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1: Development of information technology in Ireland

Eileen P. Drew

1. Introduction
2. Historical perspective
3. Government policy and the role of key institutions
4. Development of the electronics industry
5. Development of the software industry
6. The telecommunications infrastructure for it
7. Manufacturing applications of information technology
8. IT applications in the service sector
9. The impact of it on employment
10. Education and training in information technology
11. Summary and implications for developing countries
Appendix A: IT-related courses in tertiary-level institutions in 1987/88
Appendix B: EOLAS innovation support programmes
References

1. Introduction

Background to the Report

This study forms the first of a series of country reports commissioned under the auspices of the United Nations University/Trinity College Dublin informatics research project. It was envisaged that the Irish country report would lead to the production of guidelines that could be used in all the other reports.

The selection of Ireland for study was not in order to provide a model for information technology (IT) development. Rather the objective of the study was to investigate what lessons could be learned about the processes of innovation from recent Irish experiences.

In examining the Irish situation it is important to emphasize that no assumptions are being made on the likely effectiveness of any technology transfer. Ireland's membership of the European Community has brought unique advantages that would not be shared by the vast majority of developing countries. This has allowed companies located in Ireland to avail themselves of a potentially large European market, a particular attraction for North American companies. This positive locational advantage has to be balanced against Ireland's peripheral status within Europe, both geographically and economically.

As a relatively late entrant to the process of industrialization, the Irish economy has many features in common with newly industrializing countries. This makes the study of IT adoption and innovation in Ireland an interesting example of some of the range of problems that all developing countries have experienced or will encounter: a shortage of IT skilled manpower, a non-technocratic culture, relatively scarce resources for IT investment, a low level of awareness among managers and public servants regarding IT applications, and a reliance on bought-in technology transfer through multinationals. However, there is no way that Ireland should be seen as a "model" for developing countries. This report draws together the main features of IT innovation that have occurred over the last two decades, and this may provide some insights for developing countries.

Definition of Terms

Innovation

The term "innovation" is used to indicate both a new object, idea, or practice and the process by which that object, idea, or practice comes to be adopted by an individual, group, or organization. In considering the process of innovation, it is useful to consider it as a continuum:

The invention stage would apply to new types of hardware or potential software tools for information processing that have not been "developed" for any specific procedures and applications. The development phase in IT, as in any other manufacturing process, converts the invention into a marketable product or service to potential users. Diffusion is the spread of a new idea from its source of invention to its ultimate users or adopters. The diffusion process can be passively or actively pursued in that it may rely on market forces or a trickle-down effect to reach users, or it can be actively promoted through political intervention (at national, institutional, or local level).

Research into diffusion of innovations indicates that this is a critical stage and that certain patterns can be discerned.¹ In summary:

(1) Plotted over time, adoption of an innovation conforms almost always to an S-shaped curve, indicating a lag period before take-off occurs.

(2) Individuals react differently in terms of response to an innovation, ranging from "innovators," "adopters" through to "laggards."

(3) The usual stages are awareness, interest, evaluation, trial, adoption (or rejection), although not all innovation follows these stages.

(4) Certain characteristics of an innovation that make it more likely to be adopted are:

(a) advantage over existing practice;
(b) compatibility with existing values;
(c) low level of complexity as perceived by potential adopters;
(d) degree to which innovation can be tested on a limited basis.

(5) Early adopters are more likely to be younger, perform more specialized functions, respond to impersonal sources of information, and be leaders of opinion.

(6) Personal influence from peers is more important for relatively late adopters.

These patterns are important in considering the probability of adoption of innovation within institutions in Ireland and developing countries. In the context of IT innovation, they are also relevant in relation to decision makers and the formation of IT policy at national and institutional level.

Adoption is defined as the acceptance, over time, of a specific idea or practice, by individuals, groups, or other adopting units, through channels of communication (formal or informal) within a social structure by a system of values or subculture. The importance of values and culture cannot be ignored in considering innovation, in Ireland or in developing countries. The general conclusion is that diffusion and adoption are more likely to occur where there is congruence between the innovation and the dominant values of the social system.

Information Technology

The term "information technology" embodies a convergence of interest between electronics, computing, and communications, all of which are leading to the rapid development of micro-electronics.² These technologies are being utilized to restructure and reorganize the spheres of production, distribution, and circulation.

