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Bowen_House_Beehive_ParliamentWhy don’t New Zealand companies win government tenders?” asks Ian Apperley at the IITP Techblog.

He writes about the institutional bias government departments and agencies have when it comes to buying technology.

More often than not they’ll choose an overseas supplier when there are perfectly good and better value alternatives available here in New Zealand.

Apperley writes this tale of woe:

Several years ago I was doing some work for a large government agency. Part of that work included setting up a tender for a major services contract, managing it through, then choosing and recommending a vendor to the CIO. What we didn’t know was that the CIO had already chosen the vendor.

The process to complete that RFP took nearly a year. We made a number of mistakes along the way. That included having only two IT people on the panel, the rest were accountants, contract managers and the CIO’s patsies. We were watched by an auditor from New Zealand Audit, a man of much credibility and experience.

As it transpired we chose two vendors to take through to the next level. The NZ Audit man signed off on the process. Then the CIO threw our findings out and went with the vendor they had already chosen. The final result was three years of pain for that agency because they chose the wrong organisation to support them.

The following story is based on a late night bar conversation years ago with the former managing director of a local software company. The events described here took place in the late 1980s. They echo Apperley’s story. Some of the precise details are hazy, it wouldn’t stand up in a court room, but the essence of this story is true.

World class software

The managing director’s company sold a clever and advanced specialist application. It wasn’t unique, but it was world-class. Parts of the technology are still in use today.

This company had been successful selling the application to business customers in New Zealand and elsewhere. By the standards of the time it was an export success. The software company clocked up a number of impressive overseas sales, including a few to government agencies in Australia and elsewhere.

Yet, it could not get through the door of Wellington government departments. Not even when its software closely matched the documented requirements.

Enter the multinational

The company had a reseller agreement with what was in those days still a large and well-known multinational computer vendor. That vendor sold the New Zealand-developed software under its own brand, with a different product name.

The local company pitched for a significant government contract. It’s bid fell at the first round.

Meanwhile the multinational, offering the same mix of hardware and software progressed to the next round and eventually won the government contract. The company’s pitch involved a trip to a customer site in the USA to see the system in action.

It was a win, of sorts, for the local software business. It managed to sell a decent licence, albeit with its prestigious big partner taking a hefty slice of the cake.

A bigger cake

The slice was big, but so was the cake. It turned out the multinational sold the same software package for a higher licence fee than the local company.

In the wash up it turns out the local software company did OK. But the New Zealand taxpayer did not. The US-based giant pocketed a hefty premium.

Perhaps the most disturbing aspect of the managing director’s story was that the government deal involved a lucrative support contract. The multinational vendor didn’t have anyone in New Zealand with the necessary skills, so it farmed the support out to the software company.

communications plug

Tuanz — Telecommunications Users Association New Zealand — wants better consumer protection when the government revisits the Telecommunications Act.

Earlier this week Communications Minister Amy Adams published what she calls an “options paper”. This asks for feedback on the government’s proposed utility-style model for regulating fixed line telecommunications services after 2020.

The paper forms part of the government’s review of the 2001 Telecommunications Act. The Telecommunications Act 2001 review options paper is online at the Ministry of Business, Innovation and Employment website.

One of the goals of the review is to bring telecommunications regulation more into line with utlities such as electricity lines and gas pipelines. Fresh mobile regulation is possible with potential provisions for infrastructure sharing.

In a press release Tuanz CEO Craig Young says:

“Tuanz has been arguing strongly for significantly stronger consumer disputes processes under the current mandatory code regime. However, the options released today leave this important function with the TCF.

“There may be no choice but to push for the alternative option of an independent dispute and complaint model to ensure that management of disputes is user-friendly, and focused on their rights.

This is important. The recent media stories about poor UFB installations highlight how powerless consumers feel when dealing with large, faceless telecommunications companies.

New Zealand’s access model with separation between network companies and retail service providers is good, but there is a danger of finger-pointing when problems occur. An independent referee would restore confidence.

“It is also disappointing that calls for a properly funded consumer advocacy group, and end-user focused research, have been ignored.

This has worked well in other counties. In the past Tuanz has done a lot of the consumer advocacy work, but that isn’t the organisation’s primary purpose and not what it’s member pay subscriptions for. Likewise the research.

With adequate funding, the organisation could do more work in both departments. Or it could play a role setting up a new separate, consumer-oriented body. It wouldn’t be expensive and would be cost-effective.

As Young goes on to say:

“The successful Australian model proves that contestable funds are an effective way of providing these important services and that leaving it up to the support from corporate entities is unrealistic.”

In the recent past government has looked to an industry levy to fund its rural broadband project and certain services for disabled users. While it would be better to ditch the levy — the telecommunications industry is unfairly targeted in this way — it wouldn’t hurt to set aside a small share of this money to fund an independent consumer-oriented body.

Disclosure: Bill Bennett is working on a writing project for Tuanz. 

No plan to prepare for digital age

Xero managing director Anna Curzon writes in for Stuff:

“It’s about time digital technology was recognised as an important topic of education because it’s crucial we prepare our next generation for tomorrow’s world.”

Someone could have written the same words any time in the last 40 years. It’s not a new idea. People said the same when I was at school in the 1970s. We ran similar comments when I edited The Dominion’s Computer Pages in the 1980s.

The idea is no more crucial today than it was before. Imagine how many Xeros, Vends and Orions we could have now if government listened then.

The difference is that we now have a vibrant home-grown technology sector to show the benefits technology-savvy citizens can bring.

Role models

We also now have successful role models; articulate industry leaders able to argue the case for technology. Curzon is one of them.

