New Zealand's digital economy is trucking along the information superhighway, but according to the Ministry of Business, Innovation and Employment's (MBIE) ICT Sector Report a bottleneck in recruitment and international investment stands in the way of global domination.
MBIE's New Zealand Sectors Reports are seven publications providing a snapshot of important industries which make up the New Zealand economy. Each document also includes a high level look at how MBIE intends to achieve its Business Growth Agenda – although the government is adamant they are not policy documents.
According to the ICT Report which was released yesterday, the sector and its wide catchment of businesses contributes around five percent of New Zealand's annual GDP. In 2012, the sector employed 73,000 people or 3.2 percent of the entire workforce.
The report focuses mostly on the 'computer system design' vertical within ICT (software development, web design, consulting and cloud companies) which accounts for around 77 percent of all ICT employees and firms. Essentially any company ranging from Datacom to Xero.
In 2011, the workers in this segment earned on average $103,600, double the New Zealand average which sits at around $50,400. Despite the attractive pay packet, a fifth of employers surveyed say it's "severely difficult" to attract workers to the field – almost triple the New Zealand average of six percent.
"The biggest bottleneck is the scarcity of people. These are not just IT occupations, but a whole range of skills such as project managers, marketers, sales people, administrators and business analysts," says the unnamed chief executive of an industry body, in the report.
Startups such as Xero and Vend have made headlines on numerous occasions for major hiring sprees, but the number of graduates with science, technology, engineering and mathematics (STEM) qualifications isn't keeping up. MBIE says it aims to increase the number of engineering graduates coming out of tertiary institutes by 500 by 2017.
Almost half (47 percent) of all computer system design companies invested in business expansion in 2012 (double the national average), while 33 percent undertook research and development projects worth around $1.1 billion. The sector is by far the largest in terms of early stage investment, in 2012 accounting for 27 percent of the total invested in New Zealand startups.
"I think that one thing you could consider for the next report is some analysis of the value that acquisitions have on the local economy. There seems to be a school of thought that the acquisition of a local company by a foreign multi-national is a bad thing and that jobs will be lost offshore. Whilst that may be the case in the short term, the return on investment to investors and path to “liquidity events” for start-ups is invaluable and should not be under estimated," says an unnamed chief executive of a small to medium IT firm.
"Israel is a very good example of this and they focused on their economy being an incubator for ICT companies."
To encourage foreign investment and internationalisation of local companies, MBIE says it plans to deliver targeted internationally focused services to 2,000 business in New Zealand of which there will be an intensive focus on at least 80 ICT companies (amongst 500 others from outside the sector). This will include programmes such as Beachheads, Path to Market and Better by Capital.
Immigration, which has long been a thorn in the side of many technology companies, will be looked at. The goal is to streamline the process for attracting skilled immigrants and investors, through initiatives such as the Silver Ferns Visa.