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The east coast evolution of the Aussie channel

The stunning east coast of Australia plays host to the country’s most lucrative markets - buy where are the tech hot spots?

From Queensland to Tasmania — including New South Wales (NSW), the Australian Capital Territory (ACT) and Victoria — the east coast of Australia casts a large and looming shadow.

Spanning 2,829,463 km2 — or 37 per cent of the country’s total land area — four states and one territory combine to dominate the national economy.

In addition to the Canberra capital, the area is home to the country’s three largest cities in Sydney, Melbourne and Brisbane, and serves over 80 per cent of the population.

But technology providers are not seeking a geography lesson, rather a snapshot of Australia’s leading money-making markets, nestled along a lucrative coastline of customers.

Whether serving Cairns, Wollongong or Hobart, channel partners are well-placed to carve open new commercial opportunities in the years ahead, starting at the heart of the nation’s capital.

A local touch

The site of modern-day Canberra was chosen for the country’s capital city in 1908, with ACT playing host to legions of government IT business.

“Without doubt, government is the largest sector,” Citadel Group executive director and Jakeman Business Solutions co-founder, Miles Jakeman, observed. “And the Australian Government by far outweighs the ACT government.”

During the 2014–15 financial year, the Federal Government spent around $5.6 billion on ICT infrastructure, much of it likely going to external partners.

But while government contracts can be lucrative for external IT partners, they don’t always equate to enormous profits.

“Government’s not a silly buyer, and it’s got a lot of metrics that are shared amongst the different agencies,” Jakeman said.

This metrics sharing, as well as the sometimes formidable government procurement process, means that, although big ticket IT contracts are lucrative in terms of size, they may not deliver margins in line with overall dollar value.

At the same time, however, a successful public engagement can lead to long-term relationships between partners and government clients, which could be worth millions, even tens of millions of dollars, over time.

For global system integrators (GSIs) operating in Canberra, government contracts can often be cumulatively worth hundreds of millions of dollars each year.

Canberra (ACT)Credit: Dreamstime
Canberra (ACT)

While there are comparatively fewer opportunities for smaller home grown IT providers, compared to

the fistfuls of money thrown at big players like IBM, Hewlett Packard Enterprise (HPE) or Capgemini, local suppliers can also gain traction.

“As a rule, convincing governments to buy Australian has been challenging,” Jakeman said. “You’ve got to be nimble and you’ve got to pitch your differentiation.”

While the vagaries of Canberra’s public sector compete and tussle with its potential for lucrative opportunities for local partners, the private sector also offers some tantalising possibilities.

“We focus heavily on innovation and using the latest technologies,” Astute Informatics director Greg Chu said. “And with the private sector, they’re a bit more flexible.”

Not only flexible, but often more willing to adopt cloud-based services, which plays into the hands of Chu and his team.

That said, cloud adoption has not been the exclusive venture of the private sector, with some corners of the government also moving to adopt cloud technologies.

“In the past couple of years, cloud has been starting to pick up, which is good,” Chu said. “There’s been quite a few government forums which have been held here in Canberra, getting people to become more aware and more comfortable with cloud.

“We’ve also done a lot of work around data management, data integration and more recently big data. In recent years, organisations have been capturing more and more data.”

But while ACT-based public sector entities represent a large, somewhat monolithic, market for IT providers, Chu is looking further afield in a bid to diversify client bases and ease Astute Informatics’ reliance on government work.

Around 30 per cent of the company’s business comes from the ACT at the moment, according to Chu.

Yet only a few years ago, that figure was probably closer to 80 or 90 per cent. The reason for this shift, according to Chu, is that the private sector is often a “bit more with the times”.

“A lot of it’s coming from the retail market, or the aged care industry, and other segments such as that,” Chu added.

Innovation

As Australia’s least populous state, Tasmania is often thought of as trailing the rest of the nation, especially compared to the money- spinning opportunities 850km north in the capital.

