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Envisioning the Future for the Western Australian Information and Communication Industry

 

A Background Paper prepared for the

Office of Information and Communication's

Industry Development Strategy

 

Table of Contents

 

  • Introduction - Scenario Planning
  • Scenarios logic
  • Four scenarios for the future of the ICT Industries in Western Australia
  • Scenario 1: Globalised and centralised world
  • Scenario 2: Globalised world where the periphery prospers and we anticipate voluntary transformation
  • Scenario 3: Post-growth economy
  • Scenario 4: Business as Usual
  • 2.1 Introduction
  • 2.2 Industry Profile
  • 2.3 Current Status of the Industry
  • 2.4 Emerging Trends & Future Directions
  • 2.5 Future Needs of the Industry
  • 2.7 Survey Conclusion
  • 3.1 Global Issues
  • 3.2 Australian Issues
  • 3.3 Regional Western Australian Issues

 

Part 1: Scenario Planning for the Western Australian Information and Communication Industry

Introduction - Scenario Planning

Scenario Planning is a technique that has been developed over the past 20 years to assist organisations in looking at possible futures which they may encounter. Scenario planning assumes that identifying any one future is impossible. Instead, it works on the basis that good strategy for future planning will come from investigating several potential futures. A building block toward this is to identify large-scale forces and then examining the different directions they may drive society or a particular industry. Scenario planning works to identify divergent driving forces from which a range of possible scenarios can be developed. These driving forces are most often drawn from looking at trends in five spheres: the Social, Technological, Environmental, Economic and Political worlds.

This process has been followed for this project in determining the optimal industry development policies for the Western Australian Information and Communication industries. Four potential scenarios have been examined: a globalised world favouring centralisation; a globalised world where the periphery prospers; a post-growth economy; and business as usual, or a retreat to business practises of earlier times. The features of each of these has been defined and then with participants from industry been examined more closely to identify the challenges, opportunities and strategies each would suggest, particularly for the Western Australian Information and Communications Technology (ICT) industry.

This work has been taken a further step with the production of a companion Strategic Directions document. The overview of Strategic Directions synthesises the information which has been gathered in the industry survey (Part 2 of this document) and the environment scan (Part 3) and the thoughts and observations contributed by the industry representatives who attended the Scenario Planning workshop.

Scenarios logic

While we are moving to an increasingly globalised world where there is evidence of centralisation, there is also "noise" in the system. Globalisation is not a model which offers advantage to many groups. It can result in polarisation, growing areas of marginalisation and environmental problems. Global solutions have been difficult to identify and impossible to achieve. The instability in the present system could shake out in two (and probably many other) ways, see Figure 1 below. We have identified one potential path as a major shock to the system resulting in the motivation and the need to undertake business and economic activity in entirely different ways. The other major option is for voluntary change where the instability in the current system is recognised early enough for managed change to occur.

 

Figure 1.1.

For all four scenarios there are certain key, relevant assumptions about the scope and pace of change of Information and Communications Technologies.

  • Telecommunications capacity is huge, offering many valuable functions at insignificant cost.
  • Industries have restructured and their value proposition to customers is different.
  • Management fully comprehends the opportunities and challenges of the new communication and information technologies.
  • The consumerist era is ending.
  • Employment opportunities shift to the knowledge and services economy.
  • Environmental issues are addressed.
  • Global brands dominate and highly specialised smaller companies find successful niches.
  • "Intelligence" is embedded in products
  • A non-cash, digitally-based economic system develops.
  • Reduced influence of nation states.
  • Rural and regional centers experience major change and new global communities form.
  • The real experiences of life takes on new value.
  • The rich-poor divide is amplified.
  • There is no market for average quality.
  • High value-adding customer-focused organisation of product design and supply creates new intermediaries and new business opportunities.
  • Some previously affluent economies get it wrong.

 

Four scenarios for the future of the Information and Communication Industries in Western Australia

1. Globalised world - centralisation, cultural invasion, spatial inequality

In this scenario Western Australia suffers from its distance, lack of head offices and the inexorable growth of global brands. In this world we would see trends already becoming visible in the WA economy continuing towards a future where the advantages of globalisation and technological change are felt in centralised locations in the US, Europe and Japan. The current position South Australia and Tasmania find themselves in would loom in the future for WA. This is also the world of the multinational and global organisations which are successful and which control global businesses, which determine the way manufacturing is organised globally, where capital flows and how and where R&D happens. Industry restructuring of the 1990s has resulted in mergers and rationalisation reducing the numbers of people employed in the traditional industries in WA.

2. Globalised world - the periphery prospers, participation, spatial equality

This is the long promoted panacea of the information age, where the tyranny of distance is made irrelevant by Information and Communication Technologies. Small to Medium-sized Enterprises operate globally and succeed using networking and through international relationships. The large multinationals find they don't have the formulae for innovation and change requisite for reinventing themselves because of the dramatic change brought about by ICT, gene technologies, miniaturisation and other technologies which cause product, business and industry innovation to be the key ingredient for success.

3. Post-growth economy

This is the scenario when the market system fails significantly for one or many reasons. The shock could be environmental, it could be the recognition that market economics must be balanced by social, environmental and other human and social considerations. The response to the "shock" or change in policies creates a different economic and market paradigm where the rules of the market economy are challenged and replaced, such as design for obsolescence versus design for lifetime use; short versus long term investment; economic growth from high volume/low margin versus value adding. In this scenario long-term thinking and planning takes place and shareholders make demands for wider considerations in bottom line reporting such as reports against financial, social and environmental objectives.

4. Business as usual

Under this is scenario little changes internally. Governments, business and the community do not envisage a different future in the "information economy" and take no steps to harness the potential or avoid the down sides of the key forces for change and the trends to market economies and global organisation of trade and commerce. It is a scenario which assumes the pace and scope of change already occurring continues and the responses to this change remain the same as they are at present. Any planning is based on trendlines drawn from the past.

 

Scenario 1: Globalised and centralised world

Trends

Uncertainties

 

In this scenario.......

Social Issues

Unemployment and UNDERemployment will increase. Those with jobs will have to work harder or longer or better to keep their jobs, and will need to juggle continual re-skilling to embrace new technology.

There will be a preponderance of relatively low-skilled technology related jobs, such as data-entry and word-processing. Career structures will change, the "job for life" ethos will disappear, to be replaced by more short-term contractual employment. This will create difficulties for people seeking finance, or trying to plan for a family.

The population will have a higher average age, the gender gap will be less discernible in both the home and workplace, and social inequalities between rich/poor, rural/urban, and ,particularly, educated/less educated will continue to widen.

A continued (and exacerbated ) population shift from rural areas to major towns and cities will occur, partially due to the replacement of physical service provision with technological delivery methods, but primarily to do with dwindling economic activity leading to local employment in regional areas.

The trend in regional areas will be an increase in the fly-in / fly-out labour force servicing primary industry, in particular mining / exploration, which will exacerbate the "hollowing out" of these local economies. As with other trends these patterns, which are now only seen in the more out-lying regions, will begin to affect larger centres.

With specific regard to the ICT sector, the gap between skilled/unskilled employees will widen dramatically. In general, as people have greater access to information and technology, their levels of "personal satisfaction" will decline. There will be a greater incidence of occupational stress.

Technological Issues

The "killer application" and the quantum leap in bandwidth are technically determined, and are unlikely until the latter part of the ten year period. ICT componentry will continue to pervade many other traditional products and industry sectors, causing greater "sectoral" definition for policy makers and members of the ICT industry associations. "Convergence" will accelerate, possibly in ways we cannot yet determine (an "uncertainty")

We will witness the "costs" of being slow to roll out high bandwidth telecommunications infrastructure, but will have a far more efficient structure in general.

Cheaper alternative technologies will drive the uptake of ICT technologies, and further spread the penetration of technology into developing near-neighbours, which may provide export markets. Satellite and wireless services will emerge as dominant carrier technologies.

Environmental Issues

Environmental degradation will continue, at an increasing rate, more so in our developing neighbours, but at a cost that will inevitably impact on Australia (the exacerbation of El Nino by massive air pollution stemming from fires in PNG and Indonesia are good examples). Our standard of living will be further degraded, more so in the latter part of the ten year period.

The electoral backlash will (and is already) encourage belated attempts to legislate for greater environmental protection, and the development of "greener" policies by all parties.

Environmental technologies may develop as a strong export area. International pressures for environmental change will further increase. The Kyoto greenhouse conference, which put enormous pressure on Australia's green credentials, provides a good example. Countries with poor environmental records will continue to degrade their environments, and give their environmental futures into the hands of multinational companies in the search for economic/social survival.

Economic Issues

Globally successful multi-national companies will continue their market dominance, more so in the latter period as WTO and GATT-style agreements kick in.

Global branding will become increasingly dominant, with niche "backlash" economies emerging based on the provision of locally produced goods and services for geographically isolated economies, such as Western Australia, as monopolistic/ oligopolistic practises impact on transport pricing. The median income will decline.

The gap between wealthy and poor will further widen. The State's reliance on primary industry will decline, with "smart" and service industries, such as tourism, providing an ever increasing percentage of GDP.

Venture capital will be easier to obtain in these "smart", knowledge intensive industry sectors, and less easy to obtain in traditional primary production based industry sectors.

One major centre, likely to be either Sydney, Tokyo or Singapore, will emerge as the major trading centre of the Pacific / Indian Ocean hub.