They run companies that bring in valuable export dollars. Their contribution to the economy is more reliable than the bust-boom cycles from, say, the dairy industry.

That alone should get them a hearing.

It’s chilling that after the effort industry leaders and others have put into explaining this, the Minister of Education and her officials ignored them.

There’s always a danger when industries push sector-based education agenda. It would be a disaster if, say, dairy leaders talked schools into adding dairy-farming to the curriculum.

Yet digital technology is hardly special pleading. It is as fundamental to the 21st century as reading, writing and arithmetic. These days digital technology is reading, writing and arithmetic.

Vodafone RBI tower

After a slow start New Zealand’s Rural Broadband Initiative has hit its stride.

RBI is a government-subsidised scheme to give farmers and people living in rural areas a broadband network.

Communications minister Amy Adams says the first stage is now complete with 154 new cellular towers now built. The towers serve 3G and 4G fixed wireless broadband as well as conventional mobile phone services.

She says 300,000 rural homes and businesses can use RBI wireless services.

Towers of power

The towers also increase mobile coverage in rural New Zealand. Before the RBI began mobile services reach a little over one-third of New Zealand’s geographical area. Today mobile services cover half the area.

In addition to the 154 new cellular towers, Vodafone will have finished upgrading a further 387 existing towers by this time next year.

Vodafone won the original contract to build new mobile towers. Chorus, which was then still part of Telecom NZ, won the contract to connect fibre to the towers.

Despite building the towers, the RBI contracts insisted Vodafone allowed other carriers to install their equipment. This proved a smart move.

3G RBI not up to much

Early Vodafone RBI services using 3G technology were slow, expensive and had low data caps. This meant there was a pitiful take-up. One year ago the total number of customers signed for Vodafone’s RBI was officially around 8,000, although insiders insisted the number of active was lower.

In May 2015 Labour communications spokesperson Clare Curran called for an inquiry into the low take-up numbers. Tuanz CEO Craig Young said his organisation was disappointed with the low uptake of RBI services.

At the time Vodafone RBI customers paid $95 a month for 30 GB of data and free calling. The 3G broadband speeds could be lower than 1 Mbps and were rarely faster than 5 Mbps.

Spark enters

Things picked up soon after. A few months after the complaints, Spark entered the market with a competitive offer. Spark’s rural wireless broadband was 4G from day one, offered a higher data cap and had user-installed hardware making it easier to get started. Vodafone responded in kind and numbers picked up.

Today many rural users can get fibre-like speeds for little more than the price paid by urban broadband customers.

Spark and Vodafone offer similar packages where customers get 80 GB of data and local calling for $106 a month, or an 80 GB naked broadband plan for $96 a month. RBI users with a 4G connection could see speeds go as high as 80 Mbps, although typical peak speeds are more often in the 30 to 40 Mbps range.

In comparison urban residential customers can get unlimited data at fibre speeds of 100 Mbps for around the same price.

Competition

Adams says; “This agreement has been very successful, with approximately four out of every five new cell towers hosting a mix of competing operators.”

RBI doesn’t stop with the 154 new and 387 upgraded towers. The now completed first phase of RBI was subsidised with $300 million of government funds — some of this from a tax imposed on telecommunications companies.

In the 2015 budget the New Zealand government earmarked a further $100 million to extend the RBI’s reach. There’s a further $50m to fill in mobile network black spots. The government says this will improve safety on highways and better serve remote tourism locations.

Adams set down ambitious goals for rural broadband, in May she issued a statement saying: “By 2025, I want to see 99 percent of New Zealanders able to access broadband capable of 50 Mbps, and the remaining one per cent in the hardest to reach locations able to access broadband of 10 Mbps.”

IRD inland revenue department tax

Writing at the New Zealand Herald Matt Nippert says Top multinationals pay almost no tax in New Zealand.

A major Herald investigation has found the 20 multinational companies most aggressive in shifting profits out of New Zealand overall paid virtually no income tax, despite recording nearly $10 billion in annual sales to Kiwi consumers.

The analysis of financial information of more than 100 multinational corporations and their New Zealand subsidiaries showed that, had the New Zealand branches of these 20 firms reported profits at the same healthy rate as their parents, their combined income tax bill would have been nearly $490 million.

Big companies not paying tax may be legal, it isn’t moral. They shuffle profits to countries with low taxes so they can avoid paying for the taxpayer-funded infrastructure and social spending that made them rich in the first place.

Two tax avoiding tech giants Facebook and Google grew wealthy on the back of the internet.

It was originally paid for by taxpayers in countries like the USA and the UK. The internet wouldn’t exist without taxpayers, nor would Google or Facebook.

Apple grew into one of the world’s largest businesses on the back of the iPhone.

Yet for much of its history, Apple mainly sold computers. A large number of those sales were to schools. It depended on government funded education to keep it afloat during the lean years.

Without taxes, there would be no Facebook, Google or Apple.

Large countries like the USA, UK and even medium-size ones like Australia have moved to close the loopholes allowing multinationals to avoid taxes. New Zealand has less room for manoeuvre.

In the long-term our best chance of dealing with the problem is by taking part in international initiatives.

In the meantime, there is something we can do. We could insist government purchasers only buy from the companies who pay their fair share of tax.

Sure, fair share is a debatable and nebulous term. The less than one percent paid by some companies on Nippert’s list is not fair.

Not buying from tax avoiders would mean no more government purchased iPhones, no government Google Apps accounts, no government advertisements on Facebook.

At least not until they pay up.

Not taking this approach amounts to rewarding bad behaviour.