A snapshot of our ICT industry, and how much it's worth

Paul Brislen

The government’s newly released ICT sector report gives us a great snapshot of the broader ICT (information and communications technology) industry, how it’s doing and how much it’s worth.

It’s really the first time we’ve had such a comprehensive look at the sector and assuming we get an annual update (at least) it’ll be very useful in benchmarking how we’re progressing.

The report focuses on the three main segments of ICT – manufacturing, services and telecommunications itself.

First, the good news. The sector is growing and is now worth 5% of GDP. Wages are running at double the national average (you’ll be pleased to know you can expect $103,563 as your midpoint in 2011) and growing faster than the national average as well – 4.5% growth year on year instead of 3.2%.

If you want to work in ICT you’ll have to live in Auckland. One third of all ICT jobs are based in the City of Sails – not surprising given the country’s population spread, but more than half of all “computer system design jobs” are Auckland based. Interestingly, Christchurch is second with 9.6% of all ICT jobs and Wellington third with 7.3%.

You’ll probably be working for yourself – fully 75% of the industry is self-employed (zero employees) – but that’s no bad thing. It means we as an economy really need to bear in mind the cost of doing business versus the cost of being an employee as an issue.

Best of all, we’re exporting. “Computer and information services” has grown from $288 million worth of exports in 2006 to $531 million in 2012 – a compound annual growth rate of 11%. Imports, by way of contrast, are still increasing but at the lower 8% CAGR.

The day will come in the near future when our exports exceed our imports and we can rightfully take our place as one of the creators in the digital economy instead of a consumer.

Which brings us to the bad news, not that it’s going to be news to anyone in the sector. We simply aren’t turning out enough graduates to fill the roles on offer. Finding new employees with skills is still the most difficult issue raised in the report.

Today, 62,000 workers are employed in ICT roles (as opposed to working for ICT firms), and that’s up 11,000 in the past decade, but half of all ICT firms report difficulty hiring staff.

The figures can be traced back to the education sector and the lack of ICT graduates coming through the system. Although the number of graduates has increased, there were only 1200 graduates in 2011. We might get to 1900 graduates by the end of next year, but even so that’s a drop in the bucket. We could never attract a big-name ICT multinational to set up a development venture in New Zealand with that small a graduate pool.

We need to encourage our kids to consider ICT as a career option. It pays well, you can travel the world, you don’t have to dig up a national park and these skills are highly desirable, yet all too often we see good quality candidates going into accounting, law and management – three areas that have trouble placing graduates because of the oversupply of talent. The skills aren’t dissimilar – maths, logic, a flair for process – and the chances of being gainfully employed are a lot higher.

It’s great to see the government looking in this much detail at our sector. I’d hope to see more of this kind of data come through in the years ahead so we can track our progress, but that’s really only the start of it all. We shouldn’t just be tracking, we should be driving this sector forward and that means a concerted effort from both sides of the fence – industry and government alike – to make it easier for ICT to bloom.


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OH? And exactly what is it you want from "Government" Mr Brislen?

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I think I can answer that; less giving away of contracts to overseas multinationals which have the government ICT department in their pocket, the local council actually doing something about growing ICT in Wellington rather than spouting hot air, and, if it's not too much to ask, the local council, and government, getting rid of its dinosaur attitudes and actually understanding the issue.

That would be a good place to kick off.

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I'd like the government to do a few things to encourage ICT growth. As Steven Joyce said at the launch, if you're waiting for government to take the lead you'll be waiting a long time.

I'd like to see the government realise it's the country's largest ICT buyer and to start using that buying power to encourage New Zealand development.

Take the IRD computer system, budgeted at up to $1.5bn. That much money spent on local developers would be a tremendous boost to the local industry. There's no reason why NZ developers couldn't build the system - it's not as complex as Xero's current model and that was built locally at a fraction of the cost.

I'd like the government to realise that investment in infrastructure should be encouraged not saddled with licensing fees. In particular we are about to auction off 700MHz spectrum. I'd rather see the money the telcos will spend on a piece of paper from government spent on the network itself. If they each spend $100m on network deployment instead of a licence that will increase the size of the network by around 300 towers each - that's the rural broadband problem snuffed out overnight.

I'd like to see government change the tax rules so people like Rod Drury can reward the best workers with shares in his company in a more tax neutral way. This has been a tremendous boon to the US ICT industry - we should follow world's best practice and so encourage ICT workers to stay in New Zealand.

I'd like to see the government support investment in critical infrastructure like more international cables. A cable from here to the US would cost around $500m - the waterview motorway tunnel would provide funds for four of them and we'd be able to really build New Zealand up to be an exporter of ICT services rather than a net importer as we are today.

I'd like to see the government encourage more kids to take up ICT related education and training. Currently we produce 3,000 graduates a year at most - yet ICT is not one of those courses listed under the government's scheme to increase tertiary enrollments.

We are a long way from our markets. We of all the trading nations on the planet have the most to gain from taking a key role in the digital economy, yet we are doing no more than a middling job of encouraging growth in this area. I'd like to see us doing more.

Cheers

Paul

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1)
"I'd like to see the government realise it's the country's largest ICT buyer and to start using that buying power to encourage New Zealand development."
That's okay, why then are they not buying NZ?

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I suspect there's too much fear that buying an unknown local service is riskier than buying from IBM, EDS or similar.

I've heard of one local IT house turned down in a pitch process for a council job because it was deemed to be too small to provide the service, yet it cheerfully supplies services to Yahoo.

The mentality has to change.

Cheers

Paul

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Paul - great article and great replies. The IRD system is shaping up to be a colossal screw-up, with common sense already thrown out of the window in favour of a huge vanity project.

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Thanks Paul, Surely there is a process where the tendering/selection process can be challenged.
I would be disappointed if there was not, as the big overseas corps have the wherewithal to court the decision makers.
There HAS to be transparency, Surely?

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The system that both central and local government employ to choose ICT companies for work is inherently flawed. Effectively, you have to "buy into" that process via a panel, and that can cost a lot of money a smaller company can't afford.

That and the fact that a lot of these large organisations are deep in the pocket of the large overseas companies which can afford to take them to lunch, to the rugby, out for drinks after work, to conferences in Australia, Las Vegas, and other exotic locations.

The IRD work is a good example. It is actually a decision that totally defies logic for a number of reasons.

If you want an example of this in action, go and ask your council CIO or IT manager for a couple of things.

The proportion of spend on local, Wellington, ICT companies versus everything else. Then ask why it's that way.

Also, ask for the gift register for your ICT organisation. I'll bet you a couple of things. One, it probably doesn't exist and if it does exist, I'll bet it doesn't have the full story in it.

Supporting NZ ICT starts at home, John.

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I don't have a problem with the IRD having a world-class IT system... far from it. But I do think $1.5bn is asking for trouble and that if we are dumb enough to spend that much, we should spend it locally so at last some of the flow-on effects are felt locally instead of on the NASDAQ.

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I have the utmost respect for Steven Joyce and his undoubted business acumen. But..... I am left wondering at his silence on the IRD refresh decision (is it a decision yet, or a statement of intent?) to dive balls and all into a bottomless pit - with his hands still calloused from his NovoPay efforts, Joyce must know that $1.5B is just a notional figure, and the reality will only be known when it's too late. As a nation, we must surely be entitled to know (before it's inked) how this project will be staged, and what each stage will cost and deliver, without compromising the preferred vendor's commercial confidentiality. This knowledge would at least allow the local ICT community the opportunity to critique the proposal in broad daylight. To me, this default to international vendors is far more threatening to the nation than all of the (in my view) media-inspired GCSB legislation panic.

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