General manager Michael Daly tells Jamie Smyth he is keen to attract research projects to Ireland and has warned that some less valuable functions could be shed overseas

IBM Ireland is lobbying its parent corporation to locate additional research and development functions in the Republic as part of a plan to upgrade its operations, according to the firm's new country manager.

In his first interview since taking up the position of IBM country general manager last month, Mr Michael Daly, also warned that IBM could move some of its lower value functions to low cost locations overseas.

Mr Daly said IBM Ireland was looking at the possibility of basing some of its "deep computing" research in the Republic.

This type of research, which is based around the development of powerful supercomputers and systems that enable computers to combine processing capabilities, is currently carried out in the US.

Mr Daly said IBM Ireland would like to do some work on the corporation's flagship Blue Gene project - a five-year investment in a machine 80 times faster than current computers. This computer would be used to design drugs and should be completed by 2006.

"We are very supportive of Science Foundation Ireland and are trying to convince the corporation to do more R&D in Ireland... the kind of thing we are looking at is in the area of high performance computing."

"We also have a very big software division working here and we would consider expanding this," he said.

Mr Daly, who has been with IBM for 17 years and was formerly head of its global services division in the Republic, said he would spend the first three to six months evaluating IBM's operations in the Republic to ensure that the firm's existing business here is solid.

IBM Ireland employs more than 4,000 staff in the Republic in a range of functions such as software development and manufacturing as well as business and technology services. Most of the staff are work at IBM's technology campus based in Mulhuddart.

"Big companies make decisions to invest in countries based on what they offer. They can also make decisions not to invest further," said Mr Daly. "IBM looks all around the world so it is critical that Ireland remains competitive."

"If there are elements of what we do in Ireland that we can do elsewhere we could potentially move them. We are constantly re-evaluating," he said. "The Irish model is not as attractive as it was a few years ago"

Certain functions which IBM used to have in the Republic such as maintenance for laptop computers and call centre support for some services have been relocated to lower cost alternatives. But so far IBM has successfully managed to redeploy staff to other more valuable areas, said Mr Daly.

IBM upgraded its technical support call centre to become a "dotcom centre" recently enabling the majority of its staff to sell services directly to clients, rather than simply offering support.

Mr Daly remains generally positive about the Republic being a hub for technology firms and he believes it remains competitive compared to other European countries and the US. Although acknowledging that costs are rising and inflation is currently the highest in the euro zone, Mr Daly says firms like IBM look at the total investment package to measure competitiveness.

"We look at countries and measure whether they have the right labour force, management competency or infrastructure."

The disclosure earlier this week that the number of students opting to take computer sciences as their first preference at college had halved was very disappointing but not a crisis, according Mr Daly.

"It is not a prerequisite to have a computer science degree to get into this business and we are still proportionately very high [in terms of graduates] compared to other European nations. For example the number of students choosing science held up well."

The dip in computer applications probably reflects the negative publicity surrounding the IT industry. But a very high percentage of Irish jobs are in technology and there is a demand for these types of skills and qualifications, he said.

Despite IBM's decision to cut up to 20,000 jobs this year IBM Ireland has so far been unaffected by these layoffs. And the firm has no plans to cut any jobs later this year, said Mr Daly.

The company has also reaffirmed its commitment to the Republic by recently completing work on a state-of-the-art 400,000 square feet manufacturing facility in Mulhuddart. A further 350,000 square feet distribution centre is currently being built and should be completed later this year.

"We manufacture almost our complete server range here and ship them to Europe and Asia. We are looking to expand this to the US," said Mr Daly.

IBM Ireland's global services division, which has grown from 80 people to 800 since 1996, will also benefit from the firm's recent acquisition of PwC Consulting. In Ireland about 100 PwC consultants are expected to be integrated into the IBM division if the acquisition is passed by international regulators.

"I think this is great news and I'm very enthusiastic about the proposed acquisition," said Mr Daly.

"Putting together the services business at IBM and the consulting skills at PwC we will be able to offer end-to-end solutions to our customers. It will be a type of one stop shop for consumers. I believe more and more people want firms to provide the whole solution and I think we have stolen a march on our competitors."

IBM, which is best known for its hardware and software businesses, embarked a decade ago on a mission to beef up its services operation. This has proved remarkably successful and more than 50 per cent of its revenues are now generated at this division.

"My hope is that the integration of the two companies will be relatively straightforward. While we do have some consultants, the majority are not in the same area," he said.

"IBM has also been involved in many acquisitions and recently integrated Lotus and Informix. IBM culture puts a lot of focus on the well-being of its people. Staff are judged against their performance and it is clear to them how they are evaluated."

He highlights the companies decision to fund a new childcare facility in Blanchardstown which will open this September as evidence of the firm's benevolence.

But perhaps the biggest challenge facing IBM is the uncertain economic environment.

The firm missed its financial estimates this year as customers slowed their spending on technology.

But IBM is better placed than most and was able to refine its products and services to target cost savings for customers, said Mr Daly, who believes a recovery in the technology sector is close.

"On a worldwide basis growth in IT industry will come back by the end of 2002 and during 2003. Research is forecasting double digit growth by 2004," he said.

Who is he?

Michael Daly is the new country general manager at IBM Ireland. He takes over from William Burgess who retired last month after 11 years in the job.

What is his background?

Mr Daly has worked at IBM for 17 years. Prior to this appointment he was head of IBM global services. He has also worked in financial services.

Where did he go to school?

He was educated at St Fintan's High School and went to university at Trinity College Dublin.

How big are IBM Ireland?

The firm employs 4,000 staff in seven separate divisions at the Republic.