Article printed in ‘Business Week’, Irish Independent 13/10/11 – Interview with Donal O’Donovan

13/10/11
It is a bizarre state of affairs, says Claremorris man Gerry Concannon (Pictured above). CBE, the software business he set up 30 years ago, is struggling to hire staff, even though there are 440,000 people on the dole. “We’re advertising jobs but graduates are going abroad almost as soon as they come out of the colleges,” he says. For CBE, getting and retaining graduates is the lifeblood of the business.

The company sells and services computer systems for the retail sector. Historically, it only sold in Ireland but in the past four years it has sought out new markets in the UK and beyond. The business has 120 employees; most have college degrees and work out of state-of-the-art facilities in Claremorris, Co Mayo.

Unbelievable as it seems, Concannon is considering looking abroad for staff. No one in Mayo is a stranger to emigration. The county has been scourged for at least 150 years. The boom years were a rare respite. Now it’s back, and young people are on the move again. Most go because they have to, but some are drifting away even in sectors like software where there are jobs. It’s a real problem, says Concannon. “It’s become a mindset among those coming out of college,” says Concannon. “I see it at home. “Where you had 11 fellas knocking around together all their lives once eight of them are in Australia the pull for the others becomes huge.”

The loss of skilled workers threatens not only CBE but the whole economic recovery, he says. CBE spends €1m a year on research and development (R&D) and has an ambitious — export-focused — local owner. In fact, it’s exactly the kind of company the Government wants to see thriving.

Concannon says his success to date — and the millions it puts into the Mayo economy — relies on access to a pool of highly skilled people. Cutting off the flow of graduates could mean a crisis down the line. “Something needs to be done to tackle the mindset among graduates. “They think leaving the country is almost inevitable. The colleges need to push the message that there are still opportunities at home.”

Most of us will only ever see a CBE sticker on the back of a shop or hotel cash till. For retailers, the till is just the tip of the iceberg. The core of CBE’s products are the software systems controlling that hardware. It gives business owners control of everything from cash and stock control to integrating security systems. The machines CBE supplies are made by global brands, including Fujitsu and Casio, or outsourced to a contract manufacturer in China.

Service business

CBE sees itself very much as a software and customer service business. That’s true today but Concannon moved into software almost by accident. “We started by importing other people’s software but every time a system needed to be modified it cost a fortune. To control our own destiny, we needed to be the ones innovating.”

For a man who didn’t have a background in computers that meant hiring. “I’ve been in business for 31 years, the key to staying there is getting people who are better than me at what they do, and keeping them.”

It’s why the loss of IT graduates is a real issue. In the 1990s, skills shortages forced Concannon to recruit in. He hasn’t had to repeat that yet, but with unfilled openings for hardware and software workers, it’s becoming a possibility.

In software, a lack of manpower resources means losing your edge. “It takes a year to train a graduate engineer coming out of NUIG or the Galway Mayo Institute of Technology.” CBE is so dependent on retained skills that Concannon made the decision not to cut job numbers when the recession hit, even though it might have been financially prudent. “The financial numbers we were facing would have justified cutting staff by 10pc. But cutting jobs would have damaged our capacity to recover. Besides,” he says, “we are optimistic by nature.”

The Irish Independent spoke to Concannon in Dublin, where he was meeting clients and prospective clients at the SHOP retail fair in the RDS. CBE used the occasion to launch its latest product — a cashless self check-out system that lets customers make small purchases with just a wave of a card. Concannon thinks it will be a hit with the kind of shops that still have hundreds of customers passing through during busy lunchtimes.

The most interesting new departure, though, is CBE’s expansion overseas. Concannon says CBE always had ambitions to go global. However, it was the slowdown in this country that forced his hand. Like other Irish services companies, going overseas has been a big learning curve. Help from Enterprise Ireland (EI) has proved vital. “We’ve funded the UK expansion mostly from our own resources. It’s the soft supports from EI that have been valuable.” Coaching on how to apply for tenders, for example, has paid off directly with business wins. Networking opportunities, including events at the Irish Embassy in London, have helped to build a useful profile for the company in the UK, and invites to CBE’s own clients have proved a hit. It is the type of support from the Government that results in a win for everyone, says Concannon. “They support us, and by the same token we deliver with jobs.”

Four years after the first move into the UK, revenue grew by an impressive 48pc last year. A quarter of all CBE sales are now made in the UK and the company has established a sales office in Derby. Claremorris is still the hub. CBE’s own automated systems mean the team in Mayo can remotely service clients anywhere. Software updates go out over the net, technical diagnostics are done over the net. Engineers in Claremorris know about an issue in Belfast before the shop does. Claremorris is viable as a headquarters because fast broadband is available via a local area network and because Knock Airport opens Mayo up to the world. Ironically, poor roads mean getting to parts of Ireland can be an issue, but Knock is a gateway to the wider world. “We could not have a head office in Claremorris today without Knock Airport. Having the airport gave us the confidence to invest €6m in our headquarters development.”

Success abroad is thanks in part to the dramatic improvements that transformed the Irish retail experience during the boom years. Concannon says working with top-class retailers here has put him ahead of the game in the UK. Claremorris is even part of the itinerary for British shopkeepers touring Ireland to see the advances shops in this country made during the Celtic Tiger years. The relationship with clients is intense. The head office includes seminar rooms where groups of a dozen or more customers are brought for intensive three-day training courses on how to get the most from products. “We are not a cost to them — the products we sell are an investment, we will increase your profits or we will reduce your costs.”

On his third recession now, Gerry Concannon says he’s put the lessons of earlier crises to good use. When the banks stopped lending CBE was lucky enough not to need money, but some of its customers did. Instead of passing on the sales, Concannon relaunched a vendor financing service, last needed in the 1990s. “In the 1980s, we saw some of these problems. We set up our own financing systems — it was not used in the boom. Now customers are using it again,” he says simply. The financing is straightforward and CBE gets paid back over time instead of upfront. It’s low risk, too. Centralised control of software means they can simply cut off the system of a customer that stops paying.

If CBE is having a good recession there are still problems bubbling on the horizon. One goes back to the core focus on personnel. Concannon believes the Government was wrong to scrap a tax break that rewarded employees involved in creating new patents — the lifeblood of the software sector. The patent incentive scheme was dropped on the recommendation of An Bord Snip Nua. The old regime gave employees that were behind inventions a tax break on royalty payments. “The scheme was open to abuse and it was abused,” says Concannon. But it was still a good idea and, without it, outsourcing tasks to India has suddenly become more attractive.

“It’s the inventions that create the jobs,” he adds.

Original article printed in ‘Business Week’, Irish Independent 13/10/11 – Interview with Donal O’Donovan