In 30 years time there will be one million more Aucklanders. That’s according to the Auckland Council’s Economic Development Strategy document, which says that 30,000 new jobs will be required to support the forecast growth in population.
Auckland Tourism Events and Economic Development (ATEED) has identified three sectors which could provide these jobs - ICT and digital creative (which includes film, TV, and video game development), food production, and health science and biotechnology.
In October last year, Auckland Council announced its plans to redevelop property in the Wynyard Quarter on the city’s waterfront as a technology and innovation precinct. Within 20 years the Council aims to create a business hub for the Asia Pacific region akin to Silicon Valley in California.
Around $17.7 million has been earmarked for the 3.4 hectare precinct as part of the Auckland Long Term Plan released last month, with a further $10 million set aside for the refurbishment of nearby heritage buildings.
Industry-specific clusters similar to the Wynyard Quarter will be dotted across Auckland, with Wynyard to be used as an exemplar for further projects in Auckland and throughout New Zealand.
In March Nextspace, a 3D mapping and simulation company, became the first company to move into the precinct. Brett O’Riley, CEO of ATEED, says there is significant interest among the Auckland ICT sector in becoming tenants at the precinct, with more than 60 companies expressing their interest.
O’Riley took up his role at ATEED in May and has worked on developing the precinct’s business case and implementation plan since then. Before ATEED, O’Riley was the deputy chief executive of business and innovation at the Ministry of Science and Innovation (MSI) which is now a part of the Ministry of Business Innovation and Employment, and prior that he headed the NZICT industry group
After working in New Zealand’s ICT industry for more than two decades, O’Riley says it is evident the economic future of Auckland lies in the technology sector, and the innovation precinct at Wynyard will be a showcase of what that sector has to offer.
“When we talk about New Zealand exports we need to start thinking of ports as sockets in a wall rather then where containers are stored,” says O’Riley.
Research undertaken by PwC to prepare the business case for the precinct found that its success will depend partly on the make up of its tenants, says O’Riley. Early stage companies are being sought, but there is also a focus on professional services firms, research institutes and universities, and investment companies.
“We don’t just want it to be a technology park, we want it to be a vibrant 24/7 technology ecosystem,” says O’Riley.
The management of the precinct will be outsourced to a private company before its opening, and O’Riley says a request for expression of interest for this role will be sent out later this year.
Due to the complexity of the precinct, and its use as an exemplar for other similar projects, O’Riley says overseas firms with experience in developing business clusters are being sought ahead of New Zealand companies.
“What we’re developing in Wynyard has never been done in New Zealand. Given its importance as a showcase for Auckland and New Zealand we want the very best practice,” says O’Riley.
O’Riley is quick to point out that New Zealand firms are not out of the running, but expects any Kiwi companies involved would likely need to be in a joint venture with an overseas organisation.
“We are quite keen to develop our own locally based capability around this. [Wynyard] won’t be our only innovation precinct in Auckland, far from it,” he says.
O’Riley says there is co-operation between ATEED and the Christchurch City Council in taking what is being learned in Auckland and applying it to the building of Christchurch’s innovation precinct.
“We very much see what we’re doing in Auckland as a part of the national story,” says O’Riley.
Early development of the innovation precinct has already begun, with the next stage due to commence in 2013.
One of the biggest challenges in growing the ICT sector in Auckland is the shortage of skilled technology workers, says O’Riley.
Conversations he has had with the industry while at MSI, and during his time as the head of NZICT, informed O’Riley that competing on a global stage for talented workers is a struggle for many Kiwi companies.
“I don’t use the term skills shortages any more, we’re in an outright global talent war,” says O’Riley.
O’Riley says the problem of IT graduates going overseas to chase larger pay-packets is difficult to resolve without comparable salaries, which due to the size of New Zealand is often unachievable.
Returning expats and immigrants wanting to raise families in New Zealand could be easier to pull in, and O’Riley says Auckland’s image of being one of the most liveable cities in the world should be leveraged by employers.
Strengthening the pipeline between educational institutes and the industry is a major focus for O’Riley, who is a trustee of the Manaiakalani Educational Trust, which provides computers to students in the Tamaki/Point England area of Auckland.
“I’ve seen with my own eye the capacity and potential that these kids display when provided with the right tools and a bit of education,” says O’Riley.
O’Riley says this kind of partnership between government and industry, and within the industry itself can be difficult for a sector which he says is often better known for its “decisiveness rather than unification”.
“We need to make sure we’re not doing lots of initiatives that are fragmented,” says O’Riley.
“For a small country we do ‘big country’ really badly,” he adds.
O’Riley says government is also complicit in the country’s lack of cohesion at times, but steps are being made to strengthen partnerships between the Auckland Council and local industry.
One of these initiatives is the opening of government data for third parties to use. For example ATEED is working on creating a digital blue print of Auckland with tourism information, which O’Riley says could be used as a platform for further innovation.
Getting access to working capital for startups and the New Zealand angel investor space in general is frustrating for start-ups, says O’Riley.
New initiatives such as business accelerators, crowd financing, and the Kiwi Landing Pad in San Francisco are helping startups make their first steps, but without more traditional investment options O’Riley says Auckland businesses are losing their potential to scale globally.
A lack of domestic investment was cited by Rod Drury as the main reason for the failure of the Pacific Fibre internet cable project. Many companies are facing similar hurdles with domestic investment, says O’Riley. He says he is particularly dissatisfied with the New Zealand Superannuation Fund which has placed around $3.5 billion in New Zealand investments, but has not made an impact on the tech sector.
“While I think investing in service stations is a nice retail cash business, seeing them invest in developing IP in New Zealand would be a positive,” says O’Riley.
By contrast, foreign investors are not in short supply, says O’Riley.
“We’re hosting delegations from China and other Asian countries every week.” However misconceptions about Asian investors, in particular the Chinese, are inhibiting investment in the country.
“The Chinese have demonstrated they can be good investors in the technology sector and most are not looking to relocate those businesses out of New Zealand, and instead to partner with Kiwi companies to develop IP in a managed and structured way,” he says.
O’Riley says he is surprised more startups have not taken the road lead by Xero, and listed their companies on the New Zealand Stock Exchange. Auckland companies are “leaving money on the table” by not putting in place proper investment procedures, including advisory boards and capital-raising plans. Listing with the NZX builds those disciplines, he says.
Broadband and connectivity
For the technology sector in Auckland to succeed, competitive international traffic is required, O’Riley argues. Overseas businesses are often put off setting up businesses in New Zealand due to restrictive pricing for internet traffic, he says. The data prices in New Zealand should be comparable to being another state in Australia, and preferably comparable to being another state in the US.
“We need our international bandwidth prices to be lower than our competitors,” says O’Riley.
“If we want to be exponentially different don’t we need an exponentially different cost structure?”
Without a competing cable like the failed Pacific Fibre, or the new player Haiwaiki making its move, O’Riley says Southern Cross has no reason to budge from monopolistic pricing.
“We’ve seen in the past that the threat of competition has caused Southern Cross to lower its prices, but there hasn’t been any incentive to go with a disruptive model,” says O’Riley.