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Telecom layoffs have upside for NZ – McCrae

Tech company bosses are lining up to say they can take on some of the staff about to be cut from Telecom.

Orion Health CEO Ian McCrae says there's even a potential upside for New Zealand.

"It's tough on the people concerned," Mr McCrae told NBR Online from his company's Auckland headquarters. "But many will be moving from a utility company [Telecom] to high-growth export companies."

Orion, which makes software for digitising patient records, has prospered under the "Obamacare" health spending boom in the US, where reforms have required hospitals and other health practices to interconnect their files. The company has won Obamacare contracts for several US states, as well as landing business in Singapore, Australia and elsewhere. 

Mr McCrae says Orion currently has around 750 staff, and is in high-growth mode.

He talks specifics. Before Christmas, Orion landed a new project and looked to hire 55 new full time staff. It could only find 24.

"Since Christmas, we've picked up another project that requires 40 people," he says. He's confident of landing two more, which will require another 25 each.

Orion is privately held (Mr McCrae has a 62% holding), so doesn't release detailed financials, but it had more than $100 million revenue in its last financial year, and Mr McCrae wants it to become the first New Zealand software company to reach $1 billion in revenue (that's cash in the door, not market cap). 

Some, like consultant and commentator Ben Kepes, are dubious that Telecom middle managers will suit roles at lean start-ups and high-growth techs - or necessarily have the right skills.

But while Mr McCrae's company is known for hiring programmers, the CEO says many of the new positions are broader and include business analyst,  project management, marketing and consultancy roles.

Trade Me is also in hiring mode, spokesman Paul Ford says. The company currently has around 320 staff (including 25 with the about to be sold off Treat Me), and has a dozen positions open. "We're always advertising," Mr Ford says.

Xero adding 200 - but not at top end
Xero has doubled staff numbers from 200 to 400 in the past year. CEO Rod Drury tells NBR the cash-rich company will add around another 200 over the coming 12 months.

"Many start ups are light in experience in areas like marketing," he says. Staff from Telecom have in marketing and channel marketing, which was of real value. "CVs are already arriving," Mr Drury says.

Two caveats: not all of Xero's new positions will be in NZ, and Mr Dury says the company is already well-placed at the senior manager level; it's looking for mid-level staff. Some roles were specific to developing Xero's online accountiing software, but others were in areas like business analysis, marketing and project management where skills were transferrable.

Recruiting overseas
Candace Kinser - CEO of NZICT, an industry lobby group that includes the likes of Cisco, Endace, HP, IBM and Microsoft among its members - says many tech companies are "suffering now because they can't find staff."

She cites local IT services company Intergen (an NZICT member) as one example. "Intergen's CEO told me he wants to double staff numbers," she tells NBR. "You're talking several hundred people. Intergen is on a huge growth trajectory."

NBR understands the shortage is such that Intergen has been looking to fill around 200 positions by recruiting overseas. 

Hot techs have jobs - but not always at $100K
Ms Kinser has spoken to Telecom Retail CEO Chris Quin about NZICT facilitating a job matching service.

But she also cautions, "They're not all going to be $100,000 developer roles (Telecom's 2012 Annual Report listed just under 3000 staff earning $100,000-plus). I think that's where the issue is. It'll be across the spectrum; middle-management, back-office, you name it."

Some are doing it tough, but others are already striking out in new directions. Former Gen-i  head of mobility and product marketing Joe Caccioppoli, for example, is already pitching NBR with smartphone battery-enhancing products, courtesy of his new role as managing director of SeaChange. His company has just inked a deal to supply the local arm of Ingram Micro, the largest IT distributor in NZ (and globally). Elsewhere, an industry source tells NBR that a group of ex-senior Telecom staff are behind the Orcon bid fronted by Vivid Networks (a counter-rumour involves an Australian private equity player).

Labour-ish direct grants pay off
Yesterday, Telecom acknowledged that more than 1000 staff could be laid off (on top of 350 already gone this financial year from a 7600 starting point). Labour ICT spokeswoman Clare Curran says Telecom insiders are talking about a cull down to 5000 - implying an army of 2500 laid off staff that would out-number the reported 1300 tech jobs available.

