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Gartner says New Zealand technology spending will be $11.8 billion in 2017. That’s up 2.7 percent from 2016. It’s also a lot higher than last year’s forward looking forecast from Gartner. The total spend is forecast to pass $12 billion in 2018.

Communications services is the top technology category in New Zealand. Customers will spend a total of NZ$4.4 billion this year.The category includes consumer fixed and mobile voice and data services, enterprise fixed and mobile voice and data services. It may be the biggest sector, but shows next to no growth.

Gartner expects software to be the star performer over the next year, with IT services also showing respectable growth. Sales of devices and data centre systems will be flat.

Australians spend more however you cut it

New Zealand’s numbers compare with a total IT spend of A$83 billion in Australia, almost eight times the amount spent here. Australia’s communications services sector is around six times the size of New Zealand’s at A$26.8 billion.

Gartner expects both New Zealand and Australia to increase spending in the next year by more than the worldwide 2.4 percent forecast.

IT Spending Forecast Q2 2017

In part the difference between Australia and New Zealand can be put down to population size. Yet there’s more to the numbers than how many people live in each country. New Zealand’s spend amounts to around NZ$2,500 per person, while Australia’s is almost A$3,500.

One possible explaination for some of the difference is that some Australian IT companies wrap New Zealand revenue into local income. And there’s a tendency on the other side of the Tasman to gold-plate projects. Yet you can’t escape from thinking Australians appear more willing to invest in technology. If you’ve any thoughts on this please comment below.

New Zealand: IT Spending Forecast (Millions of NZ$)

Segment201620172018
Devices    1,659    1,734    1,724
Data Centre Systems        344        342        347
Software    1,363    1,499    1,647
IT Services    3,764    3,840    3,920
Communications Services    4,355    4,383    4,437
 
Grand Total  11,484  11,798  12,074

 

Xero Ipad

Xero has moved one step closer to becoming New Zealand’s first global technology giant.

Last week TCV, a Silicon Valley investment firm, bought 1.4 million Xero shares from Matrix Capital Management. The deal was worth NZ$28.5 million. That’s a little over one percent of the company.

Few people in New Zealand will have heard of TCV. Most New Zealanders will have heard of the company’s other investments. TCV owns equity in, among others, Airbnb, Facebook and Netflix.

Xero a name in Silicon Valley

Technology Crossover Ventures is based in Palo Alto, California, the epicentre of Silicon Valley.

Matrix reduced its holding in Xero from almost 10 percent of the company to around 8.5 percent.

The share transfer may not be a big deal in Silicon Vally terms or even in TCV terms. The business has close to US$10 billion invested in technology companies. The investment is from a TCV fund that focuses on mature firms that already have an impressive track record.

Yet it is significant for Xero, although not in financial terms. It’s an important vote of confidence marking Xero’s arrival in the technology premier league. That’s something no New Zealand company has managed before now.

Disruptor

The cloud accounting software company has disrupted global markets. Xero made the world sit up and look at New Zealand technology.

While Xero’s share price has fallen back from the mid-2014 high point, it has performed well so far in 2017. The price is up almost 15 percent since Christmas. In mid-December it traded at NZ$17.50, today, at the time of writing, it is NZ20.50. That’s the highest point for the company’s shares since November 2015.

Like many fast growing technology companies the business has yet to turn a profit. Although that day is now getting closer. At a recent company update founder Rod Drury said the business will soon be cashflow positive.

It continues to show strong growth in revenue. What’s more subscriber numbers continue to climb. This is a vital metric for a software-as-a-service business. At the end of March it hit the milestone of one million subscribers.

Don Christie - Brandon Keepers

Don Christie writes in the New Zealand Herald Global IT companies are taking profit here and putting nothing back:

An organisation I co-chair, NZRise, has been looking at the problem. We represent New Zealand owned digital companies who generate jobs and good incomes for tens of thousands of Kiwis. Our research shows Facebook, Google, Amazon and many other global digital companies are engaged in similar tax avoidance schemes to Apple.

Most revenues that accrue to those companies from New Zealand simply don’t get reported. They are the result of an online transaction and the money flies out of the country in the blink of an eye. No tax. No multiplier effect. No 41 per cent investment into our society.

From a business owner’s perspective it also represents a huge disincentive to invest in R&D, which is already at shockingly low levels by international standards. We find ourselves at a disadvantage to our multinational competitors.

Why create software and technical services in New Zealand when we will always be facing uneven tax playing field?

New Zealand has had a problem with multinational companies and transfer pricing for decades.

Yet the problem Christie writes about is on a different scale.

