During the past decade, Ireland has gained increasing recognition as Europe’s premier location for software development. Since the 1980s, most leading US software vendors, including Microsoft, Oracle and Symantec, have based their European operations centres in and around Dublin. The country has also become the pre-eminent site for software localisation in Europe. Less visibly, but from an economic development standpoint, more importantly, a thriving indigenous software development industry has developed in parallel. From the middle of the last decade, its international emergence has been aided by significant levels of public and private equity investment.

The indigenous industry is characterised by a large number of relatively small firms with a strong product focus and a strong export orientation. It comprises approximately 600 companies, about 250 of which have significant levels of overseas sales. In 2002, their exports amounted to €1.5 billion, an increase of more than 5 per cent over the previous year. Many of these companies are in the process of developing a global sales presence.

Because of the limited size of the domestic market, Irish firms tend to seek overseas sales at an earlier stage of their development than their counterparts in larger economies. The US and the UK are the two biggest markets, accounting for around €1 billion of total exports. Mainland Europe, Asia-Pacific and the Middle East are also significant markets for Irish software. Mobile applications developers have won customers in Japan and Hong Kong, for example, while Irish vendors have also won deals with Middle-Eastern banks and mobile operators.

The Irish software industry spans a wide range of market segments due to the broad base of companies in the sector. It has particular strengths in systems software and middleware; insurance and banking applications; telecommunications software; e-learning; and healthcare.

There is a mature development effort in the area of object-oriented middleware. This, in turn, has facilitated the emergence of a large pool of developers with J2EE skills as well as significant development activity in web services. Microsoft has singled out the Irish developer base for special attention and is forging partnerships with leading Irish firms to foster adoption of its .Net platform.

In the financial services sphere, Irish companies are marketing a wide range of products, including component-based banking applications, multichannel banking systems, next-generation customer relationship management systems, automated foreign exchange trading platforms and line-of-business applications for the insurance industry. The telecommunications segment has an even broader base of companies, with products addressing areas such as convergent mediation, rating, service assurance, network management and mobile payments. E-learning has long been an area of strength within Ireland, which has given birth to several world leaders. A number of Irish software firms have also gained competitive positions in the regulatory compliance field, stimulated by the adoption of the US Food & Drug Administration 21 CFR Part 11 regulations for managing electronic documentation in the pharmaceutical industry.

Although the indigenous Irish software gained international prominence during the late 1990s, it has a history that stretches back over three decades and a cadre of seasoned entrepreneurs, executives and investors with significant international networks. The next stage in its evolution will be marked by increasing levels of technological innovation and sophistication, stimulated by significant levels of government investment in academic research and in university-industry linkages. Science Foundation Ireland, a newly created research agency, is allocating €635m to basic research in information and communications technologies and in life sciences during 2000-2006. A significant proportion of this budget is earmarked for university-based centres of excellence that will incorporate a strong industry involvement. The next chapter in the development of the Irish software industry is about to unfold.