I am soon reassured that indeed there are Indians here, and the reason you do not see too many here in Dublin is because most of them are based in Shannon in the west of Ireland. Shannon apparently is where a lot of the software firms are heading out to.

And anyway, they will tell you a bit snobbishly perhaps, Ireland should not be compared to India because that would be mistaking Dublin for another of the software industry's `sweatshops'. Implicitly, of course, a sweatshop is what Bangalore is.

This view of Ireland's software industry is both right and wrong. Understanding why and how, is also to understand the success of Irish industrial policies, at least in software. It may help us avoid some of the pitfalls in the road they have taken.

For a start, it may be useful to understand that the Irish software sector is in fact not one but two industries. The older and the more prominent is the larger transnational sector which was lured early on into Ireland with promises of cheap skilled labour and low corporate taxes. These TNC's concentrate on what is what is known as software `localisation', and testing and distributing. `Localisation' refers to the process by which already existing software packages are customised to reflect changes in languages and cultures. this is particularly important, and profitable, in the context of the large, and multicultural, European market. Ireland provides an ideal gateway for these firms into the profitable business of selling to the Europeans. Since Ireland is a part of the EU, these firms are able to get around all sorts of protectionist measures, simply by basing their production in Ireland.

There is, also, the indigenous Irish software industry. This sector developed as a side product of the TNC sector in the mid-Eighties, when firms such as Microsoft and Lotus outsourced some of their production needs to small local firms. But over time, these firms have developed their own fields of expertise. They now specialise in the production of niche products for export markets.

But, a funny thing happened along the way. The transnationals, who were merely exploiting Ireland's comparative advantages in relatively cheap skilled labour, stuck to the lower end of the software development cycle. They found it far more profitable to carry out low level tasks in Ireland and leave the development of software in the home country. The indigenous Irish firms on the other hand, started developing new niche products and engaging in business solutions consulting.

Surveys (O Ria in 1998) now indicate that MNC's in Ireland are twice as likely to concentrate on localising software as the domestic firms. about 60 per cent of all foreign firms polled were involved primarily in localising software for the needs of the European market, while only 30 per cent of the domestic firms were interested in doing so. At the same time 60 per cent of all domestic Irish software companies were involved in business solutions consulting, compared to 46 per cent among the foreign firms. A higher percentage of domestic firms were involved in research and development efforts.

What lessons might this hold for India? For sure, there is an even greater economic case for multinational firms in India to use their Indian bases to carry out low-end activities than in Ireland. Our labour is as skilled, and even cheaper. The danger, as in Ireland, is that they will continue to carry out only these tasks in India. If so, a large part of the gains from research and development efforts might be lost to us.

But this ignores the major lesson we should draw from Ireland's example. the transnational sector has been absolutely essential to the successful existence of the Irish domestic sector in one very vital way. The presence of these TNC's established an incentive for a massive build up in the skills and knowledge necessary for the software industry in Ireland. It led to new institutional relationships between the fledgling software industry and other parts of the economy, such as the financial services industry in Dublin's International Financial Services Centre. It led to a huge surge of interest in research in the subject in Ireland's universities. These positive externalities led to the build up of a skills cluster in IT in Ireland, where earlier there was no reason for one to exist.

And a large part of the credit for this must also go to the industrial policies pursued by the Irish Development Authority. It made sure that foreign capital received priority treatment in Ireland, made sure Ireland was seen as an attractive destination for capital by freeing all controls on the repatriation of profits. But in addition to setting up a very strong institutional framework for the growth of the industry within the economy, it went out of its way to help it outside Ireland.

A particularly interesting example of their policies is the idea of setting up `incubation centres'. Realising that if Silicon Valley won't go to Ireland, the next best thing is for Ireland to go Silicon Valley, they set up these trade and technology centres in the lion's den to make sure that Irish entrepreneurs who dream big don't suffer from want of resources and managerial capacity. Only firms who can demonstrate a competent marketing and product strategy are taken on. As always competition at this level will ensure only the best are taken on. They are then given help in arranging for venture capital and in hiring competent legal and managerial ersonnel. around five companies are taken on at any one time. These companies then form a network, a buddy system as it were for fledgling companies. This helps them achieve the all important task of `networking' in Silicon Valley. Dublin's snobbery about Bangalore is justified to some extent, because Indian companies by and large have not moved into softwaredevelopment. But surely, that is a result of a lack of opportunities, financial and the networking kind. Perhaps if we were to `incubate' some of those IT eggs in hatcheries of our own, we might discover a golden egg or two. Worth a try???