Kiwis make global bid for software outsourcing

By Roger Dennis

Friday 7th May 2004

A new export industry with the potential to bring in millions of dollars, employ thousands and spawn new companies for New Zealand was formally launched in London last week.

Software development is an industry based on quality products and services that does not involve transporting physical goods around the world, nor does it need to compete with agricultural subsidies.

Outsourcing software development is not new it is one of the fastest-growing industry sectors in India.

What is new is the message delivered at a UK conference to hundreds of senior IT executives from around the world.

They were told New Zealand is not only a world centre of excellence for software development but also an outsourcing destination with potential.

The pitch was supported by Gartner Group the highly regarded and influential information technology research organisation.

The message was made even stronger by the unmissable presence of a marketing stand branded Outsource2New Zealand or O2NZ.

While global vendors pitched their services, New Zealand distinguished itself by being the only country to market itself.

The formation of O2NZ is the direct result of a few key motivated individuals determined to ensure New Zealand seizes the outsourcing opportunity.

Over the past two years Synergy, a Wellington company with a British office, has made Gartner aware of the New Zealand ICT industry.

At the same time Synergy was also working hard to gain the support of New Zealand Trade & Enterprise (NZTE).

Last year this resulted in the government funding a Gartner report detailing how the country could position itself as a destination for outsourcing.

A secondary direct benefit of this study was the inclusion of New Zealand in a separate Gartner client report that identified it as an up and coming destination for software outsourcing.

Since the findings of the Gartner report were made public, other similar reports appeared.

AT Kearney another international research organisation has also produced a report that paints New Zealand in a favourable light as an outsourcing destination.

One of the key recommendations in the Gartner government report was that an umbrella organisation was essential for New Zealand software companies to compete on a international market.

It is remarkable that in the few months since this suggestion was made, Synergy, the Information Technology Association of New Zealand (Itanz) and NZTE have worked together not only to form O2NZ but also to put together a significant presence at the outsourcing conference to capitalise on this.

In the international software market arena New Zealand cannot compete on cost India, China and the Philippines dominate the pricing market.

But it can carve out a niche in providing innovative solutions; this is the route O2NZ is pursuing.

For a number of reasons including the cultural fit Gartner recommended New Zealand focus on the British market and O2NZ has also recognised this.

There is enough opportunity in the London market alone to keep most of New Zealand's IT industry in business for years to come.

The opportunities range across the spectrum in scale. Highly specialised niche companies such as Frantic which exploits the time zone difference to output legal dictation during the British night to law firms in London compete through innovative offerings on a smaller scale.

Synergy is tackling larger project implementations, while startups such as iTools are just starting to see the first big UK contracts being closed.

However, each of these organisations has worked in isolation to achieve their success.

There is a need for a focused industry umbrella organisation like O2NZ, which can make the entry into the UK considerably easier.

In Gartner's estimate there is a 18-month window of opportunity to position New Zealand as an outsourcing market.

With this in mind, O2NZ is working to ensure it capitalises on this.

It has moved to act on the recommendations and recognises it needs to develop a clear focus.

It also needs strong branding but in a world where nobody buys Chinese gooseberries anymore this should not be an insurmountable problem.

The New Zealand IT industry needs to understand that a sector-wide outsourcing approach is the way forward.

Jim O'Neill, executive director of Itanz, said there were 148 IT-related organisations in the country and it was a fair bet to assume there was some duplication with overseas market development.

To shortcut the traditional time-consuming sales route, O2NZ needs to make full use of Kiwi expatriates already inside large corporations.

Online communities such as KEA and NZEdge are a powerful tool that can help to achieve this.

Globalisation means small countries like New Zealand will find it increasingly difficult to compete on a mass production scale.

However, the geographical isolation that is a barrier to the export of physical goods presents no such problem when they can be delivered over a fibre- optic cable.

Indeed this isolation should be seen as an opportunity the sheer physical distance from Europe and the US removes New Zealand from the herd mentality that dominates corporate thinking in those regions.

As Edward de Bono observed, innovative solutions do not come from everyone looking harder in the same direction.

On a global stage, the impressive results Weta Digital has achieved with the special effects for The Lord of the Rings film trilogy has the potential to shatter the image of New Zealand as an land of sheep and tourists.

Scott Houston, chief technology officer of Weta Digital, did a presentation at the outsourcing conference and gauged the mood of the event firsthand. He observed, "We won't get a better opportunity than this."

Roger Dennis is a technology innovation consultant based in London. He is also an expatriate Kiwi

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