Technology companies are increasingly looking overseas to protect margins under pressure from high exchange rates, says the latest Technology Investment Network 100 report.
The report benchmarked the country's 100 largest internationally focused technology firms in ICT software and services, high-tech manufacturing and biotechnology.
Technology Investment Network managing director
Greg Shanahan said revenue for the whole sector grew by 8 per cent to $5.8 billion, compared to 15 per cent growth the previous year.
"Some companies have actually accelerated their growth but the universal truth would be that most companies have shown signs of strain in some form," Shanahan said.
Technology markets were becoming commoditised more quickly, particularly as China and Asian countries industrialised.
North America was the largest market, accounting for 28 per cent of revenue, followed by Australia. The Asian market had grown but was less than one third that of the United States.
Margins were expected to continue to weaken as foreign exchange hedging contracts came to an end.
Traditionally New Zealand companies grew organically but the report showed firms were taking manufacturing offshore and acquiring overseas businesses to lower costs and increase their rate of overseas expansion, Shanahan said.
"It's just a change in the way I think that New Zealand companies do business and I think it's increasing[ly] easier to manage overseas businesses," he said.
"It doesn't necessarily mean a reduction in jobs but what it does mean is that the growth in jobs will not happen in New Zealand."
Foreign ownership of the top 100 firms increased to 19 companies, compared to 13 the previous year.
Many firms were finding the environment tougher but the sector was still healthy and robust, Shanahan said.
"I would expect that margins are further eroded [this year] but I think you'll continue to see strong growth as companies adjust to the environment ... basically push their businesses offshore and develop experience in growing businesses," he said.
"The positive thing about the sector generally is that the depth of management experience is growing in New Zealand."
TECHNOLOGY REPORT
Top 10 firms by revenue
Fisher & Paykel Appliances $1.4b
Navman $400m
Datacom $390m
Fisher & Paykel H'care $349.2m
Provenco $170.9m
Tait Electronics $150m
Weta Workshop $150m
Gallagher $120m
Tru Test $120m
Allied Telesyn $111.4m
(Some data estimated, on staff numbers and average figures for revenue per employee)
