News Analysis: Anti--IT budget

News Analysis: Anti--IT budget

When Peter Costello handed down the Federal Budget last week he might not have won too many votes from the IT sector. Nevertheless, IT defence contractors are optimistic of the potential increased security infrastructure offers.

One of the Government's main agendas according to this year's Federal Budget is border protection and the war on terrorism, which swallowed a large portion of Government spending that the channel hoped would go towards the development of Australia's IT industry.

Rob Durie, the Executive director of the Australian Information Industry Association (AIIA), said he was "disappointed but not surprised" by the Federal Budget allocation for IT spending. "Given the amount of kite flying that's been going on in Canberra, I wasn't surprised by the Budget's meagre contribution towards the development of Australia's IT industry."

This view was shared across the industry. "It wasn't as if we had any expectations that some major initiative was going to happen," said Mike Woodgate, group manager of corporate affairs for software developer Adacel. "There's nothing in the Budget that will really help the industry move from where it is now."

Perhaps the most disappointing aspect to the Government's allocation of funds in the IT sector was its poor contribution towards R&D and education.

"Of particular concern is that there is no specific funding in the Budget for the critically important ICT Framework for the Future exercise, which was announced by the Prime Minister to develop a comprehensive strategy for the development of the information and communications technology industry", said Durie.

"The decision to effectively freeze the R&D Start Grants program remains a major issue for the AIIA as this will severely impact on the ability of startups and SMEs to attract capital.

"The allocation of funding for IT skills training is welcomed, but is not sufficient in terms of targeting or funding to have any real impact in rectifying the industry's concerns regrading ICT skills."

Richard Hogg, president of the Australian Computer Society, agreed. "The area that needed the biggest capital injection was R&D and support for initiatives in the software development industry for both startups and existing companies," said Hogg. "There should've been more funds allocated to R&D."

According to Noel Jones, managing director of Tower Technology, "the Government should certainly be paying more recognition to the importance of R&D. Without this kind of recognition, increasingly we'll see Australia's IT industry move overseas. Whenever the budget is announced, the first thing I want to know is whether or not the Government has increased its spending in R&D grants and subsidies to promote this nation as a ‘clever country'. Tower Technology is an example of an R&D success story and is testimony to the value of R&D grants in the development of this industry."

However, as Terry Leister, the sales and services manager of corporate dealer Aurion Corporation, pointed out, "you can't build a business on the assumption that the Government is going to keep throwing you money, rather it must be based on harsh commercial realities. We are committed to R&D in the country, whether the Government helps us or not."

"The Government could have taken a harder look at what could be done to encourage innovation and commercialisation of Australian technology," Adacel's Woodgate said. "There are obviously a couple of spots like the new apprentices scheme for IT that might offer some assistance to us, but overall there isn't much in it for us.

"The $22.3 million in incentives offered to employers that take on new apprentices was greeted with some enthusiasm by the industry, but many pundits argues that it wasn't enough to make any substantial benefit on their businesses," Woodgate said.

"The IT apprenticeship money is interesting, but I'm not sure what benefit we're going to get out of that," said Hogg. "With regards to the funds allocated for mature-age basic computer training, it was no way near enough to be of any benefit."

But, as Woodgate pointed out, "With regards to how much they are offering for apprenticeship programs, in the current IT market, it's difficult to know how much would be enough."

The channel's response to the Federal Budget was not all doom and gloom, however. Many industry pundits recognise the potential for substantial opportunities stemming from the Government's allocation of $153 million to strengthen public and private information infrastructure, the bulk of which will be spent by the Department of Defence on online security and enhanced telecommunications.

"There were some positives for the ICT industry in the Budget," said AIIA's Durie. "The increased expenditure on strengthening Australia's critical public and private information infrastructure will provide significantly increased business opportunities for many Australian ICT firms."

Tower's Jones believes the Government's investment in defence systems will provide the industry with positive flow-on business. "For Tower, I see quite a few opportunities arising from the Government's increased investment in national security and building ‘Fortress Australis'. In areas like immigration security control, I see a whole raft of software application opportunities for Tower. There are lots of applications we could get involved with in that space."

Andrew Gersbach, general manager of ACT corporate dealer Dataflex, could also see significant benefits for his business as a result of increased Government spending on defence systems.

"Being defence-related, we expect to get a fair bit of flow-on business from this," he said. "I think it'll ramp up our laptop sales as well as server infrastructure sales and installation."

ACS's Hogg was less optimistic. "Someone made a comment to me today that it was the sort of budget that Pauline Hanson would've brought down," he said.

"The Government's massive investment in communications security and terrorist defence systems does potentially translate to opportunities for the IT industry. There'll be some potential for software development with the investment in defence systems and customs systems - take for example the development of the biometric passport. But in terms of opportunities for the channel, the Department of Defence's channel partners are predominantly multinationals and the profits largely go overseas, so I don't know how much business the Australian channel will see."

Woodgate echoed this sentiment. "There are potentially some opportunities stemming from the Government's allocation of spending in online security and secure telecommunications in the Defence side - I just wonder how much of that will flow through to the Australian industry."

Budget Vox Pop

Fiona Dicker, managing director of Dicker Data"I think it was pretty positive from a business perspective. There is nothing really good but nothing really bad either. I think the IT industry would have to get some sort of spin-off from all those extra dollars on defence, infrastructure and border protection."

Hugh Bickerstaff, general manager of Volante Systems"There was not much news in it for the IT industry. No joy, but no disasters either. We have some defence business in South Australia, but I am not sure how much of the additional spending will filter through to technology."

Steve Rust, managing director of Ingram Micro Australia"I thought it was very pedestrian in terms of IT and particularly for the channel part of the industry. It is a long string to draw to see defence spending creating any direct benefit for any individual part of the IT industry. It won't have any upswing for the broad-based channel."

C.N. Low, CEO of Digiland Australia

"It is probably good for us. The expansion of Government spending, particularly in defence, has to be good because we have resellers that sell into defence and Government. This is generally an expansionary budget from that perspective, so some of that should filter into IT."

John Grant, CEO of Data#3

"They have done nothing about bringing back the R&D Start program from the point of view of industry development. For companies like Data#3, what we need is a pick-up in business investment. The Government needs to provide incentives and an environment for businesses to invest.

When you look at Budget initiatives, I can't see where it is going to come from."

Budget impact on IT

- $153 million allocated to online security and enhanced telecommunications systems ($113 million of which will be spent on improving the security of the Department of Defence's communications systems).

- $23 million allocated for the provision of 11,500 IT training assistance packages for mature workers, valued at $500 each.

- $22.3 million in incentives allocated to employers that take on new IT apprentices, funding 25,000 apprenticeships.

- $1 million offered to the National Office of the Information Economy (NOIE) over four years to develop low-cost initiatives to help small-to-medium businesses tackle e-security problems.

- $3 billion allocated for the Innovation Action Plan, Backing Australia's Ability, which includes 21,000 new university places ($151 million), doubling Australia Research Council funding over five years ($736 million), boosting public research infrastructure ($246 million), the premium 175 per cent R&D tax concession and cash-out rebate for growing pre-profit companies, extending the CRC program ($227 million), and pre-seed funding ($78 million).

Source: Department of Communications, Information Technology and the Arts.

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