Ms Curran has called on the government to come up with a plan. Economic Development Minister Steven Joyce says the ICT job shortage means the market will take care of things.

NBR would also add the government has been hands on in the past.

In August 2011, Xero landed $4 million in no-strings taxpayer funding.

In a December 2010 direct grant round, Orion received $7.2 million. 

Some might say the $200 million-plus shovelled at tech companies by the current government - much of which has been used to hire staff - has been a case of out-Labouring Labour in state assistance.

Regardless, it's paying off for job-hunting ex-Telecom staff.

ckeall@nbr.co.nz

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Comments and questions
20

Just how many of those laid off from Telecom are likely to be able to get jobs at the likes of Orion? It seems that most of those cut at Telecom are going to be middle management - the type that can barely spell ICT, let alone do anything constructive with or to it.

I agree with Mr Grumpy.

Companies like Orion and Xero require people who are energetic, have initiative and a "can do" attitude - precisely the attributes that would stop you even getting through the door at Telecom.

How do you spell ICT?

As a Telecom staffer (fairly recently joined, I must add) I can vouch for the incredible talent within the business - and people with great attitudes, too. Telecom is actually incredibly fussy about who it hires (took me a few tries before I got a foot in the door) and I'm sure businesses like those quoted know this.

Ever wonder why your monthly Telecom bill is so high and why service is often inferior to many overseas Telcos?

These layoffs are long overdue. For too long Telecom has been more about its employees than its customers. The very fact that 1500 can be sacked at the drop of a hat just goes to show how useful these people were to this company where more than half the 7000 NZ based staff are on $100K+. Hopefully there will be many more firings to come and that this will translate to better service and lower telecom/internet fees for its reason for being: its NZ customers.

@ #4 have you ever used an overseas telco? Your sort of rhetoric is uninformed, unconstructive and unhelpful. 1,500 jobs gone will create carnage internally at Telecom as mouter and the muppets trash what Labour haven't already wrecked.

You blithely say that " Hopefully there will be many more firings to come and that this will translate to better service and lower telecom/internet fees for its reason for being: its NZ customers." - please explain how this works in a business that needs to continously invest in infrastructure whilst competition and regulators erode profit. It is well and truly time some of these ignorant Telecom haters stepped up and explained themselves.

Let's see what happens. It would be great if the likes of Orion and Xero were able to pick up a significant number of these workers and see that as a "dividend" back to the tax payer for the assistance they have received.

This is nothing to do with Government or the taxpayer. It is the normal changes that occur in a challenging and constantly evolving competitive ICT environment. Leave it alone and it will sort itself out. The anguished Labour Party comments just show why they are not the right people to be governing this country in this century.

To a degree. Every incumbent/ex-govt monopoly telco around the world is seeing profit under pressure, and huge, unavoidable technology and market change is underway as the voice lines of old are replaced by internet telephony and data-everything.

But Telecom's immediate situation is the result of the Telecommunications Act that saw the government cleave it in two in 2011. Arguably a good move for overall competition to separate its retail and wholesale operations - but very much one pushed by the government rather than the market.

Telecom's commercial success over the next few years - and that of other retail telcos and ISPs - will hinge in part on government and Commerce Commission negotiations/arm twisting over Chorus' wholesale charges, and UFB connection costs.

I wouldn't say it is due to the carve up. It has twice the staff of the combined Vodafone/TelstraClear. It was overweight before the carve up and still overweight after.

They've lost their monopoly income so now have to be competitive. That's why they brought in the new CEO.

You are obviously a telecommunications strategy expert. Where is a sarcasm mark when you need one?

I, for one, am sick and tired of people whose only real knowledge of telecommunications has been the fact they know how to use a phone weighing in as experts after the fact.

Here's a message to Harvey and all the other ignorant sofa commentators - engage brain, think then write. If you don't really know then shut up, you are not adding anything constructive.

So which parts of Harvey's comment are factually incorrect?

No, I have to disagree. That is completely inaccurate; irrespective of the parameters that the Government set down with UFB, Telecom elected to put forward a proposal that involved the demerger and separation of Chorus. The Labour Party, in government, put in place the operational separation regime, and the insane imposition of costs on Telecom as a business.

