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The smart economy is the holy grail for many politicians but it faces many challenges in the real world, writes Fearghal O'Connor.

These days the phrase "knowledge economy" is bandied about like a salve for all our ills. But are the challenges we face in building such a thing really understood by those who matter? Out in Dublin's Park West business park one company defines the knowledge economy and all that it might or might not be for Ireland.

In 2002 Tim Fritzley was living in California, running Microsoft TV and earning a lot of money. An Irish investor friend asked him to take a look at and size up a then tiny company called Intune Networks run by two UCD PhD graduates, Tom Farrell and John Dunne. 

"They flew to California and I spent two days with them and they convinced me that they had solved a very complex problem that the telecommunications industry had been working on for 25 or 30 years," he says.

He agreed to advise them and by 2006 he had packed in his job with Microsoft and moved to Dublin to become chief executive. At that time the company employed 16 people but has grown to 120 people and it is expected to employ 200 by the end of the year. It has developed hugely innovative optical switching systems using tunable lasers for the telecoms industry. It is currently preparing to bring its networking products to market. Fritzley says that in five years the company is likely to employ 2000 people, many of them in high end jobs.

But Intune Networks may also prove to be a terrible indictment of Ireland's efforts to create a knowledge economy. Fritzley says that the question of whether the company should relocate away from this country is a constant and growing issue for its board.    

"That question is not settled and it is going to be an ongoing question that my board of directors will continuously ask: is Ireland the right place to be? We have kept the company here to date to get through the first cycle of product development. But it will come down to having the right infrastructure and the right regulatory and tax regime to make it beneficial to launch a big company here."

Of course, one of the major factors for a knowledge based company like Intune Networks is the availability of highly skilled workers, specifically PhD students with an excellent grounding in mathematics, the sciences and engineering. Huge advances have undoubtedly been made at university level but has that trickled down to secondary and primary level? Is our education system capable of producing large quantities of the type of student companies like Intune need? 

Greg Tierney, of Smart Technologies says there is a lot of work to be done. Smart is the main supplier of interactive whiteboards, which, at their simplest, allow teachers to display and control a lap top on a board in front of a classroom. The most advanced class room systems can incorporate a huge array of innovations. In the UK all primary schools have at least one of these boards but in Ireland that figure is no more than 25%.

But Tierney says that many other factors need to be considered in the Irish classroom if young people are to be engaged by maths and science at an early age. For example, he points out that due to the rise of social media on the internet the average 18 year old now publishes more than they read so the whole dynamic of the classroom needs to change.

"It is not really about creating a fantastic science lab in a school," he says. "Instead ICT must become a ubiquitous part of all subjects, integrated throughout the curriculum. If you are studying for the Leaving Cert and the use of technology isn't important in achieving what you want to get then it becomes irrelevant in those final two years. But if technology is not part of what you are doing every day and seen as relevant and attainable, I am not sure how many will make the choice to go this direction even if they have the apptitude."

At the very opposite end of the education system, John Boland and his team in TCD's Centre for Research on Adaptive Nanostructures and Nanodevices (CRANN) in Trinity College have benefited hugely from a combination of the right people receiving properly targeted and well thought out funding. So much so that CRANN is a key driver in nano science research in Ireland which has pushed the country up to sixth in the world in that field.

But limited funding for such projects is likely to be a huge challenge for Ireland, believes Boland.

"We are going to have to make strategic decisions," he says. "We can't fund everything at a low level and expect it all to flourish. For example, a real challenge now is the pipeline of kids that we have educated through primary, secondary and third level and that we have encouraged to do PhDs. But in the university system there is a reduction in available PhD studentships by a factor of three. So what happens to the rest? Some will go abroad. Others will go on the dole and the differential between the cost of the studentship and the cost of being on the dole is only a couple of thousand euros at most."

And for those lucky enough to do PhDs and join research groups, funding is also an increasingly fraught issue. Boland believes that funding should be based on excellence rather than trying to spread it thin and evenly.

"What you will do is enable everyone a little bit but you won't gain anything at all," he says.

Neither does he buy into the proposal that funding should come from one single body, believing instead that a range of funding agencies work better. Nevertheless, he would like to see much better alignment between these agencies.

"In the past the HEA basically funded infrastructure such as labs and buildings and SFI ran research programmes. They weren't coordinated, which was a disaster. You ended up with really capable people funded to perform world class research programmes in environments where they couldn't deliver because the infrastructural funding did not neccessarily follow the programmatic funding. That is a disaster."

Another researcher believes that this coordinated approach needs to be carried even further. He recalls being told that he could not attend a conference organised by one state funding body because his own funding came from a different state body, despite the fact that his research had huge relevance to a range of researchers at the conference.