Political Issues

Regional development policies will continue as major policy initiatives. The emphasis will increasingly be based on infrastructure development. The predominant thinking of policy makers will continue to be based on the "bottom line" thinking prevalent today.

Little political will and vision to pre-empt social issues will emerge, until the predicted backlash occurs.

The political environment will remain relatively stable, with little impact from the GST, however that stability will attract investment from the increasingly volatile near neighbour economies. Market forces will continue to prevail.

Increased partnering between governments will occur, particularly between Australia and close countries with large manufacturing bases. Within the ICT sector, issues will continue to be under-represented until a more coherent understanding of the "shape" and "nature" of the sector emerges in political thought.

Challenges

Lack of industry definition

Social and Labour changes

Social equity in access

Regional/urban disparity

Geo-political isolation

Sydney as global city vs Singapore and Tokyo as our newest global city

Lack of appropriate policy and legislation

Lack of skills, education and training

Loss of corporates off-shore and interstate

Plenty of venture capital

 

Opportunities

Lack of killer application, the possibility it could be developed here

Emergence of markets, eg "green IT" industries

Investors increasing willingness to invest in ICTs

 

Strategies

Increase industries capacity to advocate

Shift from task-oriented to broad life-long education, requiring cross societal change and response by unions, industry, employers etc.

Achieve universal service by lobbying ACCC to allow 3rd party access to infrastructure

Develop attractive business environment

  • to grow WA businesses
  • to attract new businesses from overseas and interstate through tax breaks and grants etc

Implement skills attraction schemes such as tax breaks

Bridge the gap between technology and business and between local and global businesses

Develop seed funding arrangements for partnerships and projects

Develop sector specific precincts, geographical proximity for various parts of design, production etc.

Negotiate an international settlement rate for data

USO still necessary

Create the environments in which enterprises form, grow and prosper in WA

 

Scenario 2: Globalised world where the periphery prospers and we anticipate voluntary transformation

Voluntary transformation occurs prompted after leaders in industry and government asked the questions -

  • "are the policies to reduce barrier protection, achieve microeconomic reform and market competitiveness:

- working now and will they work in the future?

- sufficient to ensure the future prosperity of Australia?

  • is there something else we should be doing for employment, productivity and growth?"

Trends

The questioning is driven by spatial inequalities, the invasion of foreign cultures and markets, loss of employment particularly "quality" employment, economic activity and skilled people from regions and countries on the periphery. These developments lead to a significant decline in the cultural, social and economic quality of life which in turn leads to the emigration of the more able, mobile members of the workforce. This in turn begins to "solidify" the externally driven trends and drastically reduces the prospects of changing this direction.

Within Australia, rural, regional communities and states outside of Sydney suffer the impacts of global centralism in loss of amenity, access to the most attractive jobs, and the increased economic and technological polarisation of society.

Uncertainties

We may not be tied unconditionally to national, that is, Federal law or policies.

An Internet-related stockmarket crash may create an anti-ICT industry backlash weakening the resolve of political and industry leaders to pursue this path.

Liberalisation of immigration laws for ICT specialists to the United States could create a massive brain drain of younger, skilled people.

ICT policy agendas may be impacted by short-term political expediency eg a Goods and Services Tax.

 

In this scenario.....

Social Issues

Business and entrepreneurial individuals are attracted to Western Australia, and Perth in particular because it provides an excellent environment in which to live, work, educate children and keep abreast of leading edge change, technologies and market opportunities. Growth in the small and medium business sector provides job opportunities for graduates and the growing leisure and tourism industries create jobs for the less skilled.

While the physical environment has always been an asset, the job, education and "virtual proximity to the world" characteristics have been developed as deliberate national and State policies which capture the benefits of ICTs for regional areas.

Growth in intellectual capital has been built around the principle of clustering

Quality of education is critical and has been kept in line with developments in technology and the requirements of enterprise.

Perth has become the national gateway to Asia and is increasingly cosmopolitan due to the growing numbers of international students who attend school, higher education and summer schools in Perth and Fremantle universities. The citizens of Perth have extended a warm welcome to these many cultures, and the influence is obvious in the diversity of cultural events which now define Western Australian arts, entertainment and sporting life.

Technology has supported social change and a more cohesive society.

Technological Issues

Low cost communication access due in part to true competition between providers (new entrants were welcomed into the Western Australian marketplace after the traditional suppliers were not able to provide low-cost access) as well as targeted subsidies and clever aggregation of demand schemes supported by government and the community, has created in Western Australia, a society of information "haves" achieving ubiquitous access.

However a wired society may well be a net importer of goods and services which was demonstrated in 1999 and 2000. The real challenge was to use the same technologies to export, but to achieve this innovative new businesses were critical as well as rapid movement into e-business by the larger established enterprises.

Innovation was and remains key to successful participation in the new economy. Government has led the way in substantial innovation - the move to new ways of delivering government services, with a customer focus which give little heed to historical structures.

Economic Issues

While globalisation seemed to strengthen large multinationals in the late 1990s and into 2000, something remarkable became obvious early in the new century. This was that small businesses were as able to take advantage or globalisation as multinationals by networking, joint venturing and establishing global supply chains around centres of excellence. Small and medium enterprises leapfrogged traditional growth stages and quickly established themselves in significant markets around the world.

Another significant factor entered into the equation: innovation. Innovation became key to survival and growth as consumerism, remarkable technological developments in ICT, biotechnologies, miniaturisation, new energy sources and more stringent environmental regulations made old products and routes to market obsolete. The large companies were simply not fleet-of-foot and were not able to change and innovate quickly.

Their response strategy of buy-out of successful niche business proved that some company cultures were not conducive to innovation and change.

The lack of success meant shareholders did not accept this as good strategy and forced new structures into these companies which looked remarkably like networks. We are still seeing this development today. It has meant redistributed company structures - the sort of redistribution which brought parts of the multinationals to Perth clustered around our centres of excellence in mining and resources, environmental land management and a few other sectors.

New ubiquitous ICT has meant that some of the traditional significant costs of doing business in Western Australia have reduced, such as cheaper air fares, lower access costs, reduced need to travel, reduced communications costs and information costs.

Political Issues

The Western Australian government has established collaborative links with like economies in our region and on the Indian Ocean rim. Established on economic and cultural bases, around shared R&D, technology transfer and education, the result has been relationships which are well suited to a networked economy and global supply chains.

The WA Government recognises the potential of exploiting the State's position in the "third zone" and builds partnerships with complementary regions around the world.

Government has recognised the economic and social value of locally grown and built business and has implemented a range of programs to enhance the growth prospect of these companies without dulling the competitive edge essential for global success.

Politicians in Western Australia understand the importance of ICT, are keen users of it, and advocates of a strong WA ICT industry.

Challenges

An education program relevant to the emerging era

A universally accepted global vision for Western Australia's information and communication future

High level political and institutional buy-in to this vision and commitment to strategies

Social equity in distribution of the benefits of information and communications

Identify and achieve niche(s) markets

Jobs, employment

Establish WA as an ICT brand

Opportunities

Capitalise on our environment (eg Quality of Life)

Take advantages of our multicultural society for software localisation and call centres

Capture the benefits of our location in the same timezone as Indian Ocean Rim

An innovative approach to education (eg the University for Industry project being proposed in the UK)

Use isolation to our advantage, for example nuclear waste disposal

Become best-in-world in managing distributed projects

Leverage from traditional economic drivers (mining oil, gas and agriculture) for example a mining portal

Manage networked businesses

Re-direct investment funds to new markets (exploration and mining technology)

 

Strategies

The general focus of the Group was on locally-owned and operated ICT businesses. The vision for the future was for a growing and recognised industry with export activity. Together with this was a vision of effectively diffused and ubiquitous use of the technology. The assumption was that technical training for the industry was already of high standard but that there was a severe deficiency in linking commercial training (especially management for cash flow) with the technology.

Nine areas of opportunity were identified and strategies were developed within these as follows:

1. Capitalising on the Environment

  • Create a Western Australian brand
  • A positive attitude towards investment attraction, both finance and skilled people
  • Ensure technology and business infrastructure is in place
  • Take advantage of remote/"clean" environment

2. Multicultural Opportunities

  • Utilise multicultural networking opportunities - creating product, marketing and distribution, financing
  • Immigration Policy appropriate for skills requirements

3. Time Zone/Same as Indian Ocean Rim/Off peak USA and Europe

  • Trade missions
  • Pricing strategies

4. Innovative Approach to Education

  • Devise and implement enterprise/technology oriented education system, new ways of working eg. distributed projects, strategic partnerships, networked businesses
  • Emphasise learning needed and access at right time to right learning
  • Emphasise business outcomes, cash flow versus budget
  • Work experience/business mentoring
  • Marketing and distribution skills are critical

5. Isolation used to our Advantage

  • Develop solutions for decentralised development and use of the technology, emphasis on "remote" - remote sensing, on-line services (WA already recognised in this area)

6. Managing Distributed Projects

  • Consultancy services

7. Leveraging on Traditional Economic Drivers

  • For export
  • Intellectual property rights

8. Managing Networked Businesses

  • Develop serious strategies here - industry focused networks
  • Industry fairs

9. Redirect Investor Funds to CIT

  • Education of the investor market
  • Packaging the investments

Marketing is key to the whole process

 

Scenario 3: Post-growth economy

The scenario is forced by social, political, cultural upheaval and/or environmental crisis. It assumes that this shock is of such proportions that it affects the world economy and that in its wake the world enters a non-growth period. Under these circumstances there is no longer the option to modify the code, or use practises we have become accustomed to, but rather an imperative to design a new code. Part of this "redrawing" of the boundaries is the rejection of the assumption that the free market can take care of everything

 

Figure 1.2: The Post-growth Option

Trends

Challenges and Strategies

Uncertainties

 

In this scenario...

