Christchurch IT scene: It is the business case that matters

Canterbury Development Corporation on promoting local ICT companies to the world

Of the top 100 technology companies in New Zealand, 16 are based in Christchurch and collectively they contribute $1.18 billion to the New Zealand economy – or around 16 percent of the total contribution of IT firms in the country.

These statistics feature in a draft report prepared by the Canterbury Development Corporation (CDC), which is keen to capitalise on the city’s history of producing global technology companies. Technology sector leader Enrico Tronchin (pictured below left with Anthony Thomas, general manager for industrial development) says the draft report is part of a process currently being undertaken by CDC (a trust company owned by the Christchurch City Council) to determine the top two ICT fields and to market these globally. He says it could be Health IT or geo-spatial technologies or even gaming development, which is a fledgling part of ICT scene in Christchurch.

CDC chief executive Bill Luff says that ICT directly accounts for 10 percent of the local economy, but indirectly that figure is much higher because of the “facility” role it plays in other businesses.

He says the reason for Christchurch’s strong IT base is a tradition that comes down to a “few individuals who were brilliant” such as Angus Tait (Tait Electronics) and Gil Simpson (Jade Software).

“Don’t underestimate the quality of life here, apart from a few earthquakes,” he says. “Those people managed to embed wonderful technological ideas, attract great tertiary (institutions) and also because of them we attracted international companies such as Allied Telesis, which are technologically based, not ICT necessarily.”

Allied Telsis is the top technology company in Christchurch with an annual revenue of $135 million, Tait is in second place with $114 million, and Jade Software in fourth place with $50 million, behind Dynamic Controls, a manufacturer of controls for wheelchairs that has a revenue of $100 million.

According to CDC the ICT sector employs 6276 people in Christchurch or 14 percent of New Zealand’s total ICT workforce. However, its draft report notes that more than half of the companies are owner only, with just 96 firms employing more than 10 staff.

“Some companies don’t get out of the start-up phase because they can’t prove their product or service,” Luff says. “The main problem of startups advancing, particularly in ICT, is that typically the principals of those companies tend to be extremely competent technically, have a brilliant idea or product; but they don’t know about marketing and about running a company.”

Luff says the typical startup will take between seven and 10 years to become viable.

“Capital’s not a problem. Everybody says capital constraints are killing innovation in New Zealand. It’s not that, I don’t think. There is capital for good proposals and what investors are looking at are really robust business cases, they’re not actually very often seduced by great technology,” he says.

Venture funding is available through the CDC’s subsidiary the Canterbury Economic Development Fund. It was created from the proceeds of the sale of electricity company Orion Energy’s retail business during the Bradford electricity reforms and currently sits at $4.5 million. To date it has invested in 32 companies – not all of them in the ICT sector, but most of them have a technology angle, Luff says.

The fund is managed by Powerhouse Ventures, an angel investor and company in its own right that also has a private investment portfolio.

In addition, there is funding from the New Zealand Venture Capital Fund, bringing the total amount of early stage investment funding that is overseen by CDC to between $8 and $10 million.

CDC is a backer of Enable Networks, the open access fibre network that connects around 450 schools, hospitals and businesses. It is competing with Telecom to form a partnership with the Crown Fibre Holdings in the Local Fibre Co in the Canterbury area.

“The reason the city has invested in Enable is that it was not at all convinced that the incumbents were perpetuating fibre connectivity. They were sitting trying to make the most out of their existing copper and I think without the impetus that first the broadband challenge from the previous government gave, which was instrumental in establishing Enable, and now the UFB, I don’t think we would have been looking at Fibre to the Home in the sort of time frames we’re now talking about. Simply because Telecom would milk the copper assets for as long as possible,” he claims.

To date 60 percent of Christchurch schools have been connected to Enable’s fibre. In order to facilitate adoption CDC together with Enable and CORE Education Trust, formed the Greater Christchurch Initiative. It employs two contract staff to visit schools and assist them in brokering deals with service providers. The preferred ISP is locally owned Snap, but Luff says they will assist the schools in approaching other ISPs if that’s their choice.

According to a survey by the Trust, the average secondary or intermediate school had three and a half servers “on which half of those were content servers and they were turning them over every 24 to 36 months at a cost of $25 to $30,000.”

Luff says very few of the smaller schools have ICT management capability and the Trust is attempting to explain to schools the “mystery of the cloud”.

“It is a bit of a daunting prospect when you’ve got a box in the corner, to say ‘here is a bit of fibre and the box will be 10km down the road, they’ll be some diversity on the other side of town and we just need you to transfer everything out of that box,’ – that’s a big call.”

* This is the second in a series of articles about the Christchurch IT scene. Tomorrow Computerworld talks to emerging smartphone developers Smudge Apps. In the meantime, check out the details of the next Fry Up debate to be held in Christchruch on 1 March, the moot is: 'South Islanders will be the most innovative when it comes to fast fibre networks'.

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