R&D funding rules easier but still murky

If you think gaining Technology New Zealand funding is some sort of dark art, a clarified definition, from the funding body regarding what constitutes software R&D, might illuminate matters.

If you think gaining Technology New Zealand funding is some sort of dark art, a clarified definition, from the funding body regarding what constitutes software R&D, might illuminate matters.

Technology NZ, a division of the Foundation for Research, Science and Technology, hopes the new definition will encourage more innovative companies to apply for GPSRD (grants for private sector research and development) funding. It says lack of clarity may have deterred some in the past.

The definition now says R&D must involve a degree of “technical stretch” that increases capability and involves genuine innovation. Six types of activity that constitute software R&D are specified in the definition, which gives examples of projects likely to pass the funding test, provided they involve technical stretch and significant commercial


However, some murkiness remains. Technology New Zealand GPSRD investment manager John Gibson (pictured right) describes the changes as a slight rather than major shift of the goalposts. The criteria still adhere to the Frascati definition, which is used by the OECD and other international agencies to define software R&D, and who gets funding will come down to how the shifts are interpreted, says Gibson.

Software developer Stephen Baugh (pictured left), of Auckland company Queensberry, says it’s great news that Technology NZ is adjusting its rules to recognise the unique nature of software development, but questions remain about how the modified definition will work.

Queensberry was rejected 18 months ago for funding to write a web-based customer service application. The company, which produces customised photo albums, forged ahead but reckons the lack of funding held it back six months, letting three similar applications beat it to market.

Queensberry recently launched another version of its software in Las Vegas, to what it says was an enthusiastic reception. Baugh says it involved significant research, development and “technological stretch” but he still doesn’t think it would qualify.

“A lot of the technological stretch comes from evolving things you’re already working on, which falls into the business-as-usual category. Ours is more an advance on ‘prior art’ and a collection of other ideas in a unique format.”

Gibson says Technology NZ wants technical — not commercial — risk and not business-as-usual.

“The higher the technical risk, the more interested we are, because if it succeeds, the added value or economic outcome is going to be much greater.”

However, the R&D test is very much a subsidiary part of the overall assessment. There also has to be a credible marketing plan, ability to deliver, good project management and a likely commercial return. “If it’s a bit flaky in those areas we don’t want to go there.”

But Baugh asks, “What is Technology New Zealand actually trying to fund? Research for research’s sake or commercial projects that have an R&D component? I think the bent is towards the first — a reasonable expectation but flawed. ‘Technological risk’ really means that there is a risk that a solution won’t be found or that the research will be inconclusive.”

However, Baugh is happy with Technology NZ’s announcement that projects will be assessed by an independent reference group of industry experts. He says when Queensberry applied, one person decided on the project’s merits.

Auckland software developer Vaughan Nankivell, who has worked for eCom and is now with Lotus developer Convergence, says his perception of Technology NZ funding was that it was difficult to get and limited. Convergence funded its Ability-Suite software product from company growth but Nankivell says if the new rules are simpler and the process easier he will be interested in exploring the GPSRD option. He believes Convergence meets the new criteria.

Stephen Millington, director and general manager of Auckland-based Infomace International, doesn’t bother with government funding. He says the hours taken filling out the forms are better used in trying to find new clients.

Infomace specialises in the application of computational intelligence, including artificial intelligence; neural networks and fuzzy logic; to business problems, in particular, freight scheduling.

“We try to work with a particular client and they fund the R&D with us, so that when we develop something they partly own it. If we go off and sell it to somebody else, they get a royalty. In these cases it’s in the interests of the client to help us get it right. Or they might prefer to keep it to themselves which means they pay us that much more.”

Software companies need detailed knowledge of the environment their products will operate in — not just the technological environment, but the business environment and the intricacies of the business problem they are solving. Millington says because of this, working with a client puts the innovation and R&D in context.

On the other hand, Wellington web hosting company iServe successfully applied for a $100,000 grant under the former definition. The grant subsidised the costs of three projects in the areas of web hosting, domain registration and e-commerce security through to the development beta stage. iServe’s Joy Cottle says the process under the old system was daunting and she has heard of people who gave up when faced with compiling so much documentation.

The new definition is on the Technology NZ website.

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