WHEN THE next history of the Irish technology industry is written, 2008 will be seen as a pivotal year in which changes that have been coming down the tracks for a few years finally hit home.

A shift to web-based business models, alternative sources of funding, consolidation, and trade sales of the previous generation of companies were some of the major themes.

Many of the big names and shining hopes of the local industry - Iona Technologies, Changing Worlds, Horizon Technologies, Cape Clear, Xsil - ceased to exist as independent concerns or were struggling for survival as 2008 drew to a close.

The passing of Iona in particular, which was acquired by Progress Software in September for $162 million, was a significant moment.

Founded in 1991 as a result of research carried out in Trinity College by co-founders Dr Chris Horn, Dr Seán Baker and Annraí O'Toole, in 1997 it became one of the first Irish firms to float on the tech-heavy Nasdaq stock exchange. Its market capitalisation peaked at $1.75 billion in early 2000 and that, combined with its reputation for creating cutting-edge software, ensured it attracted some of the brightest minds from Irish universities.

It is now easier to count the successful technology ventures who don't have at least one senior manager who cut his teeth at Iona.

Iona sold software to large organisations that in turn enabled them to get their other applications talking to each other and numbered international telcos, financial services, manufacturing and governments among its customers. This model of enterprise software proved popular and lucrative for Irish tech ventures started in the late 90s.

However that model has now fallen out of favour as a wave of consolidation among the big players mean that independent players find it increasingly difficult to survive.

While the sale of telecoms software specialist ChangingWorlds to Israeli firm AmDocs for more than €46 million and technology services group Horizon's acquisition by US-based Avnet for €101 million were positive, the rapid demise of Xsil should concern all in the industry.

Founded by serial entrepreneur Peter Conlon (his MV Technology was sold for more than €100 million in 2001), Xsil supplied tools to the semi-conductor industry. It enjoyed rapid growth, employed more than 150 staff, won many industry awards and made a pretax profit of €8.5 million on sales of €38.3 million in 2006. At the time of writing, about 40 staff have been laid off, have not received their final months wages and Conlon is attempting to negotiate a sale of the firm which may or may not save some jobs. He is focusing on Ammado, a web social networking venture which has been called the Facebook for charities. He is not alone in making the jump into consumer-focused web technologies.

Pat Brazel, chairman of the Irish Software Association and former chief executive of banking software outfit Eontec which was sold to Siebel Systems for $130 million in 2004, got back in the game with Zignals. Closely partnering with Microsoft, it provides a range of online and mobile tools for investors.

In December, Campbell Scott, a 25-year telecoms veteran, most recently director of innovation and strategy with O2 Ireland, opened the doors to IGOpeople, his "network for the real world" which allows consumers and businesses to communicate informally.

The continued king of internet business is Web Reservations International, which through HostelWorld.com and other online properties generated a profit of €18.3 million in 2007 on revenues of €34 million.

Multinational tech firms have also been changing the sphere of activity of their Irish operations. A move to add research and development is being encouraged by State agencies as it is seen as cementing the overseas players' commitments to Ireland.

Among those who took the bait this year were EMC, IBM, SAP-subsidiary Business Objects, Houghton Mifflin Harcourt and Arris.

Under the radar, many Irish technology companies have been quietly paring back staff numbers. Despite this, many in the industry say there is still a shortage of skilled workers.

In July, Shane Dempsey, director of the Irish Software Association, told this paper there were 7,000 unfilled job vacancies in the sector

It seems unlikely that will continue into 2009 and the spectre of experienced technology workers heading overseas for work hangs on the horizon. This is even more likely, given the challenges faced by anyone hoping to raise finance for a new start-up.

Despite the government providing €175 million for co-investment with venture capital (VC) funds, start-ups are finding it increasingly difficult to raise funds from that source. In a sign of how alternative funding models will have to be considered, this year financial software and services firm Percana raised a reported €7-8 million from financial services giant StateStreet rather than going down the traditional VC route.

If 2008 was all about change, the test of 2009 will be whether the local tech industry, which employs over 80,000, can adapt to the new realities.