Federal Budget 2014: A "classic old-style" budget, says Ovum

Data#3 MD John Grant and Cisco's Tim Fawcett call for more ICT investment incentives

Technology analyst, Ovum, has labelled 2014 Federal Budget a "classic old-style" budget focusing on outsourcing, efficiency dividends and cuts to the public service.

But despite the dour description, and the Government’s decision to discontinue eight start-up programs and organisations including Commercialisation Australia and the Innovation Investment Fund, ICT industry heavyweights still see opportunity in the sector.

However, there need to be more incentives for investment in startups and encouragement for entrepreneurship, says Data#3 managing director John Grant and Cisco's general manager of corporate and government affairs, Tim Fawcett.

Grant told ARN the abolition of innovation programs would impact the sector, but also cited the need to encourage the private sector to invest more in startups.

"Predictably, they took some big knives to the whole innovation budget, but it's a pity there weren't more incentives for the private sector.

"We should be fuelling the creation of new products and services to take to market and this budget doesn't do any of that.

"One would hope they start to leverage some of the levers around incentivising business and venture capital to invest in ICT."

Read more: Updated: Government to control the prices of NBN rivals

Grant said the extra spending in infrastructure, the increase medical research funding from the $7 Medicare co-payment and the 1.5 per cent reduction in company tax, would all have a positive flow-on effect for the economy.

"At the end of the day it's about companies generating more profit and individuals earning more income and paying more tax, and I don't think that was addressed in this budget," he said.

"The only way it's really going to change our balance sheet is by revenue growth." He said the consolidation of government agencies and the continued move to Cloud and IT-as-a-service would help drive the industry.

Read more: Liberal parties at loggerheads on Tasmanian NBN

"There's going to be some reductions in the spend in relation to the implementation of staff reductions and spending cuts," he said.

"But there will be an increase in spend around Cloud and outsourcing opportunities.

"Service providers need to re-orient around areas where the spend is going to be and that's something that the channel is very good at.

Read more: Tasmania to legislate an opt-out NBN

"There's been a big government agency consolidation, and that will mean consolidation of IT systems, which will generate opportunity for the industry."

Ovum research director, Kevin Noonan, said it was a disappointing Budget with few new ideas.

"The National Commission of Audit raised hopes of some fresh ideas in government IT, but the Federal Budget was a lost opportunity. The deficit needs to be brought under control, and this is well understood by the industry," he said.

"A digital agenda could assist in driving savings, through a long term focus on 21st century e-government."

However, Noonan said the budget had lost much of that momentum.

"It was a classic old-style budget focusing on outsourcing, efficiency dividends and cuts to public service headcount," he said.

"These were themes in the early Howard government budgets long ago."

But he said there was still some positive news to be found.

"The consolidation of back office functions at the National Gallery, National Library and other institutions, is a sensible idea. Similarly, is the merger of DFAT and Customs," he said.

"This is already happening in other countries such as UK, where I am currently undertaking discussions with government agencies in London.

"The replacement of the Bureau of Meteorology’s super computer is a sensible and well-timed decision."

Cisco's general manager, corporate affairs and government, Tim Fawcett, said encouraging start-ups and equipping them with the funding, technology and expertise they need to succeed was something Cisco was passionate about. "Industry ought play a key role in fostering a strong culture of entrepreneurship," he said.

He also advocated industry-government partnerships.

"Combined with the Federal Government’s $484 million Entrepreneurs’ Infrastructure Program, industry can partner with the Government and community to encourage more entrepreneurship in Australia, which is crucial to the continued economic development of our country," he said.

"With the slowdown of the mining boom and the uncertainty around the growth of our largest trading partner, China, Australia must continue to innovate in order to remain competitive in the global digital economy for many years to come.”

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