,” said Mr Lyons. “The most likely impact is that you would have a ‘gentrification’ process that in effect kicks out the original residents – but I don’t think that’s happened in that part of Dublin.”

Mr Lyons said the arrival of big companies to the Grand Canal area has been mainly positive, not least due to the spin-off employment it creates through retail and personal services.

One potential negative side effect of clustering that has a broader impact, however, is that it concentrates investment into very localised areas.

The “Binary Triangle” is Dublin’s best example of a cluster in action. Galway, on the other hand, has become known for medical devices and gaming while Cork has become a location for pharmaceutical companies and digital media. Ultimately this draw to the three big centres can lead to an imbalance of investment across the country.

“At the end of the day we’re not going to lose investment to Ireland by saying you’re only allowed go to X, Y and Z locations,” said O’Leary. “There’s no doubt that the presence of a cluster will make it easier to attract business but different clients take different approaches.”

O’Leary pointed to the likes of PayPal – which recently announced an expansion in Dundalk – as an example of a company operating beyond Ireland’s three core IT areas.

But is it possible for the IDA to help foster a cluster in a new location to help create a fourth or fifth core area of investment?

O’Leary said international evidence suggests that cities of scale are required – though by this definition not even Cork or Galway would qualify. What is crucial, however, is finding the right “anchor tenant” that will draw in related companies, partners and rivals alike.

“You have to go for the leaders and if you get them you’ll be able to attract other companies all the way down to younger start-ups,” O’Leary said. “The challenge for Ireland is to look at emerging areas all the time.”

However, Lyons points out that finding the leaders in an emerging area is easier said than done, as no-one can predict who will be successful.

“From an Irish policy maker’s point of view, you have to create the conditions that they want to come here, he said. “Then you are in with a chance of becoming – as the IDA put it – the online capital of Europe.”

One surprising stumbling block to attracting these companies into the future might be a lack of adequate office space.

A recent report by Bloomberg suggested that – despite the over-supply left after the property collapse – there is a chronic lack of large, modern offices for multinational companies seeking to expand.

According to O’Leary, while this is not an immediate concern it may become a problem in the near future. “Another three to four significant sized projects and that’s where you begin to run in on property,” he said.

“There is a fair amount of property that is not necessarily that suitable for certain activities and I’d hope we’d be mopping up excess office space sooner rather than later.”

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