Social issues

Even further divergence between the "haves" and the have nots"

Increased levels of unemployment, reduction in employment options for others, reduction in income levels. This is likely to be the catalyst for considerable global and domestic migration, many people forced to move

This physical dislocation is likely to be accompanied by an increase in crime and social unrest generally

Individuals and communities will be forced to look to their own resources to sustain themselves, a need for greater self-reliance

Mass inward migration caused by global dislocation

Health and education standards could decline

Technological Issues

Those ICT companies without a well established and strong global niche suffer

There will be global contraction in the industry, majors will survive, fringe companies and growing companies will be vulnerable. The pace of innovation is likely to decline, although innovation based on better use of existing resources will be highly prized.

The increased difficulties in maintaining contact will make communications technologies even more valued, and probably increase demand for specific services

WA organisations generally will find fewer technology options, could result in increased levels of technology "lock-in"

Design and production for life is demanded and expected

Environmental Issues

WA is likely to have a comparative advantage with other parts of the world in relation to environmental issues under this scenario but...

...this comparative advantage will be based on our fragile environment

Likely to be increasing population pressure

Seeking short-term fixes is likely to increase pressure on the environment

Companies are held accountable for the environmental impact of their products and services, pressure on for companies to take birth to grave responsibility for their production

Sustainability and environmental protection are expected

Economic Issues

Shrinking world markets will cause oversupply, traditional WA commodity exports come under significant downward price pressure, significant pressure on costs, price competition is fierce

Globally, many overseas markets are likely to be cut off as countries move into an isolationist mentality and raise trade barriers, there is a retreat from "free trade" policies

There is a significant decline in global tourism, travel is confined to the elites, much of the service sector declines

This may be partially balanced by a surge in interest in lifestyle products - health care, fitness and well being and preventative products, particularly for the aged in the rich nations

The drive for greater recycling and reuse provides a boost for these industries

Gaining access to investment capital will be increasingly challenging, there will be a need for countries to strongly discourage capital outflows

It will be no time to be caught in the middle of any market segment. Companies producing mid-range products will suffer, the post-growth market will support low cost products (an market segment which is beyond Australia) and high grade products and services

Opportunities will abound for companies doing/producing something different and critical, particularly in reducing costs

Export business opportunities will go to those companies, with keenly priced products, which act strategically and quickly to seize on market niches, management innovation and entrepreneurial behaviour will be invaluable. Access to strategic market information will become even more important

Well known and respected brands will be prized in this uncertain environment

The "heirloom" market will revive at the expense of mass consumable products

Political Issues

The community demands on the public sector are likely to increase

The political system will become vulnerable to extremism

Western Australia, particularly with its heavy dependence on export revenue, will be highly dependent on the federal government to take decisive action in (re)negotiating trade and other international agreements to protect market access wherever possible

Significant public funds are likely to be directed to defence spending

Governments will have a greater role in regulation and in domestic and international redistribution of wealth

Challenges

Dislocation and increased unemployment

Increased economic vulnerability by being price takers for technologies and by being "locked-in" to certain technologies

Technology lock-in means there is a poor capacity to see and so to chart the optimal path forward

Pressure to move from the middle position (cheap is ruled out through our socio-economic structure, must be positioned in high quality/high value market segments)

Leadership must participate and recognise the centrality of the Knowledge Economy

Brittle natural environment

Diminished economic resources so there must be the most productive use of technology by government, industry and the community generally...

...and increased use of ICTs for more efficient service delivery for both the private and public sectors

Social equity and harmony

Managing population increases through migration

Capital drought

Opportunities

Better utilisation of resources through working smarter

  • going online for cheaper and improved service delivery
  • tighter market focus
  • partnership building
  • market intelligence

Increasing exports of Land-use ICTs

Facilitate "clean and green" trade

Larger domestic market through mass immigration

An injection of skills

Making the transition from extractive (bypassing transformative stage) to transaction

With the global shake-up there will be opportunities for new players...

...which will make entrepreneurial capacity even more highly sought, move from the current supply push mentality

 

Strategies

Requirement for expansive leadership, in both business and government

Provide global market information, emphasising the demand side in the strategy

Development of a clear and tightly focussed direction to harbour resources and to capitalise on the market opportunities as they arise

Restructuring government methods of delivering services

Recognise content is critical

Recognise that transactions are critical

Position WA as a pre-eminent provider of land care information and knowledge, eg a salt site

 

Scenario 4: Business as Usual

In this scenario ....

The focus of the WA government and business is internally focussed and largely divorced from external change. When this perspective is broken it generally occurs in a reactive rather than proactive manner. It assumes that the state's generally buoyant performance over the past two decades will continue and in the same sectors as have traditionally performed strongly.

This scenario differs from the scenario examining a globalised world in which there is increasing centralisation, cultural invasion and spatial inequality (Scenario 1) by degree. Where Scenario 1 speculates that there will be a quickening of these forces this scenario anticipates a more gradual progression down this path.

Social Issues

Western Australians maintain their strong desire for a good lifestyle - sports, entertainment, the arts and outdoors dining are strongly part and parcel of the way we want to live. Blessed by good food, schools and well serviced residential areas, there are not many reasons why we need to work hard and long - the culture does not stimulate entrepreneurial activity and the determination needed to live on a plane developing international markets. Laid back and relaxed attitudes prevail.

Traditional hierarchical management style and beliefs lives on in our organisations quashing new ideas and slowing change.

Perth society is run on the basis of "who you know". This along with the "tall poppy syndrome" slows reform, frustrates new ideas and the young people who have them leave to work elsewhere. The result is "off-the-pulse" technology, which is generally imported, and out-moded ways of doing business and delivering government services.

Insular WA attitudes are not appropriate to the challenges of the new global world where open attitudes, multicultural business relationships and partnering are increasingly required.

Insular behaviour translates into isolation which means WA enterprise is ignorant of highly relevant ICT trends.

Policy makers are frustrated that qualities of innovation and entrepreneurial behaviour are not more widespread and do not translate into global brands, sustainable economic activity and robust companies.

Western Australians are early adopters of technology which rapidly adds to growth in imports as Australians engage in electronic commerce buying in US goods, services and media and begins to erode these sectors locally.

Technological

Western Australia's technological position is patchy.

Western Australia has some niche areas, some of which are world class.

There is some strong innovation and R&D

There are companies that have good technological products or services but have poor commercialisation and managerial capabilities

There are a number of strong links between ICT sector and resources business.

But there is a lack of investment funding

Environmental

We are not utilising our renewable industries in a sustainable manner

Economic

WA is an over saturated marketplace - every ICT supplier operating in Australia operates in WA. Government currently provides 60% of the market for CIT services in the State. WA is a small domestic market Multinational branch offices are totally WA focused

The trend to outsourcing in government and the private sector has built the market demand for a range of technology suppliers, and because these contracts are often aggregated to achieve organisation wide efficiencies, the size of contract makes the larger companies more competitive, especially as they can also import new technology quickly.

Major focus of ICT industry in WA is the resources sector, the health of which significantly influences the health of the ICT sector. Recent mergers and takeovers reflect the rationalisation occurring in this sector and therefore the decreasing opportunity.

There is a worldwide shortage of ICT skills so therefore skilled people in ICT are being attracted to work overseas at high levels of remuneration

Our taxation regime sends the wrong signals - capital gains tax and payroll tax are disincentives to investment in this country. This in part explains the lack of venture capital applied in this marketplace.

The small local market, the small Australian domestic market means that growth must rely on external markets for significant expansion. Exports, development of overseas markets and supply chains is a key success factor for growth in the sector.

Lack of career path within WA inevitable means that young people migrate elsewhere to gain experience and exposure to the leading edge of their field. Lack of global organisations headquartered in WA means that these young people cannot gain the international experience within the organisation and will become employed by companies headquartered elsewhere.

Loss of unskilled and low skilled jobs, a characteristic of job markets around the world leads to oversubscribed welfare programs and marginalised regions both within and outside Perth

Political

There is failure in the education system. There is insufficient attention given to attracting students to ICT courses, particularly those leading to higher level qualifications.

WA is considered to have a technically good telecommunications infrastructure but it is too expensive to utilise properly.

There is not a good understanding by political leaders of the ICT industry and its importance to the future economy and society.

The autonomy of government agencies in their procurement means that it is much more difficult to achieve large scale savings or benefits. There are no economies of scale or systemic approach and little innovation in public service delivery. Government rules around competitive processes prescribe against innovation and successful partnering between industry and government

Less than 1% of Federal Government procurement comes to WA

Organisational

There is a fragmented ICT industry in WA

Branch office is the reality for our market

Sharing the same timezone with Asia could provide benefits

Challenges and opportunities

Reduce costs of communications

Attract Venture Capital into the State

Reduce dependence of industry on government for business

Increase the political awareness and support for industry

Need to address how government can give support to local industry through its procurement practices.

