The evolution of Irish based technology subsidiaries within global networks

Seamus Grimes Department of Geography/ Centre for Innovation and

Structural ChangeNational University of Ireland, Galway

Seamus.grimes@nuigalway.iehttp://www.nuigalway.ie/cisc/

Introduction

ITS FDI in Ireland – EME(I)A Technology TNCs Conceptualising

internationalisation of services ‘holistic’ approach – ‘end-to-end’

solutions

Introduction TNC organisational experimentation

– integrating service activities in GPNs

Shift from manufacturing to services Outsouring/offshoring FDI from 1990s – software, financial

services, shared services Ireland: a niche in supply chain

management

Conceptualising internationally traded

services

Production-oriented models Statistics – software and internet Technology sector: hardware –

software – consultancy – ‘end-to-end solutions’

complex GPNs – sophisticated tasks being decentralised

internationalisation

Globalising processes, ICTs and TNC organisational strategies

Centralised control or decentralised decision making and autonomy

Affiliates generating knowledge Global mandates

Shared services

2002: services 75% of OECD FDI TNCs affiliates servicing corporate

networks A TNC market – intra-firm flows Shared services – financial

management, administration, supply chain management

Outsourcing and offshoring

Response to increased competitiveness and technology downturn in 1990s

Outsourcing manufacturing but also services

Eastern Europe, Bangalore, etc Outsourced services: $235bn by

2005

The internationally traded services sector

in Ireland 1990s manufacturing increasing until

peak of 250, 000 in 20001 By 2010: employment in market

services to increase by 125,000 Foreign-owned sector: 73% of

employment and 75% of sales in manufacturing

2002: Irish services exports grew faster than any of top 30 exporters in world

0

10000

20000

30000

40000

50000

60000

70000

80000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Year

Empl

oym

ent

Electronics/Engineering

Pharmaceuticals/Healthcare

Misc. Industry

International/Financial Services

Source: IDA Annual Report, various years

Fig. 2 Trends in Permanent Full-Time Employment in Financial and other International Services 1993-2003

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Foreign

Irish

IFSC Component

The Future?Industrial Developmentin Ireland: 2000-Present

MNC Exports toEuropean Union

Centralisationof European

Shared Services

US FDIto Ireland

Manufacturing and LowValue-Added Services to Asia

Consolidating Controlfor US Headquarters;Indigenous SoftwareSales to the US

US FDI to Ireland

MNC Exportsto European Union

Centralisation of EuropeanShared Services and Pan-EuropeanCall Centres in Ireland

Consolidating Controlfor US Headquarters

Industrial Developmentin Ireland: 1993-2000

US FDI to Ireland

MNC Exportsto European Union

Industrial Development inIreland: Mid-1980s to Early 1990s

Dublin

RepeatInvestments

Dublin Dublin

Dublin

Company Turnover €m

Employment 2004

Rank

Dell 8500 4300 2

Microsoft European Operations

6918.62 1216 3

IBM Ireland 2500 3700 9

Oracle Europe 2019 1067 14

Apple Computer 1909.50 1200 17

Hewlett Packard (Manufacturing)

600 2500 63

Hewlett Packard (Galway) 400 306 83

Hewlett Packard Ireland 59.18 397 450

(a) Evolution of Dell in Ireland Year Employment Activity 1988 2600 Manufacturing plant in Limerick – single biggest job boost

JIT model – 25 suppliers 1992 All sales and support from Britain to Bray 1993 300 Sales operation opens in Bray 2000 Cherrywood and Bray an integrated operation 2001 4300 Limerick and Bray/Cherrywood 2001 -200 Limerick 2001 -125 Cherrywood/Bray 2001 $20m upgrade to Limerick plant 2001 European Expert Centre, Bray, focused on server business 2002 1148

3400 Dell Direct, Bray/Cherrywood Limerick

2003 1300 3200

Dell Direct Limerick

2003 Some call centre tech support relocated to India 2004 4300 6 subsidiaries

(b) Evolution of Microsoft in Ireland 1985 European Production & Development Centre: Manufacturing, distribution,

Localisation, Logistics and Services for 32 European subsidiaries and Africa, Mediterranean and Middle East (MENA)

1991 European Operations Centre 1994 E-commerce activities 1995 All European warehouses closed as Dublin becomes a single point of source

Next step: centralisation of order taking and processing under one roof 2000 $165m investment in Sandyford 2000 $75m Internet Data Centre in CityWest Business Park: all EMEA transactions

Offering software as a service 2002 +100 28 jobs in sales and marketing for Irish market 2002 Disaster Recovery Site at Corporate Data Centre 2003 1200 ft + 500 employed indirectly by vendors on site 2004 -164

