With all the talk in recent years of dotcom millionaires and computer science graduates demanding impressive salaries and stock options, it's sometimes easy to forget that the Irish technology industry has roots stretching back decades. IBM established its Irish operations 50 years ago, while System Dynamics, the oldest indigenous company still in existence, started up in 1968.
While the sector enjoyed massive growth in the 1990s, many of the original companies and executives are still around in one form or another. In fact, it was in 1996, during the global tech industry boom, that System Dynamics was acquired by former Cap Gemini divisional director Tony McGuire and ex-IBM executive Conor McWade.
System Dynamics may be one of the venerable old names of the Irish software industry, but under McGuire's management it has enjoyed steady growth through a combination of organic growth and acquisition.
McGuire has overseen four acquisitions in the past three years - most recently the purchase of Software Resources Limited (SRL) for around €1 million. As a result of the latest acquisition, which will bring additional revenues of €3 million, System Dynamics will have a turnover of €18 million this year and will employ more than 150 people.
The growth is part of McGuire's plan to create an indigenous alternative to the large international consultancies such as Accenture, IBM and his former employer Cap Gemini (now merged with Ernst & Young's consultancy practice), which win most of the large corporate and Government contracts.
"We view ourselves as capable of growing to be a real but local alternative to the international brands," says McGuire. "To do that, you need the scale and capability as well as the references."
SRL is an Irish partner of Oracle and the only local firm with expertise in the JD Edwards suite that Oracle acquired through its purchase of Peoplesoft. JD Edwards is a management package that is popular with mid-market manufacturing and distribution firms. SRL also has a relationship with Business Objects, the French business intelligence vendor which opened a European operations centre in Dublin last year.
According to McGuire, he had identified the need to build up Oracle expertise. "We could do that from the ground up, but that's hard to do, or we could acquire," he says. He estimates that System Dynamics would have had to invest €1 million in new staff, training and marketing if it was to become an Oracle partner, and even then it would have no credibility in the field. On that basis, the €1 million price tag for SRL looks like good value.
Not that mergers and acquisitions have always been plain sailing for System Dynamics under McGuire's stewardship. In 2000 the company announced that it was to merge with San Diego-based Anna Technologies, but the US firm was not able to raise the necessary funding and the deal fell apart.
He now attributes that to bad timing, as investors were turning their back on technology companies at the time. But following the experience he is firmly focused on building System Dynamics purely as the leading local player in its space.
McGuire believes the main reason that there has not been a major Irish technology company to compete with international players is the lack of consolidation in the sector. This is partly due to history - McGuire points out that from the earliest days Irish companies had to buy computers from international suppliers, so a local industry did not have a chance to develop.
"There's also an awful lot of CEOs of technology companies who are doing the job for the first time," he adds. "They tend to be technologists and they really lack leadership."
He believes the situation could be remedied if Enterprise Ireland's remit was widened to include companies that trade locally rather than export their products and services. "It's related to Enterprise Ireland in particular promoting the idea that lots of small start-ups is healthy."
He suggests that the Government should look at models in the US and Britain, where public-sector projects are awarded to the big companies but the contract stipulates that a certain amount must be supplied by local small and medium-sized enterprises. "It de-risks the decision for the buyer and forces the big company to go out and find the local suppliers who can do the job," he says.
McGuire also believes it has become too expensive to develop software products for export, although System Dynamics does retain a number of its own products in the area where it was historically strong - what he terms "information management".
When it was established by former IBMers back in the late 1960s, System Dynamics quickly gained a reputation as a company that was technically extremely competent. That, and its close relationship with IBM, saw steady demand for its services from blue-chip clients in Ireland. In the wake of the break-up with Anna Technologies, McGuire has been busy adding the business skills that are required for a full-service consultancy.
The strategy McGuire is adopting is in marked contrast to his first successful venture, Insight Software. That company was one of Ireland's first internationally successful software companies and was eventually acquired by Cap Gemini in 1990. It was at Insight that McGuire made the transition from being a technologist to a business manager, something he says "was a massively difficult decision for me to make".
It was only after repeated prodding from Insight founder Matt Crotty that McGuire finally made the transition.
"I loved technology and had great pride in my own ability, but Insight was growing rapidly and needed management, not techies," says McGuire. "I found it intellectually challenging, but that's what interested me: learning to sell, manage and form strategies. It's just as intellectually satisfying as the technology challenge, if not more so."
