Techs set for tough year

Almost nine out of 10 Irish software companies believe growing revenue will remain a difficult challenge in 2003, while three out of four believe the sector will face further mergers and acquisitions, according to an industry report.

However, on a more optimistic note, 71 per cent of respondents said their company's revenue should grow in 2003, and nearly half say they will hire more employees in the year ahead.

The annual report of the Irish Software Association (ISA), Software Industry Outlook 2003, polled 221 senior executives at Irish software companies.

"The challenge for small companies is exaggerated in difficult times and opportunities for economic efficiencies and faster market penetration can result from well-matched mergers or acquisitions," said Mr Donal Daly, executive chairman of International Ventures and author of the report, in a statement.

"This is a strategy that is currently well supported by the venture capital community."

According to industry observers, however, software companies are generally finding it difficult to raise money from the venture capital community as investors grow increasingly conservative, especially towards the beleaguered technology industry.

Nonetheless, 39 per cent of respondents said they would be looking for funding in the year ahead.

Asked to name the three most important issues facing their company this year, 86 per cent of executives said growing revenue was their key challenge. More than half (53 per cent) named the global downturn as their next biggest concern. About one-third of respondents named the need to develop the company's management team.

Of those respondents who said they expected company revenue to increase this year, 40 per cent said they did not expect to increase staff. Of the 13 corporate financial advisers who responded to the survey, none believed his or her company would see a decrease in revenue in 2003.

And, while 90 per cent of companies said they would increase or maintain their investment in developing sales, the report notes: "A worrying factor in the drive for revenue is the expectation by a significant minority of companies that they can grow sales without spending more on sales (41 per cent) or marketing (60 per cent). Clearly, for companies to grow they must be more effective with the resources they have."

A majority (79 per cent) of companies said they would increase or maintain their investment in research and development.

The Irish Software Association represents more than 230 companies and is an affiliate of IBEC.