ICT firms struggle to attract talent as sector wages climb
14 Mar 2018
The new Export Market Watch shows that the ICT sector has experienced wage inflation three times higher than economy-wide earnings. It also shows that one-third of Irish software companies have taken steps to prepare for Brexit.
A new Export Market Watch report has found that only 20% of ICT firms view the availability of labour to be good or very good at this time. A struggle to attract talent is the main contributor to a significant climb in sectoral wages, according to Investec, which outlines wage increases of 11% in the software sector; three times the rate of growth in labour earnings across the wider economy since the depths of the recession.
Published by Enterprise Ireland in conjunction with Investec, the latest Export Market Watch is the second in a series of reports examining Ireland’s major export markets and the outlook for exchange rates. Today’s report has a special emphasis on how these are directly impacting the Irish software sector and aims to support companies with global ambition who are looking to scale their business to international markets, in the face of challenges such as Brexit.
ICT / Software sector
In contrast to the issue of the availability and cost of labour, the availability of capital is viewed positively among firms in the sector with 80% rating it as satisfactory to very good.
John MacNamara, Manager, Digital Technologies said: “There is a growth phase currently being experienced by software firms mainly due to the ubiquitous nature of developing technology and the adaptable nature of Irish businesses in terms of technological trends. Companies across all sectors are becoming increasingly receptive to embracing technological change, placing demand on the software sector. What this report is telling us is that with issues attracting and maintaining top talent, demand versus supply of resources is a serious concern to many Irish ICT firms.”
Global ICT / Software markets
Further findings of the report include that one-third (33%) of companies in the software sector have taken steps to prepare for Brexit. Most companies view the UK, US and Eurozone as offering the best near-to-medium term growth opportunities and the majority of respondents don’t believe that other markets will challenge the dominance of the ‘big three’ in the short-term. In terms of long-term export trends, Enterprise Ireland market advisors believe the US will remain significant, due to innovation in areas like Artificial Intelligence (AI) which many ICT clients view as the technology disruptor that will have the most significant impact on their business.
John MacNamara explained: “Economically, the outlook for Irish software exporters across international markets is very positive, and this is especially true for the US market, which is the destination of 42% of exports. Many of our clients view AI as a crucial technology to their business and our teams on the ground in the US are seeing significant innovation in this area.
Although most do continue to view the UK as one of their most important export markets, they understand the need to be prepared to both continue business with the UK under new possible restrictions, and expand their reach globally to mitigate risks such as currency volatility. This includes becoming more geographically diversified, and we are seeing awareness of markets in Asia and the Middle East increasing.”
Market outlook for exchange rates
According to Investec, the timing is right for market diversification, as global growth is set to accelerate to a seven year high of nearly 4% in 2018. However Chief Economist, Philip O’Sullivan has cautioned that the different pace at which the world’s leading Central Banks are moving to normalise monetary policy is likely to lead to elevated volatility in the currency markets.
Commenting Mr O’Sullivan said, “The strengthening international backdrop is creating significant growth opportunities for Irish software companies. We are very encouraged by the ambition shown by many of the firms in this sector, which is supported by favourable funding conditions and the resources of agencies such as Enterprise Ireland. With that being said, we would advise firms to carefully consider the impact that sudden currency moves could have on their bottom line and recommend that they take steps to protect their profits.”
The Export Market Watch report for the software sector in Ireland can be downloaded here.