Target our poor capability for commercialisation and business management, shortage of and loss of skills

Need to create global brands

Over-dependence on resources sectors

Strategies

Reduce the costs of communications by:

collaborating to aggregate demand

increase competition between carriers

government legislation for subsidies for regional use

Attraction of Venture Capital by:

reduction/removal of Capital Gains Tax

develop skills in business planning and marketing

attract fund managers (review the effectiveness of the Federal Governments IIF scheme and emulate)

Reduce dependence on state purchasing by:

increase exports, targeted financial programs and skills development

increase WA's share of Federal spending, eg review of procurement policies which will support industry development and growth in WA

Build the politicians' understanding of ICT

  • industry needs to form mechanisms whereby it can effectively and constructively "sell" itself to government
  • industry needs to highlight to government the employment potential of the sector
  • we need to "launch" politicians into cyberspace

Review/improvement of government purchasing

  • mandatory use of Common Use Contracts
  • tenders to invite solutions, not specifying process (which enables innovation and partnering)

Commercialisation and management skills

WA version of the NIES scheme

Retain skills in WA

Global branding and international recognition

  • increase industries capacity to self-advocate

Life long education with broad social responsibility

 

Part 2: The WA Information and Communication Industries

2.1 Introduction

Any survey of the Information and Communications Technology industry has to deal with the challenge of the sector's considerable volatility, a feature that is increasing. This survey of the Western Australian industry, the first in several years, also had to contend with shifting definitions of the various categories that make up the sector. The ICT industry's growth and changing shape have instigated international discussion about which industry categories are relevant. The Australian Bureau of Statistics is involved in this process to reach agreement on the boundaries of the industry for the next century.

The categories used for this survey are those which have been used for the industry for some time and create some difficulties in trying to "pigeon-hole" certain companies. Nonetheless they have provided us with a framework which makes comparisons with earlier surveys easier.

The research indicates that the WA ICT industry is very fragmented. There is also an increasing number of small firms and individual operators, either working alone or in partnership with others on larger projects. Almost half the companies surveyed did not see themselves as part of the ICT industry but as part of their "client industry" - mining, finance etc. This perception underlines the extent to which ICT has spread to become an indispensable enabling technology or service to the economy at large.

As in other regions, the WA ICT industry is performing extremely strongly. The sector grew almost 30% last year, almost four times the pace of the state's economy. Based on the predictions of the industry, the current year is expected to yield industry-wide growth of almost 35%. This is almost seven times Treasury's current estimate of 5% growth for the State as a whole.

2.2 Industry Profile

The industry is comprised of a broad range of organisations operating within many segments. Almost half (48.5%) of the organisations considered themselves to be in industries other than the ICT. The vast majority of firms surveyed (83.9%) are Western Australian-based with most (88.5%) of these situating their head office in Perth.

Generally, Western Australian-based firms reported lower annual revenues than either interstate or overseas-based organisations. In fact, 44.6% of Western Australian-based firms stated that they had annual revenues of under $1m, whereas no interstate or overseas firm claimed to have revenues under $1m.

When asked what services they provided, provision of ICT services was the dominant activity (65.8%). This was followed by production of software (45.8%) then distribution of ICT products.

Attitudinal Findings

A number of attitudinal questions were asked to ascertain how members of the industry felt about the industry and to ascertain their aspirations. The analysis revealed that the ICT industry is comprised of five specific attitudinal groups - these are:

  • Contented 16.1%
  • Lifestylers 25.5%
  • Go-getters 13.5%
  • Networkers 29.5%
  • Motivated 15.4%

Networkers represent the largest group within the industry. As the name suggests they place a heavy emphasis on building links with other ICT firms and in other industries. They frequently exchange ideas, are innovative and have excellent management skills. They are most likely to provide ICT services and are less likely to be manufacturers.

Lifestylers are generally happy with their business lives, happy with the size and the way their business operates. They do not see themselves as aggressive nor as supply-driven, competitive or interested in export. They are more likely to provide ICT services.

Contented differ from Lifestylers in seeing themselves as being more supply-driven and less solution-driven. They are least likely to think or act globally. The largest sector within this category are distributors.

As a group the motivated are positive about their organisations and the direction they are headed. They intend moving overseas if their company grows large enough and tend to work with customers to develop products. Almost half this group are producers of software.

Go-getters were even more positive towards their business. They are most likely to believe they are competitive, innovative, creative, demand-drive, globally-oriented, have a strong export focus and solution-driven. The culture of this group is one of success, market development and building. They are the smallest group within the industry. Like the motivated, they tend to be producers of software.

 

2.3 Current Status of the Industry

WA's Gross Domestic Product in comparison with ICT Industry Revenue

 

Total 97/98

$m. (est)

% Growth

97/98 (est)

Projected %

Growth 98/99

WA Gross Domestic Product

54,872 m.

8.5%

5%

ICT Industry Revenue

1,116m.

29.2%

34.2%

ICT by industry grouping:

Manufacture of ICT equipment

 

102m.

 

10.7%

 

15.6%

Production of software

125.6m.

57.9%

46.7%

Distribution of ICT products

493.2m.

43.2%

35.1%

Provision of ICT Services

358.5m.

49.6%

38.9%

Provision of services through ICT

33.5m.

24.3%

75.9%

Commercialisation of ICT

0.22m.

0.0%

20%

Other

3.1m.

17.5%

7%

 

Provision of ICT services dominated (65.8%) the industry sector that respondents indicated they operated within. This was followed by production of software (45.8%) then distribution of ICT products.

Overall, distribution of ICT products represented the largest proportion (44.2%) of total revenue. Based on those who operate within the category, distribution of ICT products exhibited the third largest growth rate over the past 12 months (43.2%). Provision of ICT services reported the second largest proportion of total revenue (32.2%) and had the second highest growth rate (49.6%). The highest growth rate was achieved by the production of software category, which achieved a growth rate of 57.9%.

The number of people employed by firms in the industry was widely dispersed, ranging from 1 person to 300 people. The average number of people employed by organisation in 1998 was calculated at 26 people. This was three people higher than the average calculated for 1997 (23 people).

Personal networking between companies was widespread with nearly three-quarters (72.9%) of respondents considering that they had established networking relationships. The main types of networking relationships established were found to be:

As a sector the ICT Industry is a strong and rapidly growing contributor to the State's economy. The table below, drawn from WA Treasury figures, illustrates the industry's importance. (In this analysis the ICT sector makes up the bulk of Communications, the other major component is media.) Even on current growth trends it is likely to overtake a number of sectors which are currently above it.

WA Gross Domestic Product, by Sector, June 1997

Sector

$ Million ($m.)

% of Total

Mining

8217m.

16.9%

Manufacturing

4777m.

9.8%

Property and business services

4079m.

8.4%

Construction

3937m.

8.1%

Retail Trade

3457m.

7.1%

Wholesale Trade

2576m.

5.3%

Transport and storage

2238m.

4.6%

Electricity, gas and water

1559m.

3.2%

Communications*

1265m.

2.6%

Finance and insurance

837m.

1.7%

Accommodation, cafes, restaurants

794m.

1.6%

OTHERS

14,821m.

30%

TOTAL

48557m.

100%

 

Innovation

In all, 63.2% of respondents said that their organisations had developed at least one significant innovation in the last three years. On average, organisations developed 3.7 innovations over the last three years. Of these, on average 2.2 were completed and on the market, 0.3 were completed but not on the market, 0.6 were near completion and 0.6 were currently in the early stages of development.

Exporting

The same number of respondents (63.2%) indicated that their organisation currently exports products and services to markets outside Western Australia. Of those who export, 85.7% export to other Australian states and 75.5% export to overseas markets.

Organisations with sales $1m and greater (75.3%) were significantly more likely to export than those with revenue under $1m (53.3%). Furthermore, Go-getter (90.0%) and Motivated (87.0%) groups were significantly more likely to export than Networkers (70.5%), Contented (58.3%) and Lifestylers (34.2%).

The table below details the recorded total annual revenue breakdown by markets for those who export.

Market breakdown of those who export (n=98)

Market/revenue source

% of Annual Revenue

Western Australia

28.4

Interstate

51.3

Overseas

20.3

Total revenue

100.0

 

Interestingly, two respondents stated that 100% of their revenue is derived from markets outside of Western Australia. Other than Western Australia, the markets serviced were broad in scope ranging from other Australian states to Fiji.

The tables below detail the proportion of exporting organisations marketing to various locations, by state and overseas.

Export Markets

Serviced (by state)

% of those

who export

New South Wales

65.3

Victoria

60.2

Queensland

50.0

South Australia

43.9

Tasmania

38.8

Northern Territory

33.7

ACT

29.6

 

Export Markets

Serviced (by country)

% of those

who export

Malaysia

25.5

Singapore

23.5

USA

21.4

Indonesia

21.4

Europe

16.3

United Kingdom

16.3

New Zealand

13.3

Hong Kong

10.2

Middle East

10.2

Thailand

9.2

2.4 Emerging Trends & Future Directions

Emerging trends

Respondents to the survey said that they were concerned about the speed of change and the impact WA's distance from the major markets has in keeping up with trends and subtle shifts. This was a significant source of uncertainty for those considering major investments in development costs.

Despite this, a growing number of companies are exporting or planning to expand into export markets in the near future.

As is happening in many other ICT industries, WA companies regard their networking activities with other firms as becoming increasingly important and they are doing more of it. Building partnerships and alliances with interstate and international companies has also become more important.

