Tech was a booming sector for many year, with record hiring and profits reported seemingly every day. While the big companies tended to be Silicon Valley-based, Ireland’s own Silicon Dock and indigenous tech landscape were also growing at pace. But since the pandemic big technology companies have introduced lay-offs, citing “over-hiring” in response to the pandemic as a cause.
Increasing economic headwinds, including inflation, increased energy prices, and rising interest rates, which have led to a decrease in consumer confidence, have instilled a more conservative outlook among tech companies, prompting many to reduce their cost base, according to IDA Ireland. Companies that hired particularly strongly during the pandemic are the ones that are predominantly reducing headcount now.
“During the pandemic consumers invested in new devices such as laptops, phones and fitness devices; that cycle has probably abated for now as consumers are feeling more cautious,” says an IDA spokesperson. “Companies too are delaying spend on IT equipment or software investments in the light of uncertain economic conditions, including inflation, increased energy prices and rising interest rates. This more conservative outlook is prompting tech companies to reduce their cost base, which in many cases can mean job losses.”
In the foreign direct investment (FDI) segment of the economy this has led to modest contraction for some tech clients.
“Where job losses have occurred in most cases they have usually been less than 10 per cent of total workforces,” says the IDA spokesperson. “Some companies have implemented more significant lay-offs while many companies have paused hiring outside of key roles.”
As in other locations globally subsidiaries in Ireland are being impacted, according to the spokesperson. “Nevertheless in many cases lay-offs being implemented in Ireland are proportionally less than in sister sites around the world. This can be attributed to the strategic importance of the functions and roles in Ireland, the productivity of the teams here and the attractiveness of the operating environment.
“It’s an uncertain time but the consistent message that IDA is hearing is that Ireland remains a highly strategic location for our clients and that it will remain so long into the future.”
Although no one can predict what will happen in the coming months the IDA expects uncertainty to continue through much of 2023.
“Many public companies continue to respond to market conditions and investor expectations by reducing expenses and conserving costs until economic signals improve,” says the spokesperson. “Although there are likely to be further job losses in the technology sector these losses are expected to be limited, in many cases reversing some of the growth of the last 12 to 18 months. Hiring is expected to remain curtailed for the remainder of 2023 outside of key roles or strategic initiatives.
“The challenges we are seeing are not unique to Ireland; this is a global challenge. When consumer confidence returns and when global chief information officers increase their spend again, Ireland is really well placed to capitalise on that growth.”
The global lay-offs are in part because of accelerated hiring, says Jenny Melia, executive director at Enterprise Ireland, but some of it goes back to the space the tech companies are in. “It is linked to recession and consumer spending, and inflation,” says Melia.
The technology sector has undergone a period of sustained growth for more than 20 years, the IDA points out. Sectors that have helped to drive this growth include microelectronics, cloud computing and software as a service, and cybersecurity.
“A feature of the technology sector in Ireland today is the vibrant start-up ecosystem. Enterprise Ireland is the world’s top funding source for start-ups [by deal volume] and we have a credible growing cohort of venture capital organisations such as Atlantic Bridge, which focuses on deep-tech investments, and Frontline, which has been behind many leading software investments,” says the IDA spokesperson.
“As well as fostering a healthy start-up culture this has led to several acquisitions by multinationals which have then gone on to build scaled activities around the acquired companies. Among the best examples of this are Workday and MasterCard; however, the list of Fortune 500 companies acquiring great home-grown tech is long and includes IBM, Intel, Verizon, Red Hat and, more recently, Zoom.”
Melia agrees that the tech landscape is strong. “Companies are ambitious and came through Covid very well,” she says of the sector. “Last year we saw an increase in jobs across our technology and services client base, with a 9 per cent increase in digital technology, and a 6 per cent increase in fintech. According to Enterprise Ireland research, digi-tech exports grew by 18 per cent. The sector is performing very well.”
The challenges for Ireland’s tech sector are around the availability of talent, says Melia. “This is a reflection of our success in terms of how well companies are growing. We have had a shortage of talent and this means companies have had to work harder to attract and retain talent.”
Melia says Enterprise Ireland has seen a funding slowdown but there are still very strong figures from tech – €1.3 billion raised. “In terms of where we have seen impact in funding, it is on some of our earlier-stage projects. One of the actions we undertook was to increase our injection of funding into the pre-seed environment, to make sure we were supporting these early-stage projects to give them as good a chance as possible.”
Technology is now pervasive in all business sectors, and the need for tech skills across the entire industrial base remains strong, the IDA notes.
“In many cases the impacted skills are highly transferable across other sectors, including financial services, life sciences, and in the domestic economy in general,” says its spokesperson. “Despite the tech reset that we are in, companies in the sector, in general, remain committed to Ireland. And despite some challenges in the economy the proposition for investment remains compelling. Sub-sectors such as semiconductors and microelectronics remain strong – with a good flow of impactful investments.
“Cybersecurity also continues to be a strategic domain for IDA – in response to a well-aired market need for greater cyber resilience across all business sectors. The country has a mature AI capability that tech companies are taking advantage of, while we are building an emerging capability in future technologies like quantum computing.”
It is important to note that the demand for engineering skills such as computer science and electronic or electrical engineering continues to outstrip supply.
“More broadly, people with digital and AI skills will be in demand for some time to come as companies grapple with the opportunities that lie ahead and the digital transformation that they have to undergo,” says the IDA spokesperson. “These careers will continue to be in high demand well into the future and offer an excellent career choice for students considering future study options.”
Melia says Enterprise Ireland is “very cognisant” of the skills that will be needed for the tech industry in the next five to 10 years.
“The ecosystem is working together to ensure we’re developing the skills for the future, not just for home-grown businesses but for future FDI as well,” she says. “There is an opportunity to do more around funding for our scaling companies and making sure that we have sufficient funds in Ireland to drive that.”
Artificial intelligence is now reaching mainstream adoption across the technology base, says the IDA. “IDA has been focused on AI as an application for several years; however, we’re now seeing our clients increasingly looking to incorporate AI and machine learning into their product capability and technology roadmaps,” its spokesperson says.
“Although the technology sector leads in adoption, AI has applications across multiple sectors and business functions. Ireland has a very strong capability in AI; recent LinkedIn data shows that the share of AI talent in Ireland grew more than 500 per cent between 2016 and 2022, from 0.34 per cent of LinkedIn members to 2.09 per cent.”
