NZ ICT industry in doldrums: IDC

The ICT market in New Zealand is stagnating and needs reinvigoration.

That was the gist of IDC Australia analyst Peter Hind’s keynote address at this year’s CIO Conference, held in Auckland last week.

Hind says there’s a level of reinvestment in IT by commercial organizations in Australia that’s not being matched by their New Zealand counterparts. He pointed in his presentation to figures showing the average percentage spend on IT by organizations here is less than in Australia.

IT is increasingly been seen in New Zealand as an operational function, not something that can bring competitive advantage if creatively utilized, Hind says.

“Upgrade cycles are getting longer and we’re holding on to old equipment longer.”

The tight reign being kept on IT budgets is creating a negative feedback loop in which vendors are spending less, he told the audience of over 100 CIOs and IT professionals.

“All IT communities need an invigorated vendor community,” he said. Excessive marketing can be a nuisance, he notes, but “vendors bring ideas and energy and if they feel a market isn’t worth pursuing, they’ll withdraw.”

He gave the example of Accenture, which has withdrawn from New Zealand and services its NZ customers from Australia.

Recent industry events signal that some vendors are struggling in New Zealand, he said, adding that having spent 12 years working for vendors in Australia, “I know the barometers of vendor optimism.”

Another trend New Zealand would be wise to avoid is matrix marketing, in which vendors don’t assign an account manager to a client but service them with a regional industry expert resident in Australia or Asia, he said.

He pointed to Statistics New Zealand figures which show the ICT market shrank between 2002 and 2003. “Are we in a vicious circle?” he asked. “Is the ICT pulse still beating in New Zealand?”

He put some of the blame for the moribund state of the industry on economic rationalism.

“This is the age of the chief financial officer and the focus on costs is impacting the ability of CIOs to be creative.”

The short-termism that is pervading IT is reflected in the decreasing time period for expected return on investment for IT projects, he said.

“Twelve to 24 months is the most common period (among surveyed organizations) for an ROI, ie for the project to be cashflow positive.

“Try that with SAP,” he said, using SAP to make a general point, rather than single it out.

“A 12 to 24 month ROI is challenging and ICT doesn’t reward the impatient.”

The less-than-buoyant IT industry in New Zealand doesn’t sit well with our reputation as eager, early adopters of technology, he said.

“New Zealand’s use of mobile phones and Internet banking is higher than (many parts of the world). Products like Jade, Linc and MailMarshal show great software has come from here.

“I want to puncture any ICT cultural cringe factor.”

So what’s to be done to lift our ICT sector out of the doldrums? For a start, a bit of pump-priming by the government wouldn’t go amiss, Hind believes.

“The government has the ability to stimulate the market and some possible government IT projects include biometric passports, inter-departmental integration through portals and ERP systems linking primary and secondary health sector organizations.”

At a more individual level, CIOs and IT professionals should take advantage of the relatively small size of most New Zealand organizations and the lack of barriers between IT and other departments.

“You can have a dialog with business — take advantage of it.”

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