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Yet the island is a hub of technological innovation, with some of the original ideas for the National Broadband Network (NBN) spawned in the state.

Favouring the top end of town — and dividing small to medium businesses (SMBs) depending on access — the NBN and private networks have helped the local progression of technology, with cloud a model of choice in Tasmania.

“Businesses are buying as-a- service and we have seen it a lot in personal procurement,” TasmaNet managing director Josh Harris observed.

But while the state faces similar tech headwinds as the rest of Australia, such issues are not as acute due to the proactive approach of the Tasmanian Government and other state institutions such as TasICT.

According to policy, by 2018, all Tasmanian Government agencies will be procuring technology through cloud, alongside a mandate that all data produced in the state must remain on island.

“We are a regional player, we are at the end of a digital cul-de-sac so we required a policy decision to ensure some data did stay on the island,” Harris said.

“A lot of people who strategically understand technology — both in business and government — think this is important for the state.”

From an infrastructure and connectivity standpoint, the NBN continues to act as a great divide for businesses across the state.

“I wouldn’t say it’s been a smooth ride but we’ve been lucky,” Harris said. “There was pressure from the community to make the rollout as effective as possible. People have become accustomed to NBN just being there and when it’s not they get upset.”

Consequently, this has created a state of “haves and have nots”, impacting SMBs specifically. The issue is not just limited to internet connectivity however, but also telephony.

“In the areas without NBN, the price of telephony is quite high and this has disadvantaged many businesses,” Interact IT managing director James Newman said.

As one of Tasmania’s largest integrators, Interact IT serves the SMB market across the state, leveraging vendor partnerships such as Microsoft, Lenovo and Aerohive.

According to Newman, the state is experiencing a “huge tourism boom”, leading to an increase in sales within the hospitality sector as businesses pursue public Wi-Fi and point-of-sale system technologies.

Hobart (Tasmania)
Hobart (Tasmania)

“Visitors, especially those from the mainland now expect free Wi-Fi,” Newman acknowledged. “If a hotel or a restaurant does not have it, customers will go somewhere that does.”

While public Wi-Fi was once seen as a bonus service which proprietors could charge for, Newman said it
has now moved into a necessity for the sector, driving sales for the ICT industry as a result.

And with Tasmania seen as a microcosm of the greater Australian economy, pound for pound, this is an island punching well above its weight.

NBN

As Tasmania takes advantage of the potential of NBN, Queensland partners remain challenged however, by ongoing issues around connectivity and availability.

“One of the biggest challenges we are facing is the continued problems surrounding the roll out of the NBN,” Reef IT general manager Aaron Jervis said. “Some of the more common issues include the shortfall of fibre to multi-tenant premises.

“For instance, you may have an office block with 10 tenants, and nine of those are serviceable for NBN, but the 10th tenant is not, as they were missed during the fibre cabling installation. Trying to get that 10th tenant an NBN connection can take months."

Citing a lack of communication, Jervis said that with a wide variety of companies providing NBN installation services to a wide variety of tenancies, issues naturally arise around site access, faulty cabling, lack of appropriate roof access and body corporate restrictions.

“Unfortunately, when faced with an issue during an installation, your standard nbn co installer will leave site without appropriately communicating what the issue was,” Jervis added. “This can lead to weeks of delay to resolve the issue and finish the job."

Taking the NBN debate south to Victoria, similar connectivity struggles exist, creating a Tasmanian type market split in terms of the “haves and have nots”.

Because in Melbourne and the wider areas, it appears that bigger is better, with the state’s largest organisations innovating at a rapid pace with digital transformation and outsourcing the overriding theme of 2017.

Yet across SMB sectors, and even creeping into the mid-market, businesses are struggling to modernise as they anxiously wait for the NBN rollout.

Further still, the disparate rollout has seen regional customers embrace new technologies faster than metropolitan counterparts due to better connectivity levels.

