Only an earthquake stands in our way

By ADAM GIFFORD

Fear of earthquakes is the reason some companies give for considering New Zealand an unsuitable place to outsource information technology jobs.

That's the bad news. The good news, an assessment of this country's prospects in the global software outsourcing market shows, is that earthquakes are the only perceived risk.

The assessment was prepared for New Zealand Trade & Enterprise by the international IT research firm Gartner, with support from the Information Technology Association (ITANZ).

Gartner senior analyst Ian Marriott said that when people decided to outsource, their choices of where to go would be based on subjective as much as objective reasons.

"They look at political stability and infrastructure. One of the things we hear when we bring up New Zealand is, don't they have earthquakes in Wellington?" Marriott said.

For the record, the Institute of Geological and Nuclear Sciences records about 14,000 earthquakes in and around New Zealand each year. Between 100 and 150 of these can be felt. California has 11,000 earthquakes a year, 500 of them strong enough to be felt.

Gartner said the global outsourcing market for IT services was worth US$15 billion ($21.3 billion) and would grow at 30 to 40 per cent a year over the next three to five years.

New Zealand had a "key hole" of opportunity ("not large enough even to be a window!") to get a piece of that market if it built on its strengths and took a co-ordinated approach involving Government and industry.

Gartner recommended the initial focus should be on sourcing work from Britain because of long-standing business and cultural ties, followed by an attack on the US market in the medium term.

"If you are selling services, to go into the US takes a huge effort. You can get one or two anchor accounts, but then it is a hard slog for the broader market.

"In the UK, there are compatibility matches at the start, entry is easier, there is not the challenge of
scale, you can hit the marketplace where it centralises around London and hit a lot of clients in a small area.

"Once you have established a base, you can then think of going to the States, using multinational companies as bridgeheads."

Gartner recommended the industry form a UK-based consortium to promote New Zealand as an outsourcing destination and be the single face of New Zealand IT for overseas business.

The consortium would assign projects to one or more of the member companies back here and manage the client relationship on their behalf.

As it is not feasible to chase every opportunity, Gartner recommends going for work that builds on current skills, successes and references.

This would include Government and public sector projects, telecommunications, mobile and wireless computing, high-tech industries, utilities, financial services, entertainment and multimedia, and healthcare.

New Zealand should focus on the higher end of application development, the design and architecture stages, research and development, implementation of enterprise packaged applications which may need some particular industry expertise, innovation-focused projects and product development support for software companies.

"New Zealand won't compete with India on cost, but it can in areas where people can bring real creativity, innovation and a different approach to thinking about problems," Marriott said.

Weta Digital, responsible for the special effects for the Lord of the Rings trilogy, was a good example of what New Zealanders could do with technology.

The Government should be prepared to increase the amount it is prepared to spend on viable initiatives and should also consider ways to attract investment from multinational IT companies, incentives for research and development, tax breaks, and special economic zones, Marriott said.

ITANZ chief executive Jim O'Neill said there was considerable support for what ITANZ was calling Outsource 2 NZ from mid-size and small New Zealand IT companies.

"Some have very high level skills but not a lot of people, and they don't have the offshore presence which is essential for getting this kind of work."