High-tech hopes need state aid

By NICK LAMBERT*

The information and communication technology (ICT) industry and the Government must put some meat on the bones of the ICT Taskforce report.

The taskforce set targets for growth that will look realistic only if the industry accepts them quickly.

Several factors are central to achieving the stated goal of 100 ICT companies each doing $100 million worth of sales a year within 10 years. These include:

* Government acceptance that ICT is an essential component of business performance and growth.

* Addressing the alarming downturn of investment in New Zealand by multinational firms.

* Government recognition that a strong and vibrant local market is vital if the taskforce targets are to be met.

The taskforce report was valuable in outlining roadblocks the industry faces in fields such as R&D and taxation, but unless the points outlined above are acted on it is unlikely to become a significant step in advancing the country's economic cause.

We have to see some evidence soon of substance behind the rhetoric of Government targets for business. After all, achieving the targets requires sustainable market growth of 4 per cent or more each year for 10 years.

New Zealand ICT companies are mainly small to medium-sized businesses. Most are involved in product and service development. The association believes their growth is severely restricted by:

* Limited domestic market demand.

* Little or no export marketing expertise.

* Restricted access to international distribution channels.

* Limited awareness of support infrastructures.

* Little opportunity to gain reference sites for their products or services, which is vital to export success.

* Complex and difficult access to funding.

They also operate in an economy that is dominated by the state sector, which represents approximately 33 per cent of GDP. This sector's spending on ICT has a major impact on the degree of investment in and growth of ICT enterprises.

It is essential the Government harnesses this sector into its drive for ICT industry growth by directing government departments, ministries and SOEs to develop their own innovation programmes. They could be instrumental in helping the industry to develop world-leading solutions for government administrative problems.

The association believes the criteria for fresh state-sector investment in ICT should include: participation of New Zealand-owned companies in all projects; a sharing of project risk between the user and vendor groups; the use of best-practice methodologies; and world best-practice for interoperability, standards utilisation, scalability and security.

Ownership of developed intellectual property should stay in New Zealand and be licensed for use overseas, probably through the vendor consortiums. Project costs could be offset through economies of scale and export income achieved by exploiting intellectual property.

A key factor in the association's approach is that New Zealand's Government has to address problems and issues common to all economically advanced nations. Fresh solutions we find here for government needs are likely to be equally applicable abroad.

These new projects could be benchmarked as a reference point for overseas customers, which could then take up the technology with the confidence that it has been operated and tested in an economic environment similar to their own.

Outcomes would include high interest by international ICT companies in New Zealand as a research centre and test bed; increased investment from overseas; growth of Kiwi IT companies through association with the projects; and significant increased export revenues.

The association is conducting a feasibility study to determine the viability of establishing a centre for advanced government ICT applications, which could act as a catalyst for introducing such an innovative approach in the state sector.

This approach would encourage multinational firms to increase their investment, something that has fallen in recent years because multinationals have no incentive to increase their presence through such developments as research centres and labs.

There is considerable frustration at the lack of major projects able to generate innovation, progress and worthwhile business.

These companies are important to New Zealand because their overseas links can help our companies to make the connections and develop outlets for their products and services abroad.

They have the market knowledge and knowhow that is a vital component of taking new technologies offshore.

The Information Technology Association of New Zealand aims to encourage the multinationals to grow in New Zealand while at the same time building the opportunity for New Zealand firms to develop on the scale the taskforce envisaged.

Our plans to help put meat on the bones of the taskforce report reflect this approach.

The same model is equally applicable for ICT enablement in a range of important sectors within the New Zealand economy.

But the state sector is a niche area that can be rapidly fired up if the Government intends to move from rhetoric to action.

* Nick Lambert is the president of ITANZ.