The most frequently mentioned areas of focus in the future by respondents were:

  • Consultancy 25.8%
  • Packaged applications 18.7%
  • Customised applications 15.5%
  • Systems integration 15.5%
  • Systems design/development 13.5%

Future Directions

Key industry issues perceived by the majority of respondents to be influential in affecting their organisations over the next three years were:

  • Increasing competition
  • Lack of funding for export and for the development of new products
  • Ability to keep value-adding and short product life

 

The percentage of respondents who identified particular issues was:

  • Increasing competition from global competitors 59.7%
  • Lack of funding in the organisation for export 53.3%
  • The ability to keep adding value to products/services 51.3%
  • Government purchasing based on price rather than quality 45.8%
  • Establishing management systems for reacting quickly to change 45.8%
  • The ability to technically and financially afford the next new product 43.1%
  • Short life-cycle products needing constant development 42.2%
  • Lack of critical mass to enable export 39.5%
  • Rapid rate of technological change 37.7%
  • Lack of marketing expertise to market products 34.0%
  • Lack of ability to commercialise new products 30.3%
  • Low infrastructure provision in regional areas 27.5%
  • Capital gains tax preventing investment 26.7%
  • Lack of skilled and experienced ICT people 25.7%
  • No cohesive industry association 23.0%

Beside the 63.2% who currently export, a further 7.1% of respondents said they intend to export their goods and services in the future. Based on those who currently or intend to export, nearly all (92.7%) said they expect overseas and/or interstate sales revenue to increase in the future. The 7.3% who did not expect revenue to increase were from those who currently export. Statistical analysis did not find any significant links between expectation export revenue growth and respondent demographics.

New South Wales (60.2%) and Victoria (58.2%) dominated the areas where respondents believed future state export revenue growth would occur. Of the international markets, 33.7% of those who believed export revenue would increase said it would come from the USA. The figures below show the markets where respondents expect export revenue to increase.

Areas of Perceived Export Growth (by state)

% of those who export

New South Wales

60.2

Victoria

58.2

Queensland

41.8

South Australia

36.7

ACT

26.5

Tasmania

24.5

Northern Territory

24.5

 

Areas of Perceived Export Growth (by country)

% of those who export

USA

33.7

Singapore

28.6

Malaysia

27.6

Indonesia

24.5

Europe

21.4

Africa

15.3

United Kingdom

15.3

Hong Kong/China

15.3

New Zealand

13.3

Thailand

11.2

Canada

9.2

India

8.2

Taiwan

8.2

Japan

5.1

Middle East

4.1

Those sectors expecting Singapore, Malaysia and Indonesia to be the growth areas tended to be producers of software and those providing ICT services.

 

2.5 Future Needs of the Industry

Respondents identified a number of ways they believed companies and the industry generally could be assisted to expand export activity. These factors fell into two major categories, infrastructure and expertise.

Infrastructure

The survey identified three primary areas of concern for the industry, they were:

  • Access to a more efficient and cost-effective telecommunications system
  • Increasing the Western Australian customer base
  • Better financial infrastructure and access to venture capital

While a number of respondents commented on the resources the government has put into overcoming telecommunications service shortcomings in regional WA, there were also comments about the lag in some of the pricing and availability of services as a whole. Some felt the opportunities for SMEs which wanted to develop global online products and services, in particular, has been constrained by pricing practises.

It was felt that changes in State Government purchasing policies would assist the local industry, particularly in expanding its size.

In relation to venture capital, in Western Australia this has traditionally come from high net worth individuals. Respondents commented that attracting venture capital to Australia is very difficult and that alliances with overseas and interstate companies are required to attract investment. There are a number of great success stories in Western Australia and the investment level is comparatively low to create high levels of return compared to manufacturing and mining. However, respondents felt that the venture capital industry (particularly the superannuation funds who have a huge pool of capital) and government need to be educated about the value of investing in ICT.

There is perceived to be a lack of good venture capital management expertise in Western Australia to ensure returns are achieved and, if necessary, provide the marketing and financial advice to the organisation to whom they lend. Also, those venture capital firms that are operating in this state, are not known by interstate/overseas companies who may wish to put capital into Western Australia.

Expertise

The research indicated that assistance would be best achieved through:

  • Educational institutions ensuring they provide technically excellent people
  • Marketing expertise developed in the industry
  • Educational institutions and government working closely together
  • Educational institutions teaching organisational change and management skills
  • Educational institutions teaching students basic skills to learn and absorb information

 

2.6 Competitive Analysis

The major strengths of the Western Australian industry perceived by the respondents were:

  • Good quality people with world-class skills 84.4%
  • Strong telecommunications structure 63.3%
  • Innovation of Western Australian industry 62.4%
  • High reputation of Australian technology 60.6%
  • Same time zone with Asia 52.3%

Perceived weaknesses of the local industry were considered to be:

  • Lack of Government support for the industry 60.6%
  • Small local market 60.6%
  • Non-existent seed venture capital 56.0%
  • Lack of on-going capital 53.2%
  • Government does not use purchasing power to assist 50.5%

When asked where they felt real opportunities lie for competing outside Western Australia, the majority (79.8%) felt that solution-based approaches, not just technical solutions were a primary area for opportunity. Real opportunity perceived by the industry was seen to be in:

  • Solution-based approaches 79.8%
  • Developing other areas of industry specialisation 67.9%
  • Development of Internet products 60.6%
  • Export ICT services 57.8%

The major threats to the Western Australian industry were seen to be:

  • WA's isolation from where major decisions are made 68.8%
  • Lack of access to venture capital 59.6%
  • Skilled and creative people migrate 58.7%
  • Lack of market-focus 55.0%
  • Asian economic crisis 50.5%
  • Slow getting products to market 50.5%
  • Federal Government not in tune with export 50.5%

 

2.7 Survey Conclusion

Industry Profile

The Western Australian ICT industry is a fragmented and broad ranging group of businesses and organisations, many of which identify their business more in terms of the clients they service than their engagement with ICT. These companies do not identify themselves as being primarily part of the industry. Of those who do, provision of ICT services dominates followed by production of software and distribution of ICT products.

A diverse range of attitudes towards growth is reflected across the industry with almost half indicating satisfaction with their current level of business activity.

Current Status

Despite the relaxed approach of many companies, the growth rate for the industry is extremely high at an estimate of 29.2% in 97/98 and projected growth of 34.2% in 98/99. At this rate the industry is far outstripping the estimated growth for Western Australia's GDP, which is currently at 5% for 98/99. Although the production of software sector indicates the highest estimated growth rate for 97/98 at 57.9%, the provision of services through IT sector looks to dominate in the year ahead, indicating projected growth in 98/99 of 75.9%, a significant jump from 24.3% in 97/98.

Products and services from Western Australian companies are being sold to interstate and overseas markets by 63.2% of those surveyed, with interstate markets providing 51.3% of annual revenue for those who are exporting. Overseas markets provide 20.3% of annual revenue for those exporting.

Emerging Trends & Future Directions

More than half of the companies surveyed expect increasing competition from global competitors to affect their organisations over the next three years. At the same time they paint a gloomy picture of their capacity to keep pace, indicating the lack of funding for export and for the development of new products; the capacity to keep value-adding and short product life as barriers to future success.

In terms of export, 63.2% of companies currently sell to markets interstate and overseas and an additional 7.1% are intending to export goods and services in the future. Of this combined group, nearly all expect interstate and overseas sales revenue to increase with New South Wales and Victoria identified as the major interstate markets for growth and the USA, Singapore and Malaysia the top three overseas markets identified as areas for future sales revenue.

Future Needs of the Industry

The survey respondents identified a number of issues which they felt should be addressed to expand the industry:

Infrastructure

Improve infrastructure, including:

Expertise

Encourage improvements in expertise in the industry:

 

Competitive Analysis

In thinking about exporting and growth of the ICT industry, the survey revealed the following:

The industry's perception of its competitive strengths highlighted the quality of personnel with world-class skills and its capacity for innovation. These, together with good telecommunications infrastructure and Australia's international reputation for technical excellence, are consistently regarded as key strengths.

Less consistent were the responses to the perceived weaknesses of the industry, although well over half of the respondents identified a lack of government support and the small local market as major problems, followed by the lack of venture capital and ongoing capital for development.

The industry identified opportunities for competing outside Western Australia by providing solution-based approaches, rather than straight technical solutions, and through the capacity of the industry to broaden into other areas of industry specialisation.

WA's isolation from major decision-making centres was a predictable leader to perceived threats, followed by lack of access to venture capital and the potential loss of skilled and creative personnel to other parts of the world.

3. Global Trends and Issues

These trends and issues have been divided into two sections: those which are affecting all countries to a greater or lesser extent and those which are peculiar to Australia. They provide a very brief background picture to the detail which follows in the country and state case studies.

3.1 Global Issues

3.2 Australian Issues

Regional Western Australian Issues

Those establishing and building ICT companies in regional areas face all of the issues and challenges outlined above, plus a number of others. These include:

 

4. Australian and State Policy Approaches

4.1 Federal

Strategic Summary

In terms of many of the international benchmarks, Australia's policy response to the range of information economy changes has been muted and contained. The level and quality of activity - as measured by initiatives and reports - produced or commissioned by departments directly concerned with these issues has been generally encouraging. However, much of this work has had little impact in the "central" departments (of Treasury, Finance and Prime Minister and Cabinet).

In those countries that have made an impact in their economic and corporate restructuring, (see Taiwan and Ireland below) there has been strong leadership commitment, primarily to support the necessary financial and political action. In the present political climate in Canberra, this lack of high level support and serious reexamination of our current position and direction appears to apply to both sides of politics.

