Is NICTA on the road to privatisation?

It's crunch time for the nation’s premier information technology research institution and it's far from certain what the organisation will look like in two years, or whether it will still exist.

It must be nearing crunch time for the leadership at the nation’s premier information technology research institution NICTA as it faces up to an uncertain funding future.

And although senior ministers continue to assert that the work being done at NICTA will continue, it is far from certain what the organisation will look like in two years, or whether it will still exist.

The thinking inside government suggests two outcomes, or a combination of both.

The first option would see NICTA privatised, acquired by a large commercial entity and likely operated as a stand-alone research and commercial development arm. It’s understood that a number of organisations have already expressed interest.

The second option would have NICTA and the CSIRO come to terms, and fold together the areas of similar research and commercial development focus.

This would likely see the CSIRO Digital Productivity and Services flagship merge, creating an organisation of critical mass. Such a merge, the thinking goes, would attract more and better commercial engagements and deeper collaborative links into important international research consortia.

The third option would involve a combination of both. The privatisation of NICTA’s commercial development prowess, with the more research capability pressed into the Digital Productivity flagship.

It would be naive not to think that each of these options is not already under active consideration. It’s quite likely that preliminary scoping negotiations have already taken place with potential acquisition partners and with the CSIRO.

NICTA is unlikely to continue in its current form beyond the middle of 2016, when the Commonwealth “transitional funding” runs out.

So yes, crunch time is almost here for the NICTA leadership. Because without an adequate and demonstrable funding runway, it becomes near impossible for the organisation to attract top quality researchers, or commercial development contracts, or international research collaborations with the world’s elite institutions.

Alston's dotcom creation

NICTA is an unusual organisation. It was a Howard government creation of the late nineties and early noughties, the landmark achievement of former communications minister Richard Alston.

Although Howard never seemed personally engaged in the NICTA project, Alston successfully argued for its creation, and managed to secure long-term funding guarantees that went well beyond the forward estimates. That’s how important the funding runway was considered.

At launch, NICTA aimed to take advantage of the opportunities being created by what we now call the dotcom boom. That is, the newly ‘invented’ web and the internet age.

Those exact same opportunities still exist today, except that now the opportunities are much larger. So it is odd that it is a Coalition government that seems to be drawing the curtains on NICTA in its current formation.

It’s unusual too, because despite the evidence to the contrary (i.e., the federal budget in May, which ended NICTA funding beyond 2016), NICTA’s work is highly valued -- by its shareholder ministers, at least.

As recently as this week, Industry Minister Ian Macfarlane was not only singing NICTA’s praises, but making assurances that its work would continue, that it’s “work is secure.”

Prior to the last budget, it is understood that Malcolm Turnbull, Ian Macfarlane and Christopher Pyne combined to ensure NICTA funding remained untouched until mid-2016. But it became referred to as “transitional funding” -- effectively putting the writing on the wall for the organisation in its current form.

Shareholder responsibilities for NICTA fall across these three portfolios. Turnbull has carriage of cross-portfolio issues related to the Digital Economy, Macfarlane has science (and obviously industry policy) and Pyne is dealt in because NICTA houses a large PhD student program, and partners with Universities.

Historically it has been the communications portfolio that has taken the lead on NICTA issues. Certainly in the previous government, Stephen Conroy was it primary political patron and in this government Malcolm Turnbull has taken the lead.

Where to from here?

In the next three weeks, the government will unveil its Competitiveness Agenda, a big part of which - according to Macfarlane - will be “a new superstructure” to encourage deeper collaboration between the private sector and institutional researchers.

Improving these linkages is a key theme of the Abbott Government’s rebooted industry policy. Macfarlane says business-research collaboration will be critical to Australia’s successful transition to becoming a “third wave” economy - away from heavy industry and commodity-based economy “into higher value-added industries that are based on innovation, research and the sophisticated skills base of our workforce.”

This government has also indicated an appetite for improving the output of students in STEM - science, technology, engineering and maths - subjects. There is talk of a reformation of secondary structures that aims to boost the numbers of kids leaving high school with an interest and basic skills in STEM subjects.

The longer term aim, of course, is to increase the numbers of local kids who then pursue STEM-based subjects at undergraduate level and beyond.

All of this makes the timing of the NICTA “restructure” - if that’s what it is - all the more unusual.

Hard decisions ahead

On one hand, NICTA is a premier IT research organisation with a strong background in successful collaboration with the business sector - a stated objective of this government. The Commonwealth Bank and Telstra, among others have conducted important joint research projects with NICTA.

And on the other hand, NICTA hosts hundreds of PhD students among its research teams and is a critical part of the Australian infrastructure for supporting post-graduate IT researchers (who also get some exposure to commercial realities within the NICTA research teams.

It does seem odd that the NICTA leadership finds itself in a position of negotiating for the survival of programs that seem to go to the heart of this government’s industry policy.

The Abbott Government wants to reshape the way Australians think about industry policy. It made this clear when it declined further support for the car industry. Less clear is how this new thinking will affect the commercial development capability of its research institutions.

In NICTA’s case, hard decisions about its structure are being contemplated. It is likely that these decisions will need to be solidified sometime in the first quarter of 2015, just in time for the next federal budget.

James Riley has covered technology and innovation issues in Australia and Asia as a writer and commentator for 25 years. Read more from James Riley or follow him @888riley on Twitter.

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