A Wellington tech firm has been sold offshore, but its founders pitch it as a good news story that will help them expand - and hire hundreds more staff.
Qual IT, founded by brothers-in-law Shane Hewson and Jon McPhee, works in quality assurance. It tests the quality of apps, and processes used to develop them, and whether an organisation's security is up to scratch as they carry out penetration tests (using technical skills to try to get around a firewall) and "red teaming" - which includes the likes of social engineering, simulating phishing scams, and japes like gaining access to an office, then having a wander to see if any PCs are unlocked.
Qual IT's clients include NZ Police ("our largest customer"), the Ministry of Health, Transpower, Air New Zealand, Downer, AIG and Auckland Airport. The company also handled quality assurance for last year's virtual APEC summit.
The company has been bought by a rival, the Australian-based Planit Testing, which since May last year has been part of Japanese giant Nomura Group (market cap: US$13.5 billion).
Qual IT has around 250 staff today across its offices in Auckland, Christchurch, Hamilton and the capital. It will be merged with Planit's NZ operation, which employees around 300.
Planit CEO Mike Weale says the plan is to expand NZ staff numbers for the combined operation from 550 to 750.
Neither side would put a value on the deal but the local operation will have NZ revenues off around $75 million (or $250m including Australia).
The deal puts the value of the Planit Group within the top 10 New Zealand technology companies, Planit says - and the largest quality assurance player in NZ, and the number three worldwide.
Qual IT was founded in 2004 after Hewson (a test manager for Immigration) and McPhee (who had performed the same role for NZQA and NZ Post) saw how independent quality assurance firms had taken off in the UK. They saw an opportunity in NZ.
Hewson says the nature of the business was changing, with quality assurance (QA) now a matter of being involved at every step of the way, rather than giving a piece of software the once-over before it went out the door.
Delivering sub-par software has always carried reputational risk, but he says the rise of apps, and snap consumer decisions, has also made QA more pressing. "If someone doesn't like your app, they'll just delete it and try something else."
With cybersecurity becoming a larger and larger part of QA, Hewson and McPhee started a sister company in 2019, SEQA (pronounced "Secure"), headed by Aura Information Security alumnus Mark Keegan (SEQA's staff and financials are included in the headline numbers above).
It turned out to be good timing, of a sort, as the pandemic hit months later and the "new normal" of hybrid working exposed more security gaps than ever.
Worried about the labour crunch?
Hewson and McPhee, who owned the bulk of the shares in both Qual IT and SEQA, will both stay on, and will lead the combined business in NZ. The Qual IT and SEQA brands will initially be retained. McPhee says it will be business as usual for customers, bar some Planit services being added to what's on offer, over time.
The tech labour crisis continues, but Hewson says he's not fazed by the prospect of recruiting another 250 staff. "We do a lot of training, and re-training of people from other sectors," he says. "We've had two intakes of graduates this year, and we're going to expand our grad programmes."
Weale says as an accredited employer, it's also possible that Planit could import staff from offshore on visas if that proves necessary to fill gaps.
The Planit CEO says he suggested the deal.
"I met Jon and Shane 10 years ago when I gave them a courtesy warning we were going to enter the NZ market - and we've been rivals ever since. We've built a healthy respect for each other They built an incredibly successful business. I saw an opportunity to get the band together."
String off offshore sales
The Qual IT deal is the latest in a string of offshore tech sales since the pandemic began, which has included the $2.3b sale of the tech division of Sir Peter Jackson's Weta Digital to US company Unity Software for $2.3 billion, A44 Games sale to a UK venture, robotics specialist Rocos' sale to a US firm, the $100m+ sale of EzyVet, plus the sale of Vend ($455m), Timely ($135m), Seequent ($1.45b), mobile gaming outfit Ninja Kiwi ($203m), Education Perfect (in a majority-control deal valuing the firm at $455m) and the $500m Hawaiki Cable (a deal now in front of the Overseas Investment Office), while December saw the sale of local retail hero Mighty Ape to Australia's Kogan for $128m.
But in Qual IT's case, "This is about supercharging the business and creating opportunities," Hewson says.
"This is an incredible milestone for Qual IT and SEQA and will launch the next stage of growth. It will provide immediate scale, IP, geographical spread, and a significantly bigger balance sheet.
"Joining a global company is a huge and exciting opportunity for our employees and clients, providing access to global expertise, networks, resources, systems, and opportunities."
McPhee says, "The decision to partner with NRI [Nomura Research Institute] and Planit was made after careful deliberation. The shareholders, all who will remain as part of the business, decided that Planit as part of NRI was the right organisation to partner with for the next stage of growth for the business, for employees and for clients."
SEQA boss Keegan says, "This provides immediate and significant upside to our employees and clients."
Weale says the deal closed on Friday, with all regulatory and shareholder approvals secured.
Hewson says this first week of the combined operation "Will be all about people. if your staff are treated well and are happy, then your clients will be happy."
POSTSCRIPT: A family affair
While many companies talk about having a "family" culture, in Qual IT's case its leadership team literally became inlaws.
Neither Hewson nor McPhee had formal training in information technology.
Having finished school at St Patrick's College in Upper Hutt, McPhee initially became a jeweller's apprentice before changing direction, and joining the Bank of New Zealand in Tawa.
He went on to join the investment banking division at National Bank.
Hewson, who grew up in Plimmerton, went to Tawa College, followed by the University of Victoria where he graduated with a Bachelor of Commerce.
The pair became friends when Hewson also joined National Bank - and McPhee met his sister, whom he ended up marrying.
Hewson also met his future wife at the bank.
The two couples headed off to London for their OE, soon before the Y2K crisis was supposedly going to hit.
With their interest in technology growing, Hewson and McPhee paid their way through night school in London, completing a course in programming and coding.
This set them up to understand the nuts and bolts of the systems they had been using within big financial institutions where they contracted in the City.
Returning to New Zealand, the couples got married, and set about planning their next steps in Wellington
The family connection between the two business partners has influenced the way they approach work, their clients and employees - with open communications, respect, and accountability central to success, the founders say. So far, they appear to have avoided the business equivalent of quarrelling over the right way to stack the dishwasher.