Telecom made a decision that its best course was to structurally separate and move to a retail service provider business to release itself from the burden imposed by the last Labour government.

Telecom is now making decisions as a private entity as to what it deems the best to deliver on its strategy in the environment it operates in.

This is pure politicking by Labour. Claire Curran might have an "inside source", but where is her ethics? Claire has elected to go public with information that may, or not be, accurate; before employees of Telecom know what is going on, or shareholders. This is seriously irresponsible by Claire, and Labour. For a party that is meant to represent workers, how does Claire feel about the impact her actions have had on the employees of Telecom, and their families?

Quite simply, this whole affair is nothing but disgraceful. Whatever Telecom does, it's a decision for Telecom, and a matter for that company and its employees. Incompetent politicians should keep their nose out of it.

You ignore the fact that as a Labour politician, Clare and her cohorts oversaw a big part of what has caused these layoffs. She may be a hypocrite, but trust me Telecom staff have long known they were on borrowed time, thanks to the Moutter muppet show.

Totally agree!
Curran and the Labour Party wiped $53m off Telecoms worth on the stock market and her comments could and should be interpreted as "insider trading" - requiring the AG and SFO to check for insider trading by these people who suddenly find pots of surplus Cash in off shore banks...

Curran and Labour have been attempting to politic and have caused deliberate and malicious economic sabotage and they need to be held accountable and liable for the economic vandalism they cynically inflict.

@ #6 These layoffs are the result of moronic and ideological decision making by regulators that should know better.

Virtually all our retailers are 100% foreign owned, and most multinationals are paying woefully small amounts of tax.

Think about this as you smugly stand on your pulpit and preach, you fool.

Having worked alongside Telecom (we are a large corporate client), I would like to say that Telecom do have good and bad eggs just like any other corporation. It is a "top heavy" organization - too many chiefs, not enough Indians (excuse the pun). The chiefs turn up for meetings in droves in their suits with nothing much to contribute, and sometimes more of an embarassment for the techies who are doing their best to solve a problem / issue. I do feel for the real workers at telecom.

Curran has achieved the hypocritical feat of making this look like anyone's fault but Labour's - Labour sensing easy votes, fuelled anti-Telecom sentiment and created market regulations that saw Telecom bleed money whilst multinationals took wheelbarrows of cash out of NZ's economy (if their spin merchants say otherwise, just read their annual reports, it paints an interesting picture when the amount of tax paid is factored into the mix).

Telecom were also the authors of their own misfortune. Instead of looking at the slightly more difficult task of how to innovate and create compelling propositions that would generate new areas of growth, they focused on a strategy based around discounting. Now they have to cut costs. Silly billies.

We, the public, also have role to play in this sad tale, too. Telecom has been the corporate that Kiwis have all loved to hate. But we all seemed to forget that it was employing Kiwis and investing in NZ. Most our superannuation funds are tied up with Telecom, but we all bayed for blood and politicians sensing easy votes waded in....

So what do we have as a result of all this? Marginally cheaper mobile phone rates and cheaper broadband. Trouble is, if things continue in their current trajectory there will be so few of us left working or so few New Zealand-owned businesses left that no one will be able to afford said mobiles or broadband regardless of how cheap it becomes.

@7 I agree totally I was an "Indian" and there were far too many management layers - these need to go and the really productive people need to stay.

As someone who lost their job at Telecom not long ago I agree the business has been bloated. However, so far there's been no real strategy behind reducing employee numbers and this latest round seems no different. In my former team they were recruiting new people as others left up to four weeks before a few of us were made redundant. And now they're contracting some of us back again! This is madness! And it's because there's no real plan about what to stop doing. If Moutter was a true visionary he would've announced a hiring freeze for non-essential/technical roles before he even started. In fact, this should have happened at the time of the de-merger. The reality is the company's been in limbo with no real leadership ever since Reynolds 'checked out' in late 2011 after the board announced he would be leaving in 2012. Moutter has been there for nearly a year and is still to produce a grand plan or vision for the business apart from slashing and burning, and filling his exec team with fellow rich, white middle-aged men like himself.