KEY POINTS:
When Peter Maire talks about his ambition to grow a merged Provenco-Cadmus into a $500 million company, the first thought on the minds of many in the market would be, "where will it get the staff?".
The two companies which propose to merge make payment technology and software,
including Eftpos and other retail technology, petrol bowser systems and mobile and wireless devices.
"The skills problem. It's a huge issue for New Zealand companies and one we talk a lot about," Maire says.
It's one he sees not just in his chairman's role at Cadmus but in other tech companies, including health software-maker Orion, and in his previous firm, Navman.
"The idea of scaling technology companies is a challenge. We lack the people in New Zealand with the commercial skills around attacking a global market."
This country trains a lot of good engineers, but finding ones with the appropriate product experience can prove a challenge.
While there are plenty of people who can help develop leading-edge technology, commercialising it takes a different set of skills.
"There is a difference between making a product in small volumes for New Zealand and making a product at a price point that is competitive for a global supply chain. It's difficult to do but it's a critical issue for New Zealand companies who are globalising," Maire says.
If you operate in New Zealand, the chances are you are making something and selling direct to the end user, or to a wholesaler close by.
Going international often means using distribution or OEM (original equipment manufacturer) deals, where there could be many other people clipping the ticket before the widget of the software is finally sold.
Maire says that puts downward pressure on pricing.
"You may need to reduce the cost of the product to 30 per cent less than you think it should be," he says.
The alternative is to build your own global supply chain, open offices, establish your own brand and spend marketing dollars. That's why it's important not to set margins too low, so there is some fat left when companies want to change their business model.
"We started at Navman with OEM deals, then built our own brand in parallel with customers. We learned by making mistakes," Maire says.
"Going offshore, going to another country, finding a distributor, evaluating market - it's a process. You can teach it easily, just as you can teach someone to manage a grocery store, but we don't do that. We don't really have a good university culture around export businesses."
Maire says companies that ramp up need to find not just the handful of high performers needed to drive innovation and the large numbers of competent staff to put those ideas into products, they also need to find enough engineers who are good at managing other engineers.
"You find lot of fantastic products in New Zealand developed by 10 people. Maybe one tech guru with a team around them can build something great, but it becomes difficult when you try to scale that up. When you get big, developing software becomes about process."
Fortunately engineers often have good management skills if they get the right training and direction.
As it heads towards the $500 million mark, the merged company would become far more global, drawing staff from all over the world by hiring individually or by acquiring offshore companies.
Maire says it's important to grow fast to get the scale needed.
"All this intellectual property we develop rusts very quickly. If we don't globalise quickly, the value of the business diminishes."
Maire says New Zealand's technology manufacturing sector is tiny because this country has under-invested.
"Singapore also has four million people but has a huge tech industry. They have 2700 companies in their incubator system. We have 170.
"We have a world-leading dairy industry because we have invested billions of dollars in it. We have not invested in technology."
John Hosking, the professor of computer science at Auckland University, says many of the issues Maire raises are now being addressed.
"The growth of Navman was fuelled by the output of this university and others around the regions. It's not as if we have not done this before," Hosking says.
He says the university's academy programme, where students work holiday internships at companies, has improved the readiness of graduates. Many firms are now developing their own internship programmes.
The university is also pushing cross-disciplinary skills, with computer science working alongside the business school on programmes to build a research and development culture in small and medium companies.
It has also secured funding from the Foundation for Research, Science and Technology for a multi-university programme to help firms improve the process of software development.
"It's long overdue," Hosking says, with some New Zealand software companies experiencing rude shocks when they head offshore and find their products are still custom or bespoke systems under the hood.