According to Wad, it is "the low cost, high-speed and versatile processing and control capacity of the microprocessor and the tremendous information storage capacity of silicon chips that are the significant features of microelectronic technology. "3 Allied to the technological innovations in the semi-conductor and telecommunication industries, there has been a parallel growth in the supply of and demand for information as a major industry in its own right.⁴ Hence the emphasis on "information technology."

The applications for these technological developments have been grouped into four main areas:

(1) The introduction of computing power into the industrial process, thereby extending the level of automation in sectors such as automobile, chemicals, textiles, and engineering manufacture. New developments in information technology have transformed not only the equipment and machinery of the factory but also the role of human labour in production itself.

(2) The substitution of digital for analogue techniques of message transmission and switching has transformed the telecommunications process. "The speed and capacity of new transmission media (such as satellites at a global, and optical fibres at a local, level) are such that vast amounts of data are capable of being transmitted across the world in seconds." This has given rise to the issue of "transborder data flow," especially in many developing countries.

(3) The development of office automation, to support functions ranging from word processing to highly complex distributed processing systems such as are evident in the banking environment.

(4) Consumer products based on micro-electronics, which relate mainly to the "leisure" industry. These include video games and recorders, videotext services, and personal computer systems.⁵

These main areas, with a lesser emphasis on those listed in category 4, represent the developments and innovative applications under consideration in this report.

Report Outline

In the next section, innovations in IT are charted for Ireland to establish the milestones and trends in IT development.

Section 3 concentrates on the national and institutional context in which IT policy and developments have occurred. It traces the involvement and responsibilities of key institutions in Ireland.

In sections 4 and 5, major developments in the electronics (hardware) industry and software sector are examined. These will be considered against the expectations and projected growth for the Irish hardware and software industry.

The telecommunications infrastructure is dealt with in section 6, in terms of how it has enhanced developments in IT in Ireland and its potential in promoting the transfer of information.

Applications of IT in manufacturing and services are examined in sections 7 and 8, to trace the degree to which IT has penetrated into these sectors and the future expectations for further applications.

In sections 9 and 10, the human side of IT is reviewed in terms of employment trends in the electronics and IT-related industries and the IT-related education/training programmes and initiatives.

The final section draws some conclusions about Irish experience of innovation in IT to highlight some lessons that could be relevant to developing countries in the 1990s.

2. Historical perspective

The advent of information technology in Ireland coincided with a shift in emphasis in industrial policy. In the post-Independence decades, and most particularly from the 1930s to the 1950s, the emphasis was on promoting import-substituting native industries by the use of tariffs and controls on foreign investment through the Control of Manufacturers Acts (1932, 1934), which were not repealed until 1958.

By the 1960s this policy was altered to (a) actively promoting export growth and (b) attracting direct foreign investment by the availability of capital grants and tax concessions. This significant change in emphasis was due to the lack of sustained growth in Irish industry, a rising balance of payments deficit, and high levels of unemployment and emigration.⁶ The introduction of grant support (which continues to operate) and tax holidays (which have since been altered to take account of EC regulations on competition) were seen as the main mechanisms for supporting infant export industries. As this report illustrates, industrial policy has been the major tool through which the government has influenced and encouraged IT development in Ireland. It is also important in understanding the environment in which IT innovation has occurred.

Table 1.1. Survey of computer usage in Ireland, 1986/87

Source: Ref. 8.

Growth of Computer Usage in Ireland

By the end of 1969 it was estimated that there were 59 computers installed in Ireland "of a size likely to have a significant impact on an organization."⁷

In 1986/87, the National Software Centre (NSC) undertook a survey of computer usage in Ireland, the results of which are shown in table 1.1. Approximately 4,000 business units were sampled, which yielded an 18 per cent response. The results of the survey of 706 respondents indicate that less than one-quarter (24 per cent) of firms had no use for IT. Over two-thirds (68 per cent) had their own computer, whilst a further 7 per cent planned to use a computer after 1986.⁸ Depending on the representativeness of these responses, the data suggest a fairly significant level of current IT usage in Irish business units. The patterns of use and applications by these companies will be dealt with in later sections of this report.