While the old multinational would shuffle money to minimise liabilities in New Zealand, they still paid some tax. They employed people, trained people and contributed to the economy in other ways. They funded university chairs, sports clubs and other worthy causes. If the new breed does any of that, it’s invisible.

Little contribution

The new multinationals pay next to no tax. They employ next to no New Zealanders. They contribute little to the economy.

Sure, you can argue that Apple products make New Zealanders more productive and that’s a positive economic contribution. The net positive economic contribution may even be greater than Apple fails to contribute in more direct ways.

That is an argument against banning or boycotting Apple products. No-one is suggesting that.

It is not an argument against taxing Apple.

After all, our roads carry Apple products to market. Our schools give people the skills people need to use Apple products. Our health system keeps Apple’s customers alive and healthy. In some cases our tax dollars buy Apple products.

Google this!

You could argue something similar about Google. Some believe Google software makes workers more productive than they would be with other software. Maybe.

Some think that Google’s activities in the advertising sector has an economic benefit. Try saying that to a New Zealand journalist or someone who works in the media.

Again, these are not arguments against taxing Google.

Google is quite happy to sell its products and services to New Zealand government departments that it doesn’t help fund.

It’s harder to argue Facebook offers any economic benefits to New Zealand. If anything it undermines productivity. It is the digital equivalent of an all-sugar diet.

Christie has a good point

There’s little change Apple, Facebook and Google will stop selling in New Zealand if we force them to pull their economic weight.

Until recently the problem was limited. Most of the non-contributors were technology companies. That’s changing with services like Uber muscling in on our markets. If things continue our economy will be hollowed out. Let’s not allow that to happen.

It’s been said that what the companies do is legal. That’s true. It doesn’t make it right. We have the power to change that. We have left this problem in the too hard basket for too long.

PressPatron

You may have spotted the PressPatron banner at the top of this page. It invites you to be a supporter. There’s also a button to the right of this text.

They are both part of my PressPatron campaign. It’s a new way of crowd-funding websites.

I’m one of the first journalist-bloggers in New Zealand to use PressPatron. That puts me in good company. Russell Brown at Public Address got there first. Brown’s campaign has been running for about a month.

PressPatron is new, so there may be bugs in the system. Please be patient.

Soon you’ll see PressPatron banners in a lot more places.

Newsroom and Scoop are onboard. So is Sciblogs, E-Tangeta and TheatreReview. We’re all small, independent New Zealand online publishers.

What is PressPatron?

PressPatron is a way for readers like you to support the media you use. It is voluntary and painless. You get to set the amount you contribute. You can make a one-off payment or commit to a series of payments over time.

Most of all, PressPatron is not a pay wall. The stories on this site will stay free. You don’t have to pay a cent. The idea is that you’re supporting a website, not buying anything.

For now PressPatron is a New Zealand service. The founder, Alex Clark in Wellington, plans to offer it to overseas publishers. I’ve been talking to Alex about the idea for some time now and feel like I’m on the ground floor of something important.

One of the things I like most is that PressPatron doesn’t get in the way. If you don’t like seeing the banner, you can click it off. The sidebar button will stay, but it’s not offensive or distracting.

What will I do with the PressPatron money?

This site was never designed to by a source of income. It’s not my job. But it does cost money to run and it costs money to cover New Zealand technology.

So my first goal is to collect enough money so this site pays for itself.

Running this site isn’t expensive. There are managed web host fees and a handful of licences and subscriptions for services.

I’m a strong believer in paying people for work. That means paying for things like WordPress plug-ins, even when contributions are voluntary.

Around $500 will cover all my costs.

More, better local technology reporting

Any money I collect over that amount will go towards my journalism expenses. Among other things that means covering conferences and getting to industry events that might not otherwise get the attention they deserve.

InternetNZ’s NetHui is one example.

Open Source Open Society is another candidate. It would be good to get to Multicore World, ITX and the Linux AU conference when it is in New Zealand.

Some Commerce Commission conferences could do with a reporter watching what goes on. I’d also like to get to some out-of-town press conferences.

Tuanz events are useful. In my experience other smaller, narrow focus trade events can be valuable. I learned much from going to ISPANZ a year or so ago.

I’ll use any money raised money to pay for travel, accommodation and meals. Nothing fancy. At this stage PressPatron is not going to provide my income. That will continue to come from paying journalism and writing jobs.

PressPatron goals

  • First I want to make $500 to cover site costs.
  • If I reach a total $1500 I’ll be able to attend two out-of-town conferences that I wouldn’t otherwise get to.
  • A further $1500 means I’ll be able to attend all the big local scheduled events without needing to pick favourites1.
  • Any money raised over $3500 will be spent traveling outside of Auckland to get a wider perspective on technology. It means driving or flying out-of-town to chat to more people, more often.
  • If PressPatron takes off I’d like to spend some money on better photography.