“It’s a big problem for our metro clients as access to many of the services they are looking to acquire are dependent on internet speeds,” Zynet operations manager Marina Zanghellini acknowledged.

As a Melbourne-based provider serving predominantly the SMB to mid-market sectors, Zanghellini said businesses are “caught in limbo” between paying a high price for an enterprise-grade fibre network, or
dealing with connectivity issues until the NBN arrives.

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“In Melbourne, we have clients who are just hampered, the NBN is a big issue and this affects our ability to sell services to these customers,” Zanghellini explained.

Through delving into specific sectors, similar challenges also remain, with the healthcare industry particularly relying on on-premise servers with cloud back-up, hosted exchange and disaster recovery technologies.

“I think that is starting to change as the landscape evolves,” UrbanIT managing director Matt Maher said.

For Maher, a “partial shift” to cloud technologies is underway however, although such a shift remains “highly dependent” on the speed of internet.

“Even though cloud services have matured and developed, businesses can’t take advantage because internet speeds are not up to scratch,” he said. “Businesses 5–10km outside of the CBD are still not able to receive a reliable internet connection.

“They may be a small medical practice and they can’t justify the cost of a fibre connection. This is the biggest inhibitor to change in our industry.”

At the big end of town however, the rollout of NBN has had “little to no impact”, with the enterprise market operating on private fibre networks, allowing a shift to managed services and outsourcing.

“We are seeing corporations looking to move their models to OPEX,” Thomas Duryea Logicalis transformation services general manager Damian Zammit said.

“But in government and healthcare sectors, the focus is still very much on CAPEX and that’s because state and federal funding still arrives in a big chunk."

Across all market segments, Zammit said the state is fast embracing business transformation strategies, underpinned by digitalisation.

“It’s not about IT, it’s not about supportability, it’s about the user and enablement of that user,” he explained. “They are looking for a single supplier that can create a digital strategy, execute a solution and manage those solutions deployed.

“We are seeing more managed services work because of these business transformation solutions.”

Global access

Flipping the conversation to NSW, a different scenario is playing out.

When UK-based Modality Systems decided to expand to Australia, the unified communications provider chose Sydney as the launching pad for its entry into the local market.

At first, it was a toss-up between Sydney and Melbourne for the Microsoft partner, with both cities playing host to large industry and potential customers.

Sydney (NSW)Credit: Dreamstime
Sydney (NSW)

In the end however, the NSW capital proved to have much in common with Modality Systems’ own home base near London.

“A lot of the large multinational banks, professional services firms and engineering firms that we already worked with had their Australian HQ in Sydney,” Modality Systems country manager for Australia, Justin Morris said.

“Melbourne definitely has a balance of that but Sydney made sense because of the global customers.”

For Morris, Sydney made for a soft-landing site for the company.

“Support from those global customers that Modality Systems does business with internationally coinciding with the local market entry really helped to bootstrap us initially,” he said.

Morris attributes the dominance of the financial and professional services segments in the Sydney market as being a major draw for the company’s decision to settle on the city as a starting point in the local region.

Since then, however, other top industries in NSW have started to come into the fold, with the provider picking up customers in the local media, public relations and communications sub sectors.

Escaping the Sydney sprawl however, Modality Systems is also seeing increasing rates of cloud adoption among organisations in regional centres, such as Newcastle, Wollongong and Port Macquarie, especially among government customers.

Given that Modality Systems’ solutions revolve around cloud capability, this positions the company well to tap the broader NSW market.

“What we are starting to see is customers seeking out smaller, nimble specialist partners that have expertise in what they’re looking to achieve, and then forming a long-term partnership with them,” Morris said.

And although Modality Systems recently opened its second Australian office in Melbourne, the NSW market continues to deliver.

“The market is substantial here,” Morris said. “There is enough opportunity. And the way that we differentiate ourselves is by being specialised.”

Reporting by Chris Player, Hafizah Osman and Leon Spencer.