Gov't to loosen R&D purse strings

Software companies with newly created products but no cash to get them into the hands of potential customers are to be looked on more favourably by one of the government's grant giving bodies. But don't rush your funding application off quite yet: it's still working out a new formula for distributing the dosh.

Software companies with newly created products but no cash to get them into the hands of potential customers are to be looked on more favourably by one of the government’s grant giving bodies. But don’t rush your funding application off quite yet: it’s still working out a new formula for distributing the dosh.

The body concerned is Technology New Zealand and the money is allotted under its grants for private sector research and development (GPSRD) scheme. The “research and development” part of the scheme’s name is the catch when it comes to altering the criteria for awarding grants. But the scheme’s investment manager is keen to make what he calls “a shift in emphasis”, rather than “a radical change”, which will allow grants to be given at the commercialisation stage of the product lifecycle. Progress toward that goal was interrupted by the snap election and is still dependent on getting the ear of the science and technology minister.

The GPSRD scheme is coming up for two years old and, up to the end of June, had granted about $30 million. About $5 million of that went to the IT sector. Since the government anointed IT as one of three sectors (along with biotech and creative industries) that would transform the economy, Technology New Zealand has been scratching its head for ways to lift the IT grant allocation. That will require a shift from its role so far of funding the “technologically hard stuff” to giving money with the purpose of getting finished products from the lab to the market. But in easing the funding gate open a crack, it doesn’t want it to “catch the wind”, letting through a flood of grant applications.

The way the scheme was originally set up to work is typified by I-Health, an Auckland software house that received a grant at the end of last year. I-Health was awarded $350,000 to carry out R&D on an electronic health records system. A great deal of effort is going into the application of IT to the health sector, with big opportunities for the taking by any company clever enough to solve the security and software interface issues involved. If things fall into place for I-Health, it stands to do a major deal in the UK which will be directly attributable to the grant.

Where the original scheme shows its limitations is illustrated by the experience of another Auckland company. Queensberry, a made-to-order photo album producer, applied for a grant within a couple of weeks of the start of the scheme. But its application for funding to write a web-based customer service application was turned down because it had already done its R&D; that is, Queesberry had figured out what it needed, but was looking for some help paying for it.

Thus far in its life the GPSRD scheme has used the OECD’s so-called Frascati definition of R&D to decide whether an application qualifies for a grant. This defines R&D as "creative work undertaken on a systematic basis in order to increase the stock of knowledge … and the use of this stock of knowledge to devise new applications". According to Queensberry, this definition makes it very hard for software projects to qualify because they’re more like “business as usual”. That notwithstanding, Queensberry reckons the definition was misapplied in its case, and the whole experience of being turned down left it with a bad taste in the mouth.

But the company didn’t go into a sulk. It wrote its application, meanwhile calculating that the absence of funding held it back by six months, letting three other similar applications sneak past it on to the market. What does Queensberry’s software do? It gives a photographer the tools to create an album mock-up for a customer, specifying photo size and layout, before placing an order via the internet. Queensberry says the web-based tool means an order arriving on Monday from a photographer in New York, say, can be delivered on Friday, without the company holding any stock. Such smart customer service has won it commendations from Trade New Zealand and Waitakere City and a Computerworld Excellence Award.

Technology New Zealand is conscious of how it could have made the company’s path smoother and wants to make sure it does for future Queensberrys. But it has to be cautious about the transition from the relatively rigid Frascati regime to new rules that give it the flexibility to fund software’s commercialisation. The last thing it wants is to be having to justify itself to disappointed and aggrieved grant applicants. As Queensberry would probably endorse, that’s the last thing an applicant wants as well.

The change, therefore, won’t be happening overnight, but progress is hoped for by the end of the year. A GPSRD handout could be just the right Christmas present for your up-and-coming software company.

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

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