  1. Although that depends on my availability and the amount of paid work I’ve got at the time. Sometimes conferences clash with publishing projects. ↩︎

Apple Pay

Apple insists banks don’t pass on Apple Pay charges to customers. Banks accept this in most countries. But not in Australia and, by extension, New Zealand.1

Wrangling over the issue slowed Apple Pay’s progress in both countries.

Three of Australia’s four big banks asked that country’s regulator for permission to negotiate with Apple as a group.2

The fourth bank, ANZ, has its own agreement with Apple.

On Monday Westpac, Commonwealth Bank and National Australia Bank took fees off the table. In return they want Apple to open up the NFC chip in iPhone. That will allow them to run their digital wallets in direct competition to Apple Pay.

The dispute is almost academic. Digital wallet take-up rates are miniscule. For now digital wallets are a rounding error in transaction statistics. Yet everyone involved thinks they will soon be huge.

The Australian reports ANZ completed 10 million Apple Pay transactions since launching nine months ago. This compares to seven billion credit and debit card transactions in a year.

Banks and phone makers expect digital wallets to take off when they add other features. Driver’s licences, loyalty cards and membership schemes are at the front of the list. So are public transport cards.

Replacing wallets with Apple Pay

Both Apple and the Australian banks hope people will one day no longer carry conventional wallets. Both want the game to play out their way.

The key to understanding the dispute is that both sides are big, powerful semi-monopolies. Both want control and both want to clip the ticket on every transaction. It can mean rivers of gold.

The Australian banks argue that opening up the iPhone NFC chip will allow innovation to flourish. Apple argues customers will get a better digital wallet experience if it retains control. Among other things it means customers can run cards issued by different banks from a single app.

Banks elsewhere might be as uneasy with Apple Pay, but few banking markets are as tight-held as Australia and New Zealand. This gives the local big banks a clout that, say, US banks don’t have.

Customers want them all to get on with it. A handful of geeks have swapped to ANZ to use Apple Pay. If that trickle was a flood, the other banks would soon change their tune.


  1. That’s because Australia’s dominant big four banks are also New Zealand’s largest banks. ↩︎
  2. Good question. I’m glad you asked. In normal times it is illegal for competitors to collude with each other. Regulators fear this can lead to bad things for customers. ↩︎

 

Abstract, Jackson Pollock

Gartner says NZ IT spending will reach NZ$11.4 billion in 2017. That’s up 2.3 percent on last year.

This is less than the expected 2.7 percent rise in global IT spending.

The reason for New Zealand’s underperformance is that nation’s biggest IT spending category is fixed and mobile communications services. It accounts for almost 40 percent of all NZ IT spending.

Gartner says growth in this sector is likely to be flat over the next two years.

In 2016 we spent NZ$4.36 billion on fixed and mobile communications services. Gartner’s projection puts 2017 spending at NZ$4.38 billion. That’s a rise of about 0.6 percent. The estimate for 2018 is NZ$4.43 billion.

Meanwhile spending on software will rise from NZ$1.4 billion last year to NZ$1.5 billion in 2017 and will reach almost NZ$1.7 billion in 2018.

Segment2016 YR2017 YR2018 YR
Devices    1,541    1,572    1,556
Data Center Systems        400        402        398
Software    1,421    1,541    1,674
IT Services    3,442    3,518    3,599
Communications Services    4,355    4,383    4,432
Total  11,159  11,417  11,659
Gartner – all numbers in thousands of NZ dollars

Australia’s largest sector is IT services. Gartner says software will be the fastest growing sector in 2017 for both New Zealand and Australia.

Global spending is set to total US$3.5 trillion in 2017. Gartner says the year was set to see a rebound for the industry. It originally forecast 3 percent growth. However political uncertainty means the analyst company has dialled back its optimism.

Gartner research vice president John-David Lovelock says the uncertainty means there’s a wait-and-see mood with many enterprises forestalling IT investments.

Cloud, blockchain, AI all trending

He identifies the big trends as cloud, blockchain, digital business and artificial intelligence.

The analyst expects worldwide spending on devices, PCs, tablets and phones to stay flat at US$589 billion.

Gartner says a PC replacement cycle, strong pricing and functionality will help drive growth in 2018.

We’ve seen similar optimistic projections before now. Some from Gartner. It’s hard to know where that replacement cycle will come from. Technology sales have been falling for years now. Even if it does kick-in, the industry needs more than replacements to see a fresh wave of growth.

Things are strong in the IT services market. Gartner expects the global market to grow 4.2 percent in 2017. It says this will come from investments in digital business, intelligent automation and services optimisation. The report goes on to warn buyers remain cautious.