Mitigating against any change in this is the still strong policy ethos within the central departments against government intervention.

Government Policy Structures

The federal government has recently gathered together much of its ICT and "online" support activity under the National Office for the Information Economy (NOIE). Management of the federal government's own IT planning is the responsibility of the Office of Asset Sales and IT Administration, within the Department of Finance. Industry development functions have been moved from the Department of Industry Science and Resources to the IT branch in the Department for Communications, Information Technology and the Arts.

While many federal government reports have provided leading-edge insights into the changes which are occurring and the threats and opportunities which are arising, they have tended toward recommendations which lead to incremental change and are more likely to follow the US lead rather than take full account of Australia's comparative advantages and disadvantages.

In its Strategic Framework for the Information Economy (Dec., 1998) the government identifies Australia's comparative advantages as:

 

Leveraging from these strengths NOIE has identified priority areas for action, including:

The comparative advantages and priority areas for action which have been identified are thoughtful and well considered. As has been mentioned, the missing element is evidence from either side of politics of the vision or conviction for action.

 

4.2 New South Wales

Strategic Summary

NSW is a substantial market for ICT products and services in its own right. It represents almost 40% of the Australian market and an even higher proportion of fast-growing sectors like multimedia production. The Government's annual expenditure on ICT products and services is the largest in Australia and exceeds $US475m.

Of all the Australian states examined here, the NSW government is probably the least interventionist in terms of industry development. The combined effects of Sydney's position as the major gateway to the US, its development as a sub-regional centre in global financial markets, and the city's physical beauty have all contributed to building a momentum which has served as a magnet for many MNCs deciding on the location of their regional headquarters.

This level of activity has also proven to be an important stimulus to the growth and development of locally-owned companies in Sydney, greatly assisted by the concentration of a number of federal government agencies and potential investors.

Success Factors

For MNCs and Australian-owned companies NSW offers:

  • technologically advanced and, arguably, the most competitive telecommunications industry
  • multilingual and skilled workforce with Asian languages strength
  • advanced ICT research base
  • strong market base in finance, advertising and entertainment industries
  • leading-edge new media development capabilities.

NSW has a good track record in attracting Asia Pacific Call Centres and back room ICT operations for major MNCs. It is intended to continue this as the Government focuses more resources into developing advantages of regional NSW.

Government Policy Factors

The NSW government offers support to attract companies to the state, increasingly to regional areas. To assist investors, the government will:

  • liaise with Commonwealth, State and local government bodies and coordinate government approvals.
  • provide skills training for employees of new projects.
  • provide payroll, stamp duty and other tax rebates.
  • assist with relocation expenses and negotiate infrastructure charges.

The government's connect.nsw strategy, which is focussed on the public sector's use of ICTs, has four main strategies:

 

4.3 Queensland

Strategic Summary

Government support for the ICT industry has been significant and focussed. Although there has been substantial change within the government agencies concerned with ICT industry development following the change of government, there is broad bi-partisan support for the sector.

Detailed market research has been undertaken on the local industry, reflecting what appears to be a strongly consultative strategy built around relatively good links between government and the industry. This attention to research also carries over to the gathering of market research for the industry. A significant proportion of industry attraction resources is expended on attempting to lure companies from other states to resettle in Queensland.

The government has recently released a discussion paper on "Towards a Communication and Information Strategic Plan - Discussion Paper" (http://www.dcilgp.qld.gov.au/index_comminfo.html)

Government Policy Factors

Both sides of politics in Queensland recognise that the ICT industry is critical to the State's economy. Both public and private sector demand for improved communication and information products and services are key drivers of the industry's growth.

Successive Queensland governments have supported a competitive environment for the provision of infrastructure and services. The government uses ICT for many of its own services delivery functions. The Government is by far the largest purchaser of goods and services. This purchasing power is used to drive product and services innovation and development.

These actions have contributed to Queensland having the fastest growing levels of ICT employment, in percentage terms, of any state.

 

Key Strategies

Encourage development of Queensland-based companies

Create an attractive business environment and a consistent industry development policy to encourage local companies to build on their strengths and expand into new markets.

Building essential industry segments

Provide specific programs for industry segments that are essential for the creation of a mature broad-based communication and information industry in Queensland by providing test beds within government agencies.

Multimedia

Create understanding of the capacity of multimedia to meet business needs more effectively by government participating in multimedia product development and promotion.

Attracting and using venture capital

Facilitate access to adequate venture capital to accelerate growth and provide investor-ready programs for companies seeking venture capital.

Promote adoption of technologies to enhance growth of the Queensland economy

Work with Queensland businesses and local government to encourage the use of locally-developed ICT products and services in health, education, tourism, manufacturing, building and construction, retailing and small business.

Encouraging investment/ relocation

Develop a coordinated strategy that will maximise ICT opportunities to attract investment. Facilitate growth in the ICT sector through incentives, partnering arrangements, State taxation relief (where applicable) and leadership.

 

4.4 South Australia

Strategic Summary

The South Australian government has been very active in expanding the State's presence in the ICT sector; both in developing its own ICT industries and in attracting MNCs. There has been a significant focus on extending the State's existing base in the defence industry with these policies. The attraction of Motorola to establish a presence in SA is one of the more prominent examples of this approach.

The other major MNC now operating in SA is the giant Texas-based professional services firm, EDS. A part of EDS' role is in encouraging the local industry through outsourcing of government work it manages.

The Government has recently come under fire from the Opposition and press for the terms and conditions of some of the agreements it has struck. At present the claims and counter-claims of government mishandling remain largely unresolved but this situation does highlight broader issues for Australian governments attempting to implement these strategies.

The government has also been supportive of information industry enterprise development through its support of the technology business incubator, the Playford Centre, amongst other initiatives.

Government Policy Factors

The South Australian Government opened its Information Economy Policy Office towards the end of 1998. Its brief is to develop and implement policies to develop the ICT Industry.

To date, the South Australian Government has been directing its ICT industry development initiatives from the report, IT 2000: The Report of the Premier's Task Force on Information Technology Industry Development. This report was released in June 1994.

The aim of the IT2000 Vision is to transform South Australia into a centre of excellence for information industries in the Asia Pacific region by the year 2000, including being:

 

Key strategies

Building the local IT industry

Significant increase in investment

  • The industry leader strategy - focusing on the formation of significant partnerships with companies that have access to international markets - matching the local industry's skill and innovation with the marketing expertise of those companies.
  • Leverage outsourcing - offering substantial government business to a limited number of major companies in return for firm commitments to invest in the local IT industry (eg EDS). The conditions of contracts must require the involvement of, and subcontracting to, local companies, which will also benefit from investment, skills sharing, technology transfer and off-shore market access through the major companies.
  • Segment size - must be large enough to attract significant investment; specific industry development objectives must be met.
  • The outsourcing strategy - to use government expenditure on IT as a lever to secure significant private sector investment in nominated projects; to improve the efficiency of the public sector.
  • Sector and agency specific applications - outsourcing the development and maintenance of applications for specific government agencies and to communicate this to the local industry via a forward procurement plan.

Information technology as an enabler

  • Non IT industries also form an essential component of the IT2000 Vision, both as users of technology and as supporting product and service providers.

 

4.5 Victoria

The Victorian State Government's support of the ICT sector has attracted worldwide attention for its marketing drive and energetic government support at the highest levels. The Government's two most senior members, the Premier and the Treasurer, are the public face of the strategy. Both have worked hard to inform themselves of the issues and are able to speak confidently and passionately about it. Industry leaders regularly comment on this as an unusual and very attractive aspect to doing business in the state. The Government has pursued MNCs in an aggressive and targeted fashion to complement the state's existing companies' activities and the state's competitive advantages. There has been a strong understanding and commitment to the necessity of building awareness and the particular information needs of the industry and the community.

The Government has used its purchasing power vigorously, often being a "bleeding edge" customer in pushing new technologies.

Where governments elsewhere have, to varying degrees, understood the importance of the ICT sector economically, few have understood as well as the Victorian government the broad sweep and implications of the shift to a knowledge economy.

Government Policy Factors

Investment and Export

Strategic Development of Industry and Community

  • Various projects to raise awareness of the capabilities of new technology.
  • Digital Melbourne project - a survey of industry demand and development of a strategy to facilitate broadband access for the information, communication and multimedia sectors.
  • RMIT I3 - establishment of an R & D facility and infrastructure on online and multimedia industry; Industry matched funding of A$2m (plus A$0.7 outstanding from 1997-98).
  • Educational content development export program.
  • Cultural projects aimed at digitalising National Gallery of Victoria collections, development of online databases and improving Internet access in libraries.

Whole of Government Information and Communication Technologies

 

4.6 Western Australia

Responsibility for ICT within the WA Government up until early last year (1998) had rested with a group within the Department of Premier and Cabinet. A number of staff within the Department of Commerce and Trade had responsibility for industry development for the sector in WA. Both roles were consolidated and upgraded with the establishment of the Office of Communications (OIC) within the Department of Commerce and Trade at the beginning of 1998. Its brief and operational scope are comprehensive with responsibilities for public sector ICT issues, industry development and wider adoption of these technologies within business and the community in general.

This provision of resources in recognition of the importance of ICT by the government has been relatively slow in coming. Within the Australian context it could be argued that only NSW has lagged further behind WA in adopting and implementing an ICT industry development policy. Given that state's dominance of the sector the NSW government's view appears to have been that its involvement - beyond developing ICT strategies to address its own operational needs - is largely superfluous.

