Ireland was valued at £8million when he moved to Villa in August as part of the deal which saw James Milner join Manchester City.
But he has only shown his best form in patches and failed to impress in the previous two matches against Sunderland and then Burnley in the Carling Cup.
Houllier opted to use rookie central defender Ciaran Clark in a midfield role in preference to Ireland, a non-playing substitute, during the goalless draw against Blues at Villa Park yesterday.
The former Liverpool boss has warned the Irishman that skill alone is not sufficient to put him at the forefront of his plans.
Houllier said: "Ireland needs to work harder. He played against Chelsea and did well, he played against Sunderland and was not good enough to me - simple as that.
"He needs to work harder. The skill is one thing but you need to compete.
"It is a difficult period for him. We support him, we back him. He comes to a new club and there is a change of manager in between."
The Frenchman added: "We know he is a good player but I don't want to have a situation where you say 'he is a good player, but....'
"If you say 'he is a good player but he doesn't defend, he doesn't run back, he loses too many balls in crucial areas', then that is difficult.
"He needs to get rid of these 'buts' about him and be a good player. He needs to work harder in games."
Villa have now gone 344 minutes without a league goal but Houllier is confident that position can be rectified.
Striker Gabriel Agbonlahor is stepping up his rehabilitation work after groin surgery although he will not be ready for next weekend's game at Fulham.
He said: "Is the lack of goals a worry? No, because the positive side is we've conceded only one Premier League goal, an own goal against Sunderland. Yes, we know we have to score goals.
"As regards Agbonlahor, I was told he was working a bit harder today on his own with the physios.
"I don't think he will be in the plans for Fulham. After Fulham, who knows?"
Source: Team Talk