No IRD lifeline for local PC maker

It was a rich irony that last week saw the Inland Revenue Department name Acer as its preferred desktop PC supplier for the next three years, and possibly the next five.

It was a rich irony that last week saw the Inland Revenue Department name Acer as its preferred desktop PC supplier for the next three years, and possibly the next five.

Knowing the head of The PC Company, Colin Brown, I’m sure the irony was lost on him in an eruption of anger. Brown has often expressed impatience at the apparent unwillingness of public agencies to buy locally made PCs. With the fate of his Hamilton-based company hanging from a thread as this was written, the announcement would have only added to his unhappiness.

But would it make any difference to the long-term viability of local PC makers if the government tossed them the odd bone? The scale of the IRD deal would certainly have helped The PC Company along for a while. The taxman is taking an initial 2000 desktop PCs in October or November, followed by 2900 more within the three-year term of the deal. It may or may not be extended for another two years.

Those are large numbers. But according to a year-old Brown press release, his Hamilton assembly line can churn out 6000 PCs a month. The same release talked optimistically of the company breaking out of the consumer PC market and becoming a supplier to businesses. For that purpose, Brown was looking for a site on which to build a new facility that would produce 10,000 machines a month.

But optimism clearly wasn’t enough. Last week, after having gone to ground for the previous fortnight, Brown issued a release saying sales had taken a dive over the past 12 months and that he was shutting his seven retail stores pending the restructuring of the company.

The Computer Manufacturers’ Association of New Zealand (CMANZ), of which Brown was a founder, hoped that might mean the company would arise again (although a CMANZ press release on The PC Company’s predicament referred to the company’s “demise”).

CMANZ was established four years ago to back the hardware warranties of any member company that went into liquidation, and last week chairman Peter Shirley said there was plenty of money in the bank to cover outstanding PC Company agreements.

Shirley, like Brown, believes government agencies should be buying locally made PCs. Representations to the government two years ago resulted in the creation of purchasing guidelines that stipulate departments must notify the Industry Capability Network (formerly the NZ Industrial Supplies Office) -- which comes under the auspices of the Ministry of Economic Development -- of intended purchases over $50,000. But Shirley is convinced the guidelines are routinely bypassed.

One way of getting around them is using a feature of the IRD-Acer deal. It includes a syndicated procurement provision extending the same purchasing terms agreed to by the IRD to any other government agency that wants to take advantage of them, without need of going to tender. Shirley says such mechanisms do nothing for the local industry.

It’s far from being a straightforward issue, however. CMANZ points to Australia, where domestic purchasing rules are more stringent. There, public bodies – including local authorities – have to justify their choice of non-Australian products. But in a market five times the size of ours, local manufacturers are of a much bigger scale, and can foot it more ably with multinational vendors. Here, local PC assemblers are less well equipped to fill orders for thousands of PCs, shipped from the factory with a customised software install. In the IRD instance, once again, those machines will be despatched from Acer’s Sydney facility with a customised version of Windows XP pre-loaded. Brown might well say he could cope, but his would be the only local operation that would stand a chance.

But all of that is probably a sideshow. New Zealand doesn’t manage to have a domestic TV manufacturing industry, and the potential market for those is in the same league as PCs. Scale is everything in such industries and, unless we want to more fully embrace third-world pay rates, we can’t compete with countries with a large cheap labour pool. That’s not to say it won’t be an enormous loss if The PC Company is history. But there would seem to be an awful inevitability about it.

Doesburg is Computerworld’s editor. Send letters for publication to Computerworld Letters.

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