On the industry side, the ICT sector has been represented by a plethora of associations. Most of these represent particular technological "territories" - computing, telecommunications, multimedia etc. - rather than reflecting the convergence of these technologies in recent years. There has been an increasing amount of cooperation between the associations recently working together on joint projects and events.

Although the WA ICT industry has, in comparison to other states, a very strong export record these globally-focussed companies do not tend to be well represented in the executive positions of the industry associations. These positions tend to be filled by representatives of either locally owned companies whose primary focus is the domestic market or by representatives of the state offices of Multi-National Companies represented in WA. This, in turn, has a significant impact on the industry representatives filling positions on reference groups and committees established by government to consult with industry.

This structural aberration has given the WA ICT industry agenda a bias toward issues concerned with the domestic market, in particular policies for accessing additional business from the state government. In this environment it is hardly surprising that the major concerns of the industry representatives, as they are currently constituted, is in maximising the revenue they earn or that earned by their branch for their MNC parent.

It is gratifying that this dynamic is increasingly being recognised, the challenge remains for it to be acknowledged across the industry and government and for adjustments to be made to the current system to counter its effects. This is not to argue for the exclusion of the WA-owned, domestically-focussed companies or the MNCs from these fora, but that their strategic priorities be seen and appropriate adjustments be made, where needed to account for this.

Government Policy Factors

Soon after its establishment, the OIC developed and submitted to Cabinet a strategic directions document that identified a series of goals and objectives for itself. Broadly speaking, this document has formed the basis for its work. With each of these goals was identified the role the OIC intends playing to assist in achieving them.

 

To make a difference to the economy, lifestyle and living standards of Western Australians, by world-class use of the advantages of the Information Age.

 

In pursuit of this goal, the role of OIC is to lead, facilitate, co-ordinate and work in partnership with agencies, businesses and communities. This will entail:

Interaction with Government Agencies

OIC will be the lead partner, with other organisations, in helping Government gain benefits from the Information Age; working at the strategic level, sharing expertise, developing principles and standards and ensuring their adoption by WA Government agencies.

The outcomes the Government identified as priorities were:

A series of overarching programs were created within which these various goals would be managed, including:

The initial, specific priorities which were set for the OIC to achieve the Government's required outcomes were:

 

International Case Studies

5. Canada

Strategic summary

Canada has an affluent, high-tech industrial economy that closely resembles the United States in its per capita output, market-oriented economic system, and pattern of production. Communications are highly sophisticated in Canada, and comparable with those of the US.

(images missing!)

The relatively small size of Canada's technology industry (with a total market capitalisation of US$55bn) lacks the critical mass of its imposing neighbour.

While comparisons are regularly made between Canada and Australia in terms of our shared British heritage, government structure, size, population, and reliance on commodities, with regard to technology business the similarities end. There are approximately 150 Canadian technology companies, with half a dozen major players, such as Nortel, Hummingbird Communications and Newbridge Networks competing head-to-head with their US counterparts. As the graphs above indicate, Canada's own high-tech companies are significant performers in export markets.

Critical success factors

Critical challenges

STEEP Analysis

Social

US cultural and economic dominance

Technological

Pockets of technology skills, need to leverage from resource strength to Information industry

Economic

Ready access to NAFTA (North American Free Trade Agreement) and, in particular, US markets. Good market intelligence services provided by government (http://strategis.ic.gc.ca). Relatively high tax rates

Environmental

Heavy reliance on Ontario activity, limited involvement from other regions

Political

Significant conceptual work but little evidence of direct intervention to suppport ICT industry. Recent changes suggest this is changing on both a federal and provincial level

 

6. Canadian Provinces

 

6.1 Ontario

Ontario is Canada's largest province, containing Toronto, the largest city, and the national capital Ottawa. ICT is central to the Ontarian economy (third largest revenue-generating sector) and comprises about 80% (by revenue) of the Canadian IT industry. The ICT sector has an annual growth of approximately 9% on revenues of about US$23bn and employs approximately 165,000 people. Ontario is home to most of Canada's largest companies.

R&D is crucial; Ontario has the most R&D-intense provincial economy in Canada, with a 2.0 per cent ratio of R&D to GDP. In 1994, approximately US$4.1bn of R&D was carried out in Ontario, more than in the rest of Canada combined.

Bell Northern Research and a strong public research presence has created the critical mass of silicon entrepreneurs. The near 100% digital switching network throughout Ontario and the deployment of high speed digital transport facilities allows for a full range of state-of-the-art telecommunications services and reliable, low-cost access to data and information services.

The significant ICT sectors include:

  • telecommunications equipment and services, almost 60% of all ICT revenue in the province;
  • the computing sector, which is growing at a rate of 5% to 15%, faster than most other industrial sectors; and
  • the digital media industry, an extension of the computing and telecom sectors, is emerging as one of the fastest growing components of the IT sector in Ontario.

Canadian venture capitalists invested US$720m in 1996, with 83% of the capital going to startups (companies with less than US$3.3m in revenue and fewer than 50 employees). The Ontarian government spends about US$330m on information technology each year.

 

6.2 Alberta

While the economy of Alberta remains dependent on the traditional natural resource sectors, there is a growing ICT sector. In 1997 production from Alberta's ICT sector was US$5.28bn, 11% of Canadian output.

Over the past five years, output from Alberta's ICT sector has grown 10 to 12% annually, due to deregulation, increased competition among communications suppliers, explosive use of the Internet and rapid growth in international sales from the ICT manufacturing sector.

In Alberta there is an established base of technology-intensive enterprises with at least six major international technology-intensive companies. The telecommunications infrastructure is also well established, with both private and public sector networks. The public sector network covers 90% of Alberta, providing a high performance, secure and reliable backbone for the network services of many government users.

There are seven areas of established strength and potential for growth. Alberta is the wireless technology centre of Canada, with the cluster generating sales in excess of US$2bn and an annual research expenditure of over US$82m. Other key areas include System Integration and Scientific Software, the burgeoning Multimedia sector, centred around the University of Alberta and The Banff Centre for the Arts, Geographic Information Systems and Global Positioning Systems.

Annual ICT R&D expenditure is in the order of US$138m, which is currently 2.5% of ICT revenues. A recent government report found that there is a need for appropriate tax programs to encourage investment in industrial research and development. There is also a recognised need to increase Alberta's capacity to develop more knowledge-workers.

 

6.3 British Columbia

Although British Columbia has been a modest centre for technological innovation for the last 20 years it does not have a well developed ICT sector. Technology companies have struggled to find funding and skilled employees, and as a result generally have not made the transition from good ideas to large-scale commercialisation.

Exports play a significant role in economic growth in British Columbia and the province is the main beneficiary from Pacific Rim trade. British Columbia firms find it nearly impossible to recruit employees from the United States, competing with Seattle's booming ICT industry.

Entrepreneurial companies, fuelled mainly by research centres like the University of British Columbia and Simon Fraser University, are reaching beyond the Province for financing, senior-level management, and strategic partners to transform the BC economy from its traditional natural resource dependence.

Financing has also been a major challenge. Local sources have been developed only in the last ten years, and US sources were until recently hesitant to get involved in the area's early-stage ventures. Funding options have been expanding, with independent and government-sponsored venture capital firms now operating.

British Columbia does offer some distinct advantages for technology companies. The high-tech economy of the area is growing at roughly 22% annually; engineers' salaries are around half that of their US West Coast peers; and the federal government provides a tax credit for up to 35% of R&D costs. There is a need for greater public policy efforts at a province level to support technology in the province.

 

7. Finland

Strategic Summary

Both the Finnish government and corporate sector have shown themselves extremely adept at identifying attractive global niches suited to their capacity and pursuing them vigorously. Nokia's leading position in mobile telephony is a classic example.

Finland has set its objective to become one of the leading information societies of the world. Telecommunications technology and systems in Finland are among the world's most highly developed. This is complemented by an open telecommunications service market.

Finland is a country to watch in terms of identifying strong demand trends, developing technology and successfully applying it. Its efforts in technology R&D, at a business, government and university level, are exceptional. The willingness of the Finnish people to embrace the latest technologies provides a strong market environment to launch "cutting edge" technologies.

Critical Success Factors

Critical Challenges

 

STEEP Analysis

Social

Cultural isolation, high unemployment. Rapid adoption of new technologies (at 50%, it has the world's highest penetration of mobile phones as well as one of highest rates of Internet use)

Technological

Excellent technology transfer and technology strategy

Economic

Excellent infrastructure, strong culture of public and private investment in R&D, early entrants into European Monetary Union, strong export orientation

Environmental

Exploit relatively small size by moving decisively and in a (relatively) unified way

Political

Links to EU, relations and status of Russia, govt has targetted technology as a key area for growth

8. India (Bangalore)

Strategic Summary

Until 1991 India's post-independence economic policy combined a vigorous private sector with close state planning and control, treating foreign investment as a necessary evil. Foreign firms were allowed to enter the Indian market only if they possessed technology unavailable in India.

Since 1991 India has been transforming its insular economy into a more open, market-oriented economy. The industrial policy is now vastly simpler, more liberal and more transparent. It actively promotes foreign investment and Foreign Direct Investment (FDI) approvals have risen sharply. The focus of India's ICT industry is in software development. The country's competitive advantage in highly-skilled, relatively low-paid programmers has enabled it to expand significantly. From an economic and industry development perspective it faces the challenge of leveraging this technical strength into developing its own branded products and so retaining more of the value of their work.

