Growth & diversity – mutually exclusive?

Outsourcing NZ IT internationally - by Paul Matthews.

Once upon a time I was involved in the establishment and operations of a relatively successful IT company. I've been involved with several, but it's this one in particular I often muse about.As with most Kiwi small businesses, we had our boom times and our bust times; we went through cycles and shifts, restructures and focus changes. We were horribly underfunded, which led to some decisions that probably wouldn't have occurred otherwise.

For instance, we were often quick to diversify from our primary focus if it seemed worthwhile to do so – after all, we still needed to pay the rent. Except that what seemed like a good idea at the time, and in the short term, really led to larger problems in the long term.

You see, the company ended up trying to be everything to everyone: a jack of all trades. It seemed that life was good – we expanded relatively rapidly and were doing okay. However as a consequence we lost our perceived competitive edge (technical expertise and focus), our marketing message was meaningless (everything to everyone isn't a marketing message), and we didn't realise the potential we had in our highly skilled and competent staff and excellent reputation. What seemed like our strength – our diversity – was actually our most significant weakness.

So, what was the answer?

What we should have done at that point was establish partnerships with other similar but different companies, outsource a chunk of work, clip the ticket on the way through, and focus on building a world-class company in our chosen expertise. That's the recipe for success and, in a nutshell, the concept of outsourcing (albeit often administrative or IT tasks in all kinds of companies).

Now let's take a step back and consider this in the context of our country at the macro level,  ie: focusing on our lucrative and significantly underdeveloped export opportunities in IT. That makes our country the company, and our market the world.

Firstly, IT in New Zealand has a pretty chronic skills shortage. This has eased a little in recent times, thanks to the recession, but recessions are only temporary. Secondly, New Zealand faces massive competition on the world stage – India alone, for example, produces 100,000 English-speaking IT graduates every year to feed their $70 billion (and growing) IT sector. To put that in perspective, that's over half of New Zealand's total GDP, and that's just one country.

However it's pretty clear that New Zealand is missing a significant opportunity in terms of exporting IT products and services. In fact, sadly, things are getting worse. Whilst domestic IT in 2008 increased by 4%, our sector's exports actually dropped 1%. That's right, the world's still riding the wave of the IT revolution and innovation and yet, somehow, we're missing the boat.

Just as can occur with a company at the micro level, at the macro level our fundamental problem is New Zealand has lost its vision on the world stage, in IT at least. Our country has a handful of internationally renowned IT companies but other than that, we really don't paint a picture to the world that we are a technologically-rich country with expertise and speciality in specific areas of IT. There are plenty of countries around the world able to do plenty of things. We're currently a "me too!" country, significantly outnumbered and lacking the massive resources pumped into the IT sector in other countries. Yet we have a huge opportunity to carve out a niche, build a reputation and take the world by storm.

The time has come for New Zealand to paint a different picture. We need to rediscover what we're good at (from an IT perspective), let go of the low-value, jack-of-all-trades approach and focus on a high-value, high-quality expertise that some other countries may find difficult. And if we manage to do that, IT will play the economic development role it is so well suited to, we'll blow the balance of payments out of the water and, in terms of economic growth relative to Australia, the Aussies won't know what hit them!