cl-nz logo
Story image

Rod Drury - Rattling the chains

01 Oct 2006

I’m going to put a challenge out there.  Let’s shoot for a million dollars per head.

The majority of New Zealand IT talent is engaged in delivering a services-based model. Effectively selling their time, and selling this mainly to a competitive domestic customer base.

For New Zealand the adoption of this model has been inevitable as it’s inherently low risk and doesn’t require significant capital or investment. Also services-based business can generate an adequate return to their owners (often the senior management team), further reducing risk. Everyone is comfy.

The dream of almost all IT people is using their intellectual skills to develop a product. A product that sells while you’re sleeping.

There have been many articles written about what it takes to cross the chasm from Products to Services and I’m going to offer my suggestions there as well. But the new argument that I’m going to advance is that it is your duty to make this move as both an IT person and as a New Zealander.

We love the lifestyle we have here. If you travel you’ll appreciate it more but you’ll also notice how far we are slipping behind.  The lack of investment a small country like ours can make is readily apparent when you see what is on offer in other parts of the world.  Education, health and supporting our aging population are all issues we need to thing about.  We need to grow our pie.  IT, especially software development, is a fantastic way to do this.

IT, especially software, requires a small to modest capital investment. It is easily global. Many of the natural barriers we face as global traders are just not there.  Further we’re really good at it.  Our generalist skills and services give us a solid experience and good alignment between IT and business value.  We Kiwis love new things and typically exploit new technology as soon as we can.  Our small size sees cross-skilled networks quickly form.

Recent comments from government writing off the impact IT can have compared to our staple primary production should shame our industry.  We have failed to make the difference.  We have been happy using our skills to solve low value problems.

What is our annual employee contribution to Gross Domestic Product? 100 to 200k per person? That is not a high number for technology-based companies. Lawyers probably make more money go around than that. We need to think more about one million dollars per employee.  We need to use the fantastic tools we have to gain leverage.  If we don’t do it, who will pay for our retirement? We’re uniquely positioned in our economy to have easy access to tools that leverage our intellectual capacity. To have near zero technology leverage and sell hours the same way a lawyer does (who do not have the powerful tools that we have at our disposal) is simply not good enough. 

We can be far more effective as individuals, as an industry and as a country. Exporting products directly or supporting the exporting of products needs to be the goal of all IT people in this country. 

How to get there ?

A big part of the answer is ideas and capital.

A benefit of our service-based heritage is that we understand complex business problems. We have broad experience. Our sales people are solution sales people because with a small customer base they need to understand their customers and continuously look for business problems or opportunities. Our developers are used to solving complex problems within relative small budgets. They are very experienced.

So our services background is a great platform for uncovering ideas and opportunities.  Within our own customers we can probably think of many applications that would be useful to many other companies.

But to get off the fee for service treadmill requires cash. We need to have enough in the till to allow our great people to develop and idea into a product. That requires capital. 

Our services businesses are usually excellent traders.  Our service business owners are very experienced and have run their businesses with strong organic growth and through some of the down market conditions of the past five years.  They are an investment dream. 

With the wall of cash coming in from Australian compulsory savings and more sophistication in our local investment community there has never been a better time to introduce capital into your business. 

But for us to take that step we need to want it.  I believe it is our duty to use the tools at our disposal to raise our productivity. New Zealand is not just about sheep and milk anymore. Let us leverage technology to sell the output from our brains as well. One million dollars in revenue per employee should be our goal.