Home / Tech  / Yes, it is an $8-bln industry full of clever, funky, ambitious technology companies out to take on the world, and the rising stars are…

Yes, it is an $8-bln industry full of clever, funky, ambitious technology companies out to take on the world, and the rising stars are…

“In the past, when we shake hands, we might say, ‘Hi, I am from New Zealand,’ it was almost apologetic. But there has been a change in perspective. We are really punching above our weight. Companies are getting better at what they do, becoming leaders in their field, and have a vision to be world leaders,” managing director of Technology Investment Network (TIN), Greg Shanahan told Idealog.

He adds that the growth ambitions of Kiwi companies have changed. “People’s ambition for (global) domination has grown. “

The aspiration is not far fetched given the success of New Zealand companies in taking pole position. Good examples of Kiwi companies who lead the world in what they do include Orion Health (health software), Xero (online accounting software), F&P Healthcare (medical devices), Weta Digital (digital effects), and Vista Entertainment Solutions (cinema & film industry software).

And what a difference 10 years has made. When Shanahan started out collecting data for the TIN report in 2005, there were 50 companies classified in the tech sector and 4 to 5 CEOs would have their pictures in the report. Today 95% of the 200-odd CEOs supply their pictures, and the industry has come a long way, he says.

TIN’s 10th report, just released, paints a rosy picture with TIN 100 & 100+ companies’ combined revenue at $8.3 billion (bln), with $6.1 bln chalked up in exports during 2013-2014 period. This places technology as NZ’s third largest export sector behind dairy (at $14.9 bln) and tourism, at $10.3 bln.

Leaders of the pack

The revenue growth among technology companies was led by those in the $100 million+ (mln) revenue but smaller tech companies (TIN100+) saw revenue grow to a record $52 mln. Software development companies continued to grow strongly in most markets, increasing total revenue by 15% to $1.3 bln over the year while IT services companies’ revenue was $1.2 billion over the same period.

Going ahead, Shanahan thinks it is critical for smaller tech companies to gain critical mass. Companies who want to be leaders in their field have to make strategic decisions about whether they are going to invest in R&D, he says.

Where pockets of excellence have arisen is not just around the greater Auckland area, but in the provinces. “People in the provinces are doing cool stuff with a world vision. People are also finding niches where they can make money, and finding cost structures that support the business opportunities,” he says.

He notes that it is interesting that when companies were asked what issues were key concerns, “currency (high NZ dollar), and access to capital are well down the list.”

“The guys out there are working with factors they can control. They are out there creating value. Unless you are creating value that can sustain the margin of erosion, you are history,” he says.

Unlike the period following the global financial crisis which saw the sector’s growth hit plateau, and companies being sold to US concerns, companies are becoming more sophisticated. There has also been a recovery in the manufacturing sector with companies definitely getting better at what they do, Shanahan says.

Key highlights of the TIN 2014 report

  • IT Services growth slowed, with revenue sitting at $1.2 bln revenue
  • Software development companies’ growth stayed strong in most markets. Total revenues grew 15% to $1.3 bln over the year.
  • Manufacturing also grew in the areas of healthcare, primary sector (agritech) technology, and airport solutions/logistics.
  • TIN100 healthcare, a $1.3 bln export sector, saw revenue rise by $125 mln (+ 11%) due to good performances from well known companies such as F&P Healthcare, Orion Health and AFT Pharmaceuticals.
  • Primary sector technology companies saw revenues grow by 10% to $789 mln in 2014, closing in soon on the billion-dollar mark.

Shanahan notes that the tech sector’s success leads to its set of problems with the need for skills outstripping the supply. TIN jobs grew to 35,200 in 2014, up from 24,700 in 2007.

And the rising stars are…

Companies going big, bigger

What is TIN

The TIN100 report monitors the performance of New Zealand’s 200 (TIN100 and TIN100+) largest technology exporters in the areas of information and communication technology (ICT), high-tech manufacturing and biotechnology. It is produced by the Technology Investment Network.  Sponsors include Callaghan Innovation, NZTE, EY, Aon and Lumley. 

Loves peanut sauce, tennis, taichi, stockmarkets, and cool entrepreneurs – not necessarily in that order. In her previous reincarnations, she was an intranet worker bee at Mercer HR Consulting, a Reuters worker ant, and a NZ Herald mule.

Review overview