Jade turnaround highlights ICT policy alternatives

Five years ago, Reserve Bank deputy governor Rod Carr jumped ship to the private sector, as managing director of Jade Software

Jade Software is yet another company to enter into a contract with a large Indian company, in this case with CMC, from whom it has just taken on nine staff.

The deal is in part about skills shortages in New Zealand but at another level it goes to the heart of what Jade managing director Rod Carr sees as the future direction for local software companies, one which does not necessarily sit comfortably with central government plans.

For its part, CMC wanted to focus on Jade’s student management system, which it saw as ideal for resale in India, Carr says. That’s because it’s a low-cost solution to complex problems — and the deal provides scalability not available in New Zealand.

And that, in a nutshell, is where New Zealand companies should be heading, he says. “There’s no particular reason to believe we’re any better here at development than elsewhere. It’s what we do with it.

“We’ve got all the complexity without the scale. It’s not surprising that we should focus on logistics and supply chain, especially in areas such as farming.”

For Jade, that’s meant partially focusing the company on areas such as container port management software. It has made notable exports to ports such as Gdansk, in Poland, based on its New Zealand experience, and in the US, UK and Australia.

For example, Rio Tinto Aluminium uses Jade Master Terminal for scheduling and bulk cargo tracking in Australia. Jade’s other areas of expertise are in HR and payroll, tertiary education, financial services, law enforcement (the Australian federal police use Jade’s criminal investigation management system) and governance, risk and compliance.

It aims to develop enterprise solutions involving complex data models and complicated and changing rules.

Carr says the value of IP is collapsing, that it probably has a half-life of just 18 months.

“My sense is that bright ideas can be generated any time, spontaneously, but if you’re trying to build a sustainable community you should ask yourself why your community would be better at creating new ideas.

“There are many more people doing that now, since the fall of the Berlin Wall and the opening up of China.

“We used to get value by how we controlled an idea, by controlling, say, the hardware platform.

“Over the past 10 to 15 years, those barriers have essentially collapsed. The number of ideas has exploded but the ability to extract value from them has significantly decreased.”

Value must be created very quickly, he says, because there is now much less friction in the ways ideas transition.

New Zealand doesn’t have densely populated urban centres so is more likely to develop good ideas around things rural, water management or sustainable tourism.

“But the government wants to develop policies around commercialisation that are more likely to get pay off in public policy,” Carr says.

“I don’t think the government has got its head around ICT. They’re still trying to think what a definition of ICT is. The old No.8 [wire] argument is really about us being quite alone and destitute. So we have had to develop a just in time way of doing things.

“The ambulance is at the bottom the cliff because we can’t afford the fence at the top.

“We have to provide low-cost solutions to complex problems.”

He says the perception in government is that the universities are stocked full of bright ideas of huge commercial value. “I suspect there is no commercial value or that it would cost too much to develop it. I suspect 95% of the cost would be in the risk and of development.”

Commenting on the broader economic outlook — which as a former deputy governor of the Reserve Bank he is well qualified to do — he says people are not more productive in New Zealand because 35% of them are tied up in central government.

“How the hell can you measure things? People get more passionate the further they get from Wellington.”

He says the situation is not worse than in Australia but it may matter more because New Zealand is small and remote.

“What would we do, for example, if Australia decided to introduce zero tax based on its mineral wealth?”

To survive and grow, New Zealand ICT companies must figure out suitable margins, he says.

“Basically, banks won’t lend to IT companies, so interest rates don’t matter. The labour market and inflation rates are the big issues.

“Our deal with CMC was not about getting cheap labour but guaranteeing it at a fixed price. We left value on the table for them; we said we would pay the same that we would if we could find the labour in New Zealand. It was revenue-neutral for Jade.”

He says it is very difficult to give his middle-level IT people a pay rise when they have children and attract the government Working for Families rebate.

“If I give them, says, $10,000, they’ll be lucky if they receive $2000. But that puts my day rate up. If they go to Australia and get, say, $30,000 more, they’ll get to keep $20,000 of that.

The key to improving New Zealand business, and for individuals, is less tax, he says.

Jade currently generates 51% of its revenue from overseas, 43% of which comes from services. Carr says the company is targeting sales of $50 million.

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