+54 Localisation Software engineering

2004 1216 4 subsidiaries

(c) Evolution of IBM in Ireland

1956 Sales and Service – mainly Irish market

1990s Impressed HQ with software project

1995 300

1995 +400 Acquired Lotus (operation in Ireland since 1986)

1996 650 $350m Mulhuddart campus – manufacturing servers and electronic products for EMEA – chosen against China, Mexico, Eastern EuropeCustomer support for 29 countries including US

1997 Microelectronics division added

1999 Centralised EMEA operations 29 countries 12 languagesDirect sales and marketingInternational Solutions UnitIBM Corporate Treasury EMEA at IFSC (now Ballsbridge)Sales and Services operation, Cork

1999 Staff redeployed

Relocation of laptop maintenanceRelocation of call centre to low cost location

2001 $100m expansion at Mulhuddart – worldwide management of chip business – expansion of server and micorelectronics

2001 Lotus integrated – one of 4 main pillars of IBM software groupLocalisation, software engineeringConsolidation of customer support for UK, France, Germany to Dublin

2001 No redundancies

Relocation of hard disk drive operation to Germany

Evolution of IBM in Ireland

2002 +100 Acquired PWC consultancy operation

2002 To shut telesales centre (sold PCs, etc to UK, France and Germany)

2002 Global Services – fastest growing division (800 in Dublin and Belfast)

2002 4000 7 separate divisions

2003 Geodis logistics €50m contract investment in IBM campus

2003 Several new missions, including E-commerce suppler portal40% of IBM global web-based procurement

2003 +200 Sales and Marketing – less emphasis on support – more on sales

2003 Mulhuddart €301.9m campus manages all internal and external websites + technical support for international clients

2003 Dublin Software Lab designated as one of 7 Centres of Advanced Studies R&D investment

2004 3700 7 divisions: software development, manufacturing, business and technology services

(d) Evolution of Apple in Ireland 1984 European manufacturing and distribution Mid-1990s

1500 Shift from manufacturing to software and R&D

1998 1900 (900 temp)

Strategic assessment: Manufacturing to Indonesia, Taiwan and the Czech Republic

1998 All European financial 1999 -450 Production of iMac to Wales 2000 Sales and Marketing from Dublin to Cork 2000 European call centre – tech support (previously outsourced) 2001 All European telesales, order management

European Data Centre European HQ designated

2004 1200 Workforce: 85% in value added, 15% in manufacturing

(e) Evolution of Oracle in Ireland 1989 200 Development Centre – converting Oracle products for Unix

Also looked at Scotland, Switzerland an the Netherlands – the calibre of employees swung it for the Republic Software manufacturing and localisation for EMEA

1996 European Business Centre – centralised sales and tech support 1990 400 1998 International E-Business Centre – Shared Services – 30 countries

Accountancy, purchasing, licensing 1999 500 ASP Centre – manages all European computer systems

Telemarketing Centre East Point 2000 European HQ of Salesforce.Com – targeting SME market 2002 +440 East point Internet Sales – 30% of EMEA sales 2003 975 2003 -105 Shared Services 2003 Global Development Centre 2004 1067

(f) Evolution of HP in Ireland 1974 Offices in Dublin, Belfast, Cork and Limerick 1976 Sales and Services division 1995 ROI chosen over Puerto Rico, Spain, San Diego and Oregon 1996 Availability of large site near airport and port

Manufacturing of inkjet cartridges 1999 2000 2002

2100 $19bn merger with Compaq Compaq call centres in Dublin and Galway and European Software Centre, Galway (formerly Digital)

2002 120 Sales and Services 2002 -80 Merger result (-15,000 in Europe) – strong results in all five units 2002 HP Global Services Multi-million contract to support 61,000 MS employees

and clients – call centres in Dublin and US 2002 HP Financial Services – centralised business model

Regional HQs Dublin and Sydney 2003 HP International Banking functions to Ireland 2003 $600m outsourcing contract – 350 Bank of Ireland staff to transfer 2003 5 units: sales and service; inkjet manufacturing; international banking;

European software centre; technical support – several locations 2003 +30 Baltimore sold authorisation business to HP 2004 306 HP Galway 2004 2500 HP Manufacturing 2004 397 HP Ireland Source: Irish Times, 1984-2004

Evolution of technology affiliates

From manufacturing to services On-going restructuring – changing

competitiveness and low cost regions

Considerable expansion – IBM, MS Additional divisions for EMEA Movement up value chain Supply chain management

Conclusion Conceptualising shift towards services

in technology TNCs – holistic solutions Evolution of technology TNCs Restructuring – relocation – an

ongoing evolution towards value added activities

How Ireland has evolved an intermediary niche in supply chain management