The head of Wellington development house Intergen, Tony Stewart, believes the government ICT Taskforce target of 100 companies turning over $100 million each will spread New Zealand resources too thinly.
“Perhaps we should be thinking in terms of 10 billion-dollar companies,” says Stewart.
The taskforce has released a draft report outlining the goal of building an ITC sector worth $10 billion by 2012, representing 10% of GDP. Today's ICT GDP contribution is put at 4.3%
The choice New Zealand has is either to build big enough to compete fully on a world footing in mainstream markets, or to exploit niches, Stewart believes. And a $100 million company, he says, is rather too big to be a niche player.
New Zealand should concentrate on “building businesses of real value” with lasting intellectual capital retained in the country, rather than “selling our time to the rest of the world” or inviting overseas companies to set up R&D establishments here, says Stewart.
The first is what he calls “the Indian model”; programmers developing software for sale overseas, and it’s a model we don’t want to follow, he says. It casts New Zealand in the role of a “cheap-labour” country and lets the knowledge leak out to the benefit of overseas customers.
“We need to make sure the intellectual capital stays in New Zealand so we can leverage it to make money offshore.
“I’m not so keen on making a home for international companies to set up here,” he says. “New Zealand [with its capable developers] has been a well-kept secret. Once we let overseas companies access our cheap, smart labour, they’ll soak it all up,” and there will be none left to further development in New Zealand.
“The only way that approach will benefit us is by earning revenue,” he says. There may be some skills built by cross-fertilisation with a big overseas partner, he concedes, “but they’ll all be used up in generating income overseas. We’ll develop the idea, and they’ll sell it over and over again.”
One of the main problems is the availability of investment capital, he says.
“The government is brave to [even hint at] tax incentives for investment in the industry,” he says, and is clearly tiptoeing cautiously around the question, because it doesn’t really fit with its politics.
"But it’s got to happen eventually.”