Building productivity on the cloud

The productivity debate in Australia shouldn't just be about the labour market and regulatory reform. It's time for the benefits of the cloud and information technology are brought into the mix.

Does Australian industry understand productivity? Does government?

I would argue the productivity debate in Australia is far too narrow and we run the risk of it being lost in the age-old argument between labour and capital. To echo the recent work of the Australian Internet Industry Association, I believe we should be talking about the benefits of the cloud and information technology to productivity – not just about labour market and regulatory reform.

Why aren’t we talking about productivity gains from technology? Further, why aren’t we talking about innovation from local industry for export to the world across the internet? It makes you question whether we really do understand how best to grow productivity in this current two speed Australian economy.

We know low productivity growth (Australia’s is low and has fallen in recent years) is an issue because productivity growth is a key driver of a nation’s standard of living. Leading global economists, such as Krugman and Porter, as well as business executives, such as Cisco’s John Chambers, have pointed out that if you want to drive up the standard of living in a country, you need to improve productivity. 

So productivity matters, not only intuitively, but in the wider context of standards of living. It’s proven. 

But if that’s the case, do we really “get” the productivity debate in Australia? 

As an angel investor in several early stage and innovative ventures it strikes me as odd that the nature of the productivity debate in Australia is so narrow. We hear a lot from politicians, business groups (mostly from the big end of town, incidentally) and others that the best way to get our national productivity levels up from zero is to free up the labour market, open up infrastructure such as ports etc. All very good but all very industrial age thinking! 

Labour market and regulatory reforms, in resources, manufacturing and retail, are important for our national productivity growth – no doubting that. However, why is there so little debate about the role of information technology, cloud computing, mobile devices, tablets and other emerging technologies to support productivity growth? 

Major business lobby groups, such as the Business Council of Australia (BCA) embrace the idea of technology-based productivity – the Business Council said in 2009, that “The Business Council of Australia places high importance on the effective use of ICT by our businesses, governments and households as a driver of future prosperity.”

As I mentioned earlier, perhaps the best and most comprehensive substantive argument for information technology based productivity was the recent study commissioned by the Australian Internet Industry Association and KPMG, who found that:

"As a result of the productivity gains from cloud computing, firms either produce an increase in output from the same level of inputs, or output in the implementing enterprise is held steady freeing up resources for alternate forms of production."

Or take an Australian, real life example. One of the early stage investments  I am associated with, Floktu, provides ‘cloud’ based software which allows open access to anyone, including professional event organisers to plan, manage, launch on-line and report on conferences and events in a way which increases productivity and reduces costs.

One of Floktu’s clients, Conexus Financial, which manages high level conferences and events for the global superannuation funds industry, recently reported that it had managed to double its productivity using the Floktu event platform.

I am not claiming that the only way to increase productivity is to invest in new technology. Far from it. Technology in the workplace can be wasteful, even damaging to productivity if it’s not considered from a strategic point of view.  

But overall, there has never been a time when the benefits of information technology to productivity have been greater. We should be considering it more from a national perspective than we do. We should be encouraging innovative business models, creating investment to ensure clever ideas are incubated and funded here.

We should be encouraging institutional investors to support this growth industry. Left to angel investors and high net worth investors to invest alone is not the way to go. Australia will never compete with US innovation hubs such as Silicon Valley if the status quo remains wherein cloud based information technology is considered an afterthought by government and financial institutions.

Jeremy de Constantin is the director of Hunter Angels and CEO of Floktu.