Peter Griffin: Knowledge Wave eases to a ripple

COMMENT

As a journalist it's always interesting to look back through the Herald's digital archives to see what was being written a few years ago - even if it's just to check how much of what we said was going to happen actually did.

It was interesting then that the archive brought me back to a series of articles from August 2001 on the Knowledge Wave conference, an event this paper enthusiastically supported.

Remember that? The star-studded talkfest that set the agenda for booting New Zealand back into the top half of the OECD? Some of you may have attended.

Reading through the determined articles of the time, from the likes of Prime Minister Helen Clark and the then University of Auckland Vice-Chancellor John Hood, got me thinking about where our IT industry has come in the 2 1/2 years since that gathering of minds.

The conclusion has to be "not very far". In fact, a look at a few key performance indicators would appear to show that our little old IT industry has been treading water these past 2 1/2 years.

Sure, building the Knowledge Economy was always going to be about more than just IT. There was education to be considered, marketing ourselves to the world, economic stimulation and social development.

But technology was to be a key plank of the whole shebang in both a commercial and social sense.

The figures released by Statistics New Zealand last month show that the value of sales in the IT sector fell by 1 per cent last year, to about $7 billion. The value of IT exports fell 30 per cent last year to $677 million.

Though 2002 seems to have been an exceptional year for exports, back in 2001 our IT exports were worth $770 million.

Statistics New Zealand and the Ministry of Economic Development are at a loss to explain the large dip. A few unfortunate factors such as the high kiwi dollar won't have helped.

There is little data to prove either way, but it appears commercial research and development activity in the IT industry is no further along. In fact, we've recently lost a handful of development houses, most recently the team maintained by NetIQ, the US buyers of Marshal Software, and the Bulletin Wireless developers.

Government initiatives in the tech sector continue to be well-meaning but piecemeal.

We've had the ICT Taskforce report which set an ambitious goal of growing 100 new $100 million companies by 2012. That, when sales revenue for the sector is shrinking.

Funding grants from New Zealand Trade and Enterprise continue to flow, with the IT sector picking up its fair share. Initiatives such as establishing the Waikato Innovation Park are encouraging but will have longer-term outcomes.

Finance Minister Michael Cullen is expected to make some announcements about "accelerated research and development" in this month's Budget. We wait with interest to see what he can produce.

Our core IT vendors continue to plug away at the local and overseas markets with mixed success. Two of our biggest software exporters, Peace Software and Jade, have faced tough times.

Jade lost $15.6 million last year as operating revenue dipped from $45.3 million in 2002 to $30.3 million.

It has restructured to survive. Peace has had a couple of rounds of job cuts, the last one in January claiming 40 jobs. It has been hit by sluggish market conditions in the US.

Electronics maker Navman is thriving, but is now mainly owned by Americans.

The multinational IT vendors in this country, who contribute most to the value of the industry, are battening down the hatches as they cope with their own problems.

Hewlett-Packard turned a $2.6 million profit for the year to October 31 last month, despite generating revenue of $539 million. It was hit by a foreign exchange loss of $18.2 million.

EDS last year reported a record $78 million loss put down to accounting changes.

Even IBM, which reported a $31 million profit in August for the 2002 year, wasn't to squeeze a great margin out of its $326 million of revenue.

In 2002 the plug was pulled on the Ericsson Synergy development, which was set up after we failed to lure Motorola's development muscle.

A rare bright spot was the Government-funded move last year by IT giant EDS to outsource call-centre services to New Zealand in a deal brokered by local EDS chief Rick Ellis.

The IT Association and NZ Trade and Enterprise were last week pushing the Outsource2New Zealand initiative in London. Good idea, but a little late in the delivery. India, China and even Australia have for a couple of years been mopping up IT contracts from the US and Europe.

They are facing the backlash of the anti-outsourcing movement before we've even entered the fray.

You can say that, more than anything, global forces such as crumbling markets and currency fluctuations have damaged our IT aspirations.

But shouldn't we as a country be fighting like hell to pull something else out of the bag to try to counter those forces? Something big to stop us sliding backwards? How realistic are we about investing in building this knowledge economy? There appears to be less activity, less momentum, less happening, than there was 2 1/2 years ago.

As far as technology's role in the broader aims of building the Knowledge Economy, little progress has been made. Despite the flurry of activity from the Commerce Commission on telecoms regulation, consumers and businesses have yet to see any tangible benefit in the form of lower bills for internet and telecoms access.

Telecom's more realistic broadband pricing is beginning to help here, but not much.

It looks increasingly likely we'll join Mexico as the only country not to impose local loop unbundling on its incumbent operator.

We languish at the bottom of researcher Point Topic's Broadband Growth Index - with Latvia and the Czech Republic.

Project Probe, the plan to get high-speed internet to all schools, has faced delivery problems. Regional broadband services that have rolled out are hampered by high set-up costs and the fact that no voice services are yet available over them.

The politicians were careful not to promise too much at the Knowledge Wave conference. Which is just as well. As far as IT is concerned, we've been ambling along for the past 2 1/2 years. Government and industry will have to up the pace if we're to find ourselves riding the Knowledge Wave any time soon.

* Email Peter Griffin