By CHRIS BARTON
One hundred new information and communications technology (ICT) companies, each earning over $100 million in sales per year, by 2012 is the lofty "quantum change" proposed by the Government's ICT taskforce.
Its draft report wants the industry to increase from contributing 4.3 per cent ($4.8 billion) of GDP to 10 per cent in 10 years.
The ICT taskforce was established in response to the Government's Growth and Innovation Framework, Growing An Innovative New Zealand, released in February, which targeted ICT with biotechnology and the creative industries as key sectors to promote long-term prosperity.
The enormity of the ICT task is highlighted by the large number, 7544, of ICT firms with annual sales of less than $5 million and only 171 with sales above.
Just 16 companies have annual sales exceeding $100 million and half of them are the New Zealand-based arms of multinationals. These include EDS, IBM, Hewlett-Packard, Unisys, TelstraClear, Vodafone, and Ericsson and are responsible for 64 per cent of the sector's contribution to GDP.
New Zealand companies in the same category include Fisher & Paykel Healthcare, Solnet, Tait Electronics, Datacom, Gen-i and Renaissance. Telecom is the single largest contributor and accounts for over 2.2 per cent of GDP.
About 75 per cent of the sector's contribution to GDP comes from 84 companies with revenues exceeding $20 million and the report says the country needs more of this sized company. A critical factor to boosting the country's ICT business is having the necessary commercialisation experience and skills to go global.
The taskforce forecasts 125,000 people will be employed in the sector by 2012 compared with the current level of 41,000. Export income from the ICT sector in 2001 was $900 million and if the growth target is achieved should be $16 billion by 2012.
One of the biggest constraints to growth of the ICT sector is the supply of appropriately educated graduates - those who not only have the necessary ICT technical skills, but also an understanding of the sales, marketing and commercial needs of an ICT business. There are currently 24,000 tertiary trained graduates employed in the ICT sector and tertiary institutions' produce 4000 ICT graduates a year, with many being overseas students.
That leaves a significant shortfall: "Modelling of the ICT sector outputs, based on existing levels of graduate supply, indicates that sector growth will plateau at around 6 per cent of GDP compared with the 10 per cent target."
As well as not having enough graduates, the report highlights another threat, the emergence of China, Hong Kong and Taiwan as a bloc competing for the scarce global resource in ICT skills.
"The New Zealand ICT industry needs to position itself now to take advantage of the resulting opportunities and also prepare itself to counteract the resulting competition for both markets and skills," says the report.
The taskforce also recommends more effort to retain the high proportion of foreign students among ICT graduates, particularly in electrical engineering. Specific measures could include offering an automatic right to citizenship upon graduation.
"Some countries, in recognition of this scarcity, offer residency permits and related incentives. New Zealand needs to trump this competition, as well as recruit through targeted immigration."
The lack of ICT teaching at secondary level is another cause for concern. The report points out that ICT taught at sixth-form level is focused on computer literacy and does not appear to address the additional requirement for technical competency.
"There is currently no ICT course taught at seventh-form level but the Government is proposing to offer from 2004 onwards an ICT qualification containing some requirement for advanced computer programming skills.
"It is a matter of priority that schools be appropriately resourced to offer this course."
By CHRIS BARTON