"We need to foster more collaboration between research streams that are funded from the various research bodies," says the researcher. "Agencies need to get nano scientists and bioinformatics people and whoever into the same room just to see what comes out of it. A top level strategy should decide who funds what but it is often the researchers themselves that will see potential synergies and collaborations."

Like Boland, he does not favour a single funding stream, believing it may make it more difficult for researchers in new cutting edge areas to obtain funding. Many believe that establishing centres of excellence in different universities for key disciplines is the way to go. The researcher agrees, but probably only in an ideal world.

 "Imagine the politics of that," he says. "It is happening in a sense with UCD and Trinity at the moment trying to pitch themselves as the top tier. The other universities are rallying together to oppose that, resulting in further fragmentation. Can you imagine Irish politicians deciding which university will focus on what discipline and therefore which funding stream any given institution will benefit from? You would need to use very open and transparent metrics. But what? Publication records? Success with intellectual property? In the end it could end up being a measure of who is a better lobbyist rather than a better researcher." 

In today's results driven environment, one of the key metrics that any research group is judged by is its ability to spin out its research into the commercial world.

"CRANN has several ideas in the pipeline," says John Boland. "It is all about education - generating smart people and generating good ideas and then exploiting those good ideas by  translating them into the marketplace. This is an extraordinary challenge."

Not making this process any easier is dramatic cuts in the Enterprise Ireland funding that is supposed to facilitate such spin outs.  But the knowledge economy must exist beyond university laboratories if it is to be real. And it is here that the story of Intune Networks provides a salutary lesson for Ireland.  

The technology that it is developing is expected to be transformational, allowing telcos to achieve huge efficiencies. But the problem they faced in taking their research from the lab to the real world was that the initial build cost for the technology was €60 to €80 million and four years of work. Moving from this start up phase, through the development phase and into the real big time is something that few if any Irish technology companies have ever achieved.

"You have the IDA, which has a lot of money, but they are focussed on bringing big multinationals in," says Fritzley. "Then you have Enterprise Ireland with much smaller seed money to help companies here in Ireland get started. But there is not an organised structure here for companies like Intune who aren't start ups anymore but still need capital infusion to get a big idea product like this into the market place."

Fritzley believes that either Enterprise Ireland or the IDA should be given the remit to help domestic Irish firms get beyond what he says is called the "killing zone" in Silicon Valley - that point where a company is out of the start up phase but not yet into large revenues.

"That is where a lot of companies fail without the right investors or governmental support," he says. "It is a big problem for small Irish companies. For a knowledge economy, it is those types of companies that you need to get to scale. Look at Nokia in Finland. It seeded a technology ecosystem that is now self sustaining. Ireland has never had a home grown technology company that has hit that critical mass.  A company like Intune could do this."

But the problem in Ireland goes way beyond government agencies. He believes there is a cultural adversity to risk.

"Irish financiers aren't used to making those kinds of bets. When I came over here in 2006 it was the height of the property bubble. I was going out to people who, at that point in time, had hundreds of millions of euros but I couldn't get any of them to even look at investing in Intune. So I had to go to London and Boston to find my investors. I couldn't get one Irish company to invest in this company. I was completely shocked."

"Also a lot of people here aren't used to investing that kind of money for such a long period of time before you get a return on it. Whereas in Silicon Valley there is a culture where you will spend €50, €60, €100 million and it will take three to five years but you will then get a Google or a Cisco out of it or something really big."

He agrees that if Intune does abandon Ireland for somewhere like Silicon Valley it will be a real indictment of where Ireland, and its ambitions to build a knowledge economy, is at.

And in the end such a decision could come down to some very simple factors that at first glance have little to do with a knowledge economy. For example, a major problematic factor he pinpoints is that more and more airlines have cancelled flights out of Dublin.

"Getting anywhere is becoming more and more difficult and it will become more and more expensive going forward," he says.

And that does not just go for international travel. Trying to attract the type of highly skilled labour from abroad that a company like Intune needs is not made any easier by our substandard infrastructure.

"One of the things that still astounds me is that nothing here is linked - the bus system, the DART system, the Luas, the trains. No common ticketing," he says. "Park West, where we are based, is an incredibly difficult place to get into and out of. Then look at the communications infrastructure - broadband is still not great.

"Look at the health system. Can you recruit people to come here and give them a quality of life? Can they afford rents? Those are the types of things that a company looks at when you are trying to grow up to a 1000 or more people. We are going to be competing for those people with a lot of other places."

Intune

Key facts

• Established by UCD graduates Tom Farrell and John Dunne in 1999
• Designs high-speed electronics and optical systems for telcos allowing them to move from big, energy guzzling silicon based network switches to systems that use lasers and different coloured beams of light.
• Intune has achieved many world firsts starting in 2000 with the world's fastest automated laser calibration system
• It has attracted venture capital from Europe's tier 1 venture firms Balderton Capital and Amadeus, and US firm Spark Capital.

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