The Australasian Trade Commission (Austrade) has touted the success of one of its latest projects, assisting a multinational e-business consultancy to set up shop in Australia and acquire two local Web integrators in the process.
Austrade's assistance helped Icon Medialab, a Swedish-based e-business consultancy, to establish an office in Australia and acquire Sydney's Vitascope and Melbourne's Fluid Digital. Seeing as the role of Austrade is to provide export opportunities for Australian companies, existing integrators are asking why the government department is spending its resources on introducing a new competitor in the domestic market, and how this is supposed to aid Australian export opportunities.
The relationship between Austrade and Icon Medialab came about in May 2000, after Austrade held a roadshow in Australia called Eurolink, designed to convince Australian high-tech companies that there were opportunities for exporting their intellectual property to Europe.
One of the guest speakers asked to host a presentation at the roadshow was Magnus Berman, from Icon Medialab's Singapore office. During the visit, Berman became interested in investing in Australian high-tech companies, and with the help of Austrade set up an Australian office and acquired Vitascope and Fluid Digital. "Austrade was very effective in supplying Icon with excellent contacts, by introducing us to people and in helping build knowledge of the brand locally," said former CEO of Icon Medialab Australia, Mark Forsyth.
Aldous Mitchell, managing director of Melbourne-based integrator InterServ, said all Austrade had done was set up a direct competitor to Australian businesses like his own. "Overseas companies acquiring local companies does not raise the level of skills here," he said. "It only changes where the profits get sent."
The man who rendered the majority of this assistance is Glenn Nielson, business development manager for Austrade in Stockholm, Sweden. Nielson defended the move, claiming it attracted $30 million of foreign investment into Australia, creating 160 job opportunities. He also said Icon Medialab's Australian "partners", Vitascope and Fluid Digital, have already seen export opportunities through selling their products via Icon's global subsidiaries.
"I strongly believe Icon's presence here will increase the export of technology from Australia, as the industry will benefit from Icon's presence," he said. Icon Medialab spokesperson Alison Brink agreed, suggesting there were no Australian companies able to offer an end-to-end solution across strategic consulting, design and development. She believes there are plenty of good companies offering strategic consulting (such as the Big Five), and plenty of creative Web shops, but no companies that can do both. She suggested the only companies Icon saw as a threat in Australia were the American subsidiaries of companies such as MarchFirst, Sapient et al, which recently closed its Australian offices.
InterServ's Mitchell disagrees. His company, like many of its peers around Australia, can provide these exact services. "We've got world-class skills here," he said. "This is unnecessary".
Mitchell's thoughts were echoed by Stephen Langsford, executive director of Web developer and integrator Method (a division of the newly named SMS Management and Technology, formerly Sausage Software). "We have excellent development skills in Australia," he said. "As we have demonstrated, there is every reason to believe you can bring together quality technologists in this country. I don't think we need to get desperate to get in new skills. Equally, I don't see too much problem with competition."
Icon's Brink said the two companies it acquired felt they would only be able to fulfil their long-term aspirations with the investment of a multinational.
"Australia is a remote country," she said. "e-commerce helps companies expand their products into international markets and break down the tyranny of distance. In cases such as this, Austrade is not looking at the heritage of the companies it assists, but what opportunities they provide to the Australian market."
Austrade's own research suggests assisting multinational companies to compete in the Australian market has been a successful strategy. In 1999-2000, the agency claimed its schemes created over 2000 new jobs and $530 million in "projected new exports".
One advocate of Austrade's efforts is Tim Birdsall, director of business at Web developer Presence Online, a company that has opened four international offices with the help of Austrade. "We are absolutely an Austrade success story," he said. "Austrade was invaluable in helping us in Europe and South America. When we first began in Europe, it helped us through all the immigration issues and gave us access to the British High Commission."
Adrian Ballantine, executive chairman of ASX-listed Internet company MultiEmedia.com, said his company has utilised Austrade's services in several international markets, and it was a case of hit and miss as to whether the agency was able to help local developers in the same way it helped Icon Medialab. This year, MultiEmedia.com has decided to go it alone when exhibiting at Europe's CeBIT rather than exhibit with Austrade. "We decided we wanted to have our own presence," he said.
InterServ's Mitchell is confident homegrown businesses like his own will continue to thrive in the presence of competition from large multinationals. He takes comfort in the failure of the US subsidiaries like Sapient, MarchFirst and Xpedior in the domestic market, and believes the survival of Australian Web integrators suggests there are sufficient skills here to render the introduction of further competition unnecessary. "It takes years to set up the relationships you need to be successful in this business," he said.