Professional service organisations need to target Asia with Y2K, business continuity and ERP implementation and management services. Software developers and hardware manufacturers need to build niche products based on de facto industry standards.
These findings came out of Gartner Group's just-released report, Australia's IT&T Future.
It also blasted the Australian tax system for discouraging foreign investment so desperately needed by Australian IT companies.
While Australia was the most sophisticated user of IT in the Asia-Pacific region, as a producer of IT products and services our performance "can only be described as woeful", said Gartner's group vice president, Asia-Pacific, Bob Hayward. When compared to Asian neighbours Singapore, which manages close to 8 per cent of total IT production, and Malaysia, which accounts for a surprising 5.5 per cent, Australia's performance is dismal, Hayward said.
"Without radical action, Australia's trade deficit in IT goods and services may exceed $45 billion by 2005, an untenable situation," the report claimed.
It is not that there were no opportunities for Australian companies. "Most Asian countries have not invested adequately in fixing the year 2000 problem with existing systems. Australia has amassed some considerable experience in [the year 2000 problem] in the past few years, and can be the optimal location for year 2000-related services and business continuity in the event of any failure," the report said.
"[Also] within the next several years, large numbers of Asian companies will be struggling with installation, implementation and operations management challenges with ERP solutions and Australian-based companies will be well positioned to provide services to help."
Software developers and hardware manufacturers should forget about "reinventing the wheel", Hayward said.
They should build niche solutions based on industry standards like NT and SAP.
However, foreign investment is desperately needed to fund the entry of Australian companies into international markets. Australia does not have the venture capital culture that provides the money and, just as importantly, the network to solid business management, partnerships and marketing expertise.
To encourage investment, Gartner called for the Australian Government to:
Reform the tax system, particularly with regard to capital gains tax and high rates of personal income taxRemove barriers to tax-free pension investment funds from the US. It is these funds that most venture capital companies use to fund and invest in young up and coming IT companies.
Sell Telstra and use a small percentage of that sale to fund incentives that would encourage investment in other IT companies.
Foster the innovative use of the broadband cable network, either by pressuring Telstra or Optus or through other incentives.
Pass electronic commerce laws and review local regulations that could hold back Australian companies from competing in the global electronic marketplace.
While the Howard Government would be encouraged by Gartner's call for tax reform, it would be less pleased with Hayward's comment that: "There doesn't exist in Australia the political leadership to drive a national IT strategy."