Oracle will outsource two of its Irish business divisions to India within the next few months resulting in up to 40 redundancies at the software company.

Other smaller units could also move to India in 2004 but its managing director said yesterday that Oracle, which employs 870 staff in Dublin, was attracting new higher value projects to Ireland.

Mr Nicky Sheridan, who took over as head of Oracle Ireland in 2002, said Dublin had attracted new accountancy and consulting divisions from overseas which would mean its overall workforce would not fall during 2004.

Oracle's Irish operations act as the US firm's European headquarters.

They generated €490.6 million pre tax profits in the year to the end of May 2003, up from €455 million in the previous year, according to new results filed in Dublin.

Despite this increase in profitability, however, Oracle's turnover fell slightly in the year to the end of May 2003 to €2.018 billion, down from €2.065 million.

This reflected a general downturn in the software business last year.

Mr Sheridan confirmed that the decision to outsource Oracle's billing division and the unit that administers its partner network to India was taken following a budget review for 2004 by its Irish operation.

Oracle Ireland staff working in these business units would be redeployed or offered some form of redundancy package, he said.

Oracle employs more than 3,000 people in India and last year outsourced 105 jobs from its Dublin-based shared service centre to the subcontinent.

Other Irish-based software firms, such as Riverdeep and Honeywell, have also outsourced work to India and eastern Europe where wages are significantly cheaper than in Ireland.

Mr Sheridan said the jobs that would be moved to India from Oracle Ireland were lower value jobs that could be performed efficiently in cheaper locations.

He said it was unrealistic to expect that lower value activities could be retained in Ireland where costs were higher.

But he said Irish managers of multinational firms could be proactive in bidding for higher value activity that would survive in the Republic.

He said Oracle's Irish operation had been successful in attracting two new business divisions within Oracle Corporation to the Republic in 2004. The firm is currently recruiting more than 100 staff to fill these new positions, 30 of which will work for a "near-shore consulting" unit.

This consulting unit would be staffed by very highly skilled employees that would offer specialist technology advice to certain European clients, he said.

Oracle Ireland was also successful in attracting accountancy work to Dublin. The firm will now centralise more of its accounting business from 41 countries in the Europe, Middle East and Africa to the Republic.

Mr Sheridan said Oracle's overall wage bill would increase by 12.4 per cent next year as a result of the higher value activities undertaken by the company.

Sales of Oracle software in the Republic in the year to end May 2003 were €30.1 million, down from €33.7 million in 2002.