Milestones in IT. Innovation

Installation of Computer Hardware

Electronic data processing in Ireland originated in the early 1920s with the punch card service operation. A company known as the British Tabulating Machine Company was founded in 1907 and by 1920 it had formed the punch card bureaus registered as Calculating and Statistical Services, based in Pearse Street, Dublin, and in Belfast. It had the agency for both Hollerith and Comptometer equipment for Ireland. In the 1930s another company, Power Samas, entered the market for service bureau operations. Major customers of these companies were the Electricity Supply Board (ESB), Civil Service departments, and the larger state-sponsored bodies.⁹

The first electronic computer to be used in Ireland was from International Computers and Tabulators (ICT 1201), a company formed by the merger of Hollerith and Power Samas. This punch card machine, with a printer speed of 100 lines a minute, was installed by the Sugar Company in Thurles, Co. Tipperary. According to Donovan, the early introduction of electronic processing in Ireland, only two years after the first commercial installation in the United States, was facilitated by the already established punch card bureau services.

The second ICT installation was by the Revenue Commissioners in June 1963 with an ICT 1301 computer. In the absence of any assembler language, all programmes were written in machine code. The first applications were for income tax, followed by turnover tax and corporation profits tax. In 1960, the ESB installed an IBM 650, and the Post Office introduced an IBM 604 programmed calculator for Savings Bank transactions.⁹

A substantial rise in the number of installations occurred in 1964 when 13 organizations had computers installed. By 1969 the total number in Ireland was 50. Some of these were replacements of existing computers by more up to-date and/or larger models. In addition to the computer installations, by 1969 a further 250 organizations were using bureau facilities, the most significant growth having occurred in the three-year period 1966-1969.

The reliance on external commercial bureau facilities was an important feature in the early use of electronic data processing. By 1970, only 1 in 6 users of computer services had a computer installed. The remainder used bureau services.⁷ According to the NSC survey in 1986/87, only 1 in 10 of organizations with electronic data-processing requirements were using bureau services.⁸

Another significant development in computer installations, which was to have unforeseen consequences, was the introduction of IBM computers in Aer Lingus, during the early 1960s. An IBM 1410 (and subsequently IBM 7070) was installed, supplemented by a second-hand Bunker-Ramo on-line system to store information on reservations and seat sales. The IBM 1440 was introduced to hold records of non-numerical data. It was followed by a second 1440 for accounting purposes. These three early machines were ultimately replaced by the IBM 360, using the IPARS package for reservation applications. The installation went live in 1968/69.⁹

In 1969, Aer Lingus set up a separate computer department. The objective of this was to generate revenue by utilizing excess capacity on its in-house computers, following the installation of a second mainframe to provide backup to the reservations system. The new department was staffed from the parent company and was subsequently established as Cara Data Processing Ltd. In 1972, Aer Lingus took over another successful computer bureau, Irish Computer Bureau Services Ltd (ICBS), which was merged with Cara. The subsequent company, CARA/ICBS, holds in excess of 60 per cent of the Irish market for computer bureau services.¹⁰

Apart from the Revenue Commissioners, the first use of computers in the Irish public service was by the Central Data Processing Services, with an IBM 370, in January 1973. A feature of the installation was the high volume of batch work that was processed over telecommunication lines. Four high-speed terminals were installed within months in the Department of Education, the Central Statistics Office, and the Health Boards. This remote operation was rapidly expanded to provide services to almost 20 sites, including a link to the Department of Social Welfare, which had installed two Honeywell minicomputers.⁹

At university level, the first computer was installed in Trinity College, Dublin (TCD), in 1962, an IBM 1620, within the Engineering School. It was replaced in 1966/67 by an IBM 1130, and in 1968 by a System 360 model 44. University College, Cork (UCC), installed an IBM 1620 in 1964 to be replaced in 1969 by an IBM 1130. An IBM 1620 was also installed in University College, Dublin (UCD), in 1965, and replaced by an IBM 3650 in 1970. In University College, Galway (UCG), an IBM 1800 series machine was installed in 1967. It was replaced in 1977 by a DEC 2060.

