Global business services
Big potential for a small island
The Irish medtech sector could be an ideal candidate for global business services, writes Sharon Higgins, reporting from a recent workshop about the topic.
Thirty-five medical technology industry leaders attended the recent Global Business Services Workshop jointly hosted by the Irish Medical Devices Association (IMDA) and IDA Ireland on April 29th in Limerick. The Workshop outlined the rationale for setting up global business services in Ireland, showcased organisations that are already successfully operating these services here and provided a step by step guide as to how medical technology companies can establish their own centres.
The medtech sector is an important industry for Ireland, employing large numbers of people in high end employment. Its genesis was in manufacturing but it has grown significantly over the last 10 years to include research and development (R&D) activity. The sector is constantly looking at new ways to enhance activity, and in its last strategy review, the IMDA identified global business services as one activity that Ireland can be at the forefront of development.
Bill Doherty, executive vice-president of Cook Medical, Europe and CEO of Cook Ireland as well as a board member of the IMDA, is the chair of the taskforce that developed the programme. Cook Ireland is already operating significant parts of Cook Medical's global business services activity out of Ireland, serving markets throughout Europe, the Middle East and Africa. He explained how traditional shared service centres (SSCs) have evolved from centralised processing operations to become dynamic, proactive business partners offering systems solutions and innovation across a broad spectrum of activities. These new global business centers (GBCs) have the ability to make significant contributions to the multinational parent company, and position the Irish subsidiaries as a pivotal player in the corporation's global network.
Therefore, the workshop discussed the evolution from SSC to GBC and explored ways of incorporating new business functions such as regulatory affairs and clinical trial management into the GBC model. This would see the Irish operation managing European or global product registrations on behalf of sister divisions and designing and managing clinical trials internationally. The workshop also discussed how the traditional SSC model and its function could be expanded in terms of complexity and responsibility, allowing the Irish subsidiary to manage and develop core internal functions such as finance, hr etc on behalf of divisions or subsidiaries located throughout Europe or, indeed, globally. Ireland has an excellent track record as a location for the delivery of GBS and our highly skilled workforce and low risk, low tax business environment has attracted leading international companies in other sectors, notably ICT, to choose Ireland as their base. Many such companies report that the innovation and flexibility of their Irish GBCs have become key business drivers.
Benefits of a strong and innovative GBC are very real and can have a significant impact on the bottom line of an international company as well as improving the delivery of healthcare to patients. Studies show that costs can be significantly reduced by re-designing and standardising processes such as customer service, invoicing, cash collection and other repetitive tasks. Standardisation also leads to consistency in services and the company can be sure that their customers receive the same high level of service, no matter where they are located geographically. As medtech companies deal with healthcare professionals, hospitals and other health providers, it is imperative that they provide a consistently high level of service as well as products of the highest quality. Patients also need to be able to depend on these companies to deliver life saving devices when and where required.
Ireland's 12.5% corporate tax rate offers further significant advantages when a global business centre is combined with a tax efficient supply chain strategy that sees the Irish operation assuming management responsibility for assets (both tangible and intangible) as well as managing key business functions for subsidiary businesses located throughout Europe or indeed globally. Because most of the management responsibility and business risks are located in Ireland, most of the company's profits can be taxed at 12.5%, leading to a lower effective corporate tax rate. This is a win win situation for both the global parent and the local Irish subsidiary which becomes an integral and vital part of the global operation. As an increasing number of Irish medtech companies engage in R&D activity, management of IP and other associated activities such as clinical trial management can be integrated into this model.
Finally the workshop heard from companies in both the medtech and ICT industries that have successfully implemented a global business centre as part of their Irish operations. Although it was stressed that there is no magic formula for setting up a successful GBC, participants were keen to learn from the experience of these companies.
Sharon Higgins is director of the IMDA.