Most of this activity is located in the southern city of Bangalore, largely through the presence of several leading research and training institutions. In recent years, significant national and state government initiatives have encouraged ICT developments elsewhere around the country. The Government has stimulated exports, focussing on infrastructure and high-tech sectors, and now permits foreign firms to hold up to 51% equity in Indian ventures.

Critical Success Factors

Critical Challenges

STEEP Analysis

Social

Large supply of cheap and highly skilled workforce; Brain drain, attracting emigres (and investors) back

Technological

Capital and investment "drought" to capitalise on opportunities beyond body hire

Economic

Massive economic disparity

Environmental

Rise of high tech "enclaves" generating population and environmental pressures

Political

Economic deregulation and liberalisation

 

9. Ireland

Strategic Summary

Ireland's economic transformation over the past decade places it as arguably the most successful example of positive government intervention of any country in the western world. It has the fastest growing economy of all the OECD countries - 7.4% growth in GDP in 1996 and 9.8% in 1997 - and it has been in surplus each year since 1991.

ICT industries have been a central part of this success. Many of the industry's "blue chip" global companies use Ireland as their base and/or gateway into the European Community. Both exports and employment by these MNCs have doubled since the beginning of the decade and local firms are also growing, although not as strongly. Ireland has attracted 30% of U.S. high-tech companies investing in Europe, is the source of one-third of all computers sold in Europe, and ranks second only to the US in world software exports.

Electronics and software now account for 40% (US$20.2bn) of Ireland's exports. This is crucial for Ireland; exports contribute about 80% of the country's GDP.

 

Critical Success Factors

Critical Challenges

STEEP Analysis

Social

Overcoming high unemployment, particularly levels of long-term unemployed

Technological

Liberalising telecommunications sector

Economic

Further lifting performance of indigenous SMEs, satisfying trade union demands

Environmental

Facing the challenge of converting the success of the last decade into home-grown company expansion

Political

The impending reduction in European Union financial support and the impact on government support programs and other interventionist initiatives

 

 

10. Singapore

Strategic Summary

The Singapore Government has traditionally taken a highly interventionist approach in industry development and the country's economy generally. The ICT sector has attracted a considerable amount of attention from government from an early stage. The Singaporean Government can justifiably claim to have been one of the first to recognise the strategic importance of ICT. It has developed comprehensive policies to build the sector and to extend the use of the technology widely into the economy and society generally.

The Government's focussed, long-term approach to development has converted the country into one of the "Asian Tigers" through the second half of the century. It has refused to intervene in the local stock market and while government-linked companies exist, there is little evidence of the nepotism and corruption found in many other Asian economies.

A major deficiency with Singapore's top-down approach is that efficiency has been an end in itself. There has been little encouragement of entrepreneurialism within the private business community. MNCs are a very important part of the local ICT industry, local companies are not as significant as in some other Asian ICT industries.

An example of the "government-centric" approach, often to the expense of SMEs in particular, is the public sector's pursuit of the best talent the country has to offer: while Singapore certainly has a few world class entrepreneurs, it has a much larger number, at least proportionally, of world-class civil servants.

Critical Success Factors

STEEP Analysis

Social

Opportunities as an Asian hub; Government recognised lack of creativity in workforce

Technological

Excellent infrastructure, awareness and technology penetration

Economic

Limited indigenous SMES;
Strong government funding; Reliance on MNC's and GLC's; Government is lead user of ICT

Environmental

Economy is dependent on trading with its neighbours; Reliance on government for direction

Political

Political control; Government heavily involved in a top-down fashion in industry development

 

 

11. Taiwan (Republic of China)

Strategic Summary

Through the development of a clear and long-sighted set of government policies over the past three decades Taiwan has built itself into a financial and technological powerhouse.

Taiwan is the world's 13th largest economy with the world's third largest foreign exchange reserves and over $235 bn in two-way trade. Its economy is expanding at 6% with full employment and low inflation. The electronics sector of the Taiwan Stock Exchange has surged 170% over the past 18 months with many new computer-related companies still awaiting listing.

This mix of factors has created tremendous liquidity in the system. The Taiwan Stock Exchange had a trading volume of US$1.3 trillion, greater than Tokyo's and the third largest in the world after New York and London.

The combination of financial capacity, an entrepreneurial culture, efficient production expertise, and a growing capacity to understand and implement the intangibles of the information economy, paints a picture rich in possibilities for Taiwan into the new millennium.

Critical Success Factors

STEEP Analysis

Social

Highly entrepreneurial culture; strong bias to engineering education

Technological

Highly skilled workforce; very rapid technology diffusion; Software limitations; Clustering through technology parks

Economic

Fluid network of active, vigorous and competitive indigenous ICT SMEs; Strong and rapidly growing investment community

Environmental

Significant and growing pollution problems (driving shift to software and knowledge industries)

Political

Relations with mainland China; Corruption in government is an issue; Strong leadership in promotion of new technologies

 

12. WA "Goodness of Fit"

This section summarises some of the industry features and policy approaches found in the various state and country case studies which may be relevant to Western Australia.

New South Wales

The state's ICT sector has flourished through Sydney's position as the primary gateway to the US, its position as a sub-regional centre in global financial markets and physical beauty. These have all contributed to making Sydney the nation's ICT capital and attracted many MNC offices.

  • Increasingly sophisticated investment community plus national capital for the advertising, entertainment and media industries
  • Competitive telecommunications market
  • Strong ICT research base

Queensland

Support for the ICT sector has been bi-partisan, high level and focussed. There appear to be good links between government agencies and the industry which has led to the production of a number of highly functional and practical support programs. The state has attracted some companies, particularly encouraging companies from other states to relocate.

Queensland's ICT industry has the fastest employment growth per capita of any state

  • High level, bi-partisan support for the sector
  • Strong links with industry
  • Strongly focussed on supporting local companies rather than seeking savings at all costs

South Australia

Has recognised the opportunity ICT presents to rejuvenate its economy. Has sought to build alliances with a number of MNCs both to extend existing strengths and to act as a clearing house for industry development.

  • Have focussed on competitive strength in defence research
  • Implemented an active knowledge entrepreneur incubation program
  • Taken a "whole of government" approach to outsourcing

Victoria

The Victorian Government's ICT strategy has been recognised internationally as one of the best in the world, particularly for its support from senior politicians.

The incorporation of content as a central part of policies, beyond simply hardware and software has also attracted much attention.

  • Government has taken on the role of "bleeding edge" customer
  • Policies reflect a greater understanding of the knowledge economy and its dynamics
  • The drive for these policies has come from the most senior levels of government, overseas and local industry reps have commented about how well informed these politicians are of the issues.

Canada

Any discussion of the Canadian economy has to take close account of its giant neighbour. The US provides a massive, almost domestic, market and an ever present threat to Canadian companies. This challenging paradox has encouraged a culture of seeing clear and distinct political and economic boundaries between what is acceptable and what is not in striking an acceptable balance.

  • strong R&D culture
  • growing venture capital industry
  • North American Free Trade Agreement membership massively expands market

Finland

Has been at the front line of changes within the eastern bloc which have forced a significant adjustment to its economic assumptions. Having been closely economically tied to the former USSR the country has reoriented itself both in terms of geographical and sectoral markets.

  • aggressive global niche marketing
  • strong export focus
  • very strong niche R&D activities and...
  • ...excellent commercialisation credentials
  • Clustering of R&D and technology companies

India

The government has been reorienting the country's economy to being more open and market oriented. This has been particularly constructive for the ICT industries.

State governments have also begun pursuing ICT opportunities.

  • very strong and extensive technical skills base
  • significant skills in managing distributed work projects
  • located in a time zone ideal for global workflow
  • working to develop positive outcomes through MNC partnerships
  • growing government support for the development of local companies
  • expanding government push to develop clusters/high tech zones

Ireland

Ireland's turn-around over the past decade has been extraordinary, albeit with substantial, long-term assistance from the European Union. Having said this the government has shown a vigorous strategic vision and determination to build the fastest growing economy, largely through ICTs.

  • successful exploitation of relatively cheap, skilled labour force
  • highly successful industry attraction policy (NB an important caveat to this is the European Union's long-running and substantial funding)
  • strong export culture
  • sympathetic corporate tax regime
  • well developed understanding of online business issues at senior levels of government and business
  • excellent personal networkers
  • make good use of the global "Irish Network"

Singapore

The ICT sector has benefited from the government's traditional centralised planning approach although strategy has raised questions amongst some observers about dampening entrepreneurial activity.

  • strong strategic focus
  • significant optimisation of available assets
  • strong "whole-of-society" approach to awareness and involvement
  • substantial focus on infrastructure optimisation

Taiwan

Like Ireland, Taiwan has turned itself into an ICT powerhouse. It has built on its strong manufacturing capacity to move into higher value stages of production. The success of the ICT and other industries over recent years has given the country massive reserves making Taiwan's investment community one of the largest and most active in the world.

  • strong export focus
  • leveraged MNC presence to build partnerships
  • strong enterprise culture contributing to company building and enormous investment activity
  • business-friendly tax policies
  • significant levels of off-shore experience
  • strong off-shore manufacturing capacity and management skills (based in mainland China) to offset growing domestic labour costs
  • government support for building local companies
  • strong clustering focus by government and companies
  • a systematic and serious approach taken by both government and companies to global market intelligence gathering

 

 


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