In banking, the introduction of decimalization was a great impetus to conversion from electro-mechanical to electronic computers in Irish banks. The four associated banks were among the first to introduce computers on a large scale, commencing in 1969/70 with the installation of an ICL 1900, subsequently replaced by the ICL 2900. The Bank of Ireland used optical character reading for scanning vouchers from all the branches at the Computer Centre in Dublin. Allied Irish Banks (AIB) commenced computer operations in 1973, using floppy disks to record branch transactions and for transmission of data between branches and its Computer Centre. AIB was the first of the banks to introduce intelligent terminals at each branch.

These milestones in the development of hardware installations indicate how the gradual build-up in electronic data-processing capacity occurred:

• starting with bureau services, followed by
• the purchase of (often rapidly obsolete) large mainframe computers,
• the more widespread adoption of minicomputers (such as the VAX 11/780),
• data transmission across telecommunication links, and
• direct on-line access to data from remote terminals.

As the remainder of the report illustrates, the trend towards miniaturization has continued, with the advent of a growing micro market.

Telecommunication links and the emergence of a demand for networking have been important. A shift in emphasis has also occurred from a preoccupation with hardware to a recognition of the need for development of software applications to meet varied end-user needs. In parallel with a continued reliance on bureau services for some routine functions (such as payroll and transaction processing), most Irish firms are now convinced that the purchase of their own computer hardware is justified.

Software Development

Since 1977 the software industry has undergone rapid expansion. Estimates for that year suggest that employment in the software business was about 300 in about 30 companies. The industry is currently estimated to have some 3,000 employees, with another 1,500 in the software departments of hardware companies.¹¹

According to one commentator, "Ireland had a 'computer services industry' in 1977 rather than a software business and the notion that products could be developed here and sold abroad was radical and new." In terms of how it has evolved in the decade since 1977, he goes on to state: "unlike the hardware industry, foreign-owned ventures have never dominated its evolution.... It has been the native companies that have created this industry, even though their progress has been fitful and erratic over the decade."¹²

Software development was a logical spin-off development from the preexisting bureau services and data preparation companies in Ireland. In 1977 approximately 200 jobs existed, in addition to those in the limited number of software firms. They concentrated on providing a service that involved coding in advance of batch processing. Most software work was undertaken on a custom contract basis. One major source of projects was in the large data-processing installations, which farmed out programming tasks for peak development requirements or to augment the in-house software specialist skills. Other work was assigned by smaller establishments that lacked their own software staff and wanted customized applications. Cara, already mentioned, and System Dynamics were the leading software companies in 1977. Smaller firms like AMS (now Insight Software) and Memory were emerging in this fast-growing sector.

The employment and development potential from a growing software industry was recognized by the Industrial Development Authority (IDA), and meetings began in 1977 to explore the possibility of exporting Irish software. The debates that followed, to try and extend to software companies the entitlements to grant aid and tax incentives, highlighted an important obstacle to the full development of the software industry. Through companies like the Irish Sugar Company, ESB, and Aer Lingus, and government departments, the state sector had taken a lead over manufacturing and finance companies in installing computer hardware. It therefore remained an important market for software expansion and development. Unlike other countries where the industry developed through government contracts, Irish installations were reluctant to farm out software development work to outside organizations. According to Matt Crotty of AMS, trade unions were imposing impossible restrictions on the use of outside staff in the big installations, and he criticized the government for importing foreign consultancy services instead of tapping local computer expertise. Arguably, this may have retarded the growth of individual Irish software companies and their ability to compete for international sales.¹²

By the end of the 1970s the IDA was operating a policy of attracting foreign software companies to set up projects in Ireland. Altogether, 500 jobs were approved in foreign-owned US, Canadian, British, and Dutch software companies such as Zeus-Hermes, Samson Infocom, Comtech, and Altergo. Few of them got beyond the start-up phase, although some, like Altergo, provided a grounding for indigenous skilled personnel. ¹²

The emergence of packaged software as a marketable product in the late 1970s heralded a new era for software development in Ireland. This was orchestrated by a different type of company, often headed by former computer users, who believed that they could design better ways of handling specific applications. The new direction and growth in the software sector are covered in section 5.

This review of the milestones in the adoption of IT within Irish institutions illustrates how state institutions (particularly commercially traded companies such as Aer Lingus and ESB) were at the forefront of early adoption. The next section examines government policy and the role of state institutions in IT development.

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