The election is over, the new government is sworn in, and the first area that attracts cost cutting scrutiny will be the "Information Technology" (IT) sector
Not because there is any fat to spare given the price deflation over the last two decades, but as a budget line item, IT presents a juicy target. IT has increased national productivity and benefited taxpayers by delivering the greatest productivity gains since the industrial revolution. However, the paradox is that technology driven services demand talented practitioners to build and maintain the systems; and public service salaries seldom match the higher pay-packets offered in the private sector.
Government may wish to initiate budget cuts, but to retain the skilled employees required to support the technical infrastructure means matching the remuneration offered in the private sector. That well used cliché of “doing more with less” does not apply any more. Taxpayers have come to expect high-performance systems that deliver services securely, irrespective of how the data is accessed.
There’s that premium word: “securely”.
Security comes at a high cost, invariably accompanied by a reduction in user flexibility in the pursuit of greater privacy. The upshot is that if the federal government’s wish to reduce IT budgets, further investments must be made in system and process automation. The alternative is for users to accept that the Government can’t afford to match the service levels offered by the private sector.
If the software costs too much then use the free alternative
Unlike many other high-tech businesses, IT seems to attract unfair scrutiny over the prices vendors charge.
The recent Senate price enquiry highlighted how poorly our elected representatives understand the software industry. Every commercial product available has an open source equivalent that matches the functional needs of the market leaders. That’s a pretty competitive operating environment!
Imagine if your business had a competitor who offered a similar product to yours for free, only requesting a nominal donation to invest in further application development? How can you price-gouge if the competition offers their products without charge? Hardly a business environment that is monopolistic or controlled by a cartel of ‘robber shareholders’.
Ongoing product development attracting paying customers is clearly the difference. So why are market leaders Microsoft, Apple and Adobe pilloried by a Senate committee? Because they are soft targets.
Nobody is holding a gun to the heads of Australian consumers
Politicians seem unwilling or unable to face the fact that the rest of the world designs and makes better IT products than we do. It’s not the inflated dollar or higher wages that should be blamed for this failure, but locally made products often prove unattractive to the marketplace. The same rule applies to other manufacturers.
Car buyers prefer SUV’s that position the driver higher in the seat and easily cope with kids, pets and bulky items over sedans. The exception is TV production where the writers create content that resonates with viewers who invest in their home, cook-up-a-storm or dream of stardom. Clever designers and manufacturers identify gaps in the market and capitalise on these un-met consumer or business needs.
They create simple and elegant products that can be manufactured in low-wage economic zones or built with robots and automated technology in developed economies. Value can be added with marketing and demand generation, an area of expertise where the USA has led the world for over 100 years.
Another fallacy is that Australian products are too expensive. If that’s the case explain the bottled water phenomenon? The alluring label conjures images of pristine glaciers but the product is manufactured using industrial strength water filtration systems hosted in a suburban factory. How much can you charge for a product that falls freely from the skies? A great deal of money as it turns out. Price is all about perception.
Australia must stop subsidising twilight industries and encourage investment in innovation
It’s perplexing observing the continued bi-partisan subsidies provided to the automotive manufacturing industry. We may save a few jobs in the short term, (and save some marginal electoral seats) but we can’t beat Government sponsored global competitors backed by economies exponentially larger than ours.
When we evaluate Australia's competitive advantage, the futility of the effort becomes apparent. Every day that we prolong the inevitable demise of legacy manufacturing means another opportunity passing us by as we gaze into the national rear vision mirror. Assuming that high technology is the only way the Government should invest our tax dollar ignores marketplace facts. Prosperity can be realised from a vast array of products that range from fizzy energy drinks through to enterprise class software applications.
Is reviewing what and how we educate a better allocation of our resources?
Could a better investment be made by investing in education and training in partnership with Australia’s biggest employers? Is a sponsored Woolworth’s degree in supply chain re-engineering a possible model for the future of education? We can continue to invest in our manufacturing future using gerrymander based politics or is it time to completely rethink how we can achieve a better return on our tax dollars.
Lost opportunity will continue to weigh heavily on our national prosperity if we don’t stop subsidising globally uncompetitive industries. Yesterday’s innovators must either adapt or die when pitted against the harsh forces of the global market. Engaging in constructive dialogue helps, but cutting the subsidy umbilical cord focusses the mind and brings lasting change.
Mike Ryan is a Hunter Valley based technical writer with more than twenty years of experience in the Information market.