David and I had a lengthy dialogue over the weekend regarding the appropriateness or otherwise of actually making things in New Zealand. Those interested can read it here.
Basically (and to paraphrase David’s comments) he felt that manufacturing in NZ is dead and that we should be finding new ways to keep our workers busy – he mentioned film and software as two examples.
I replied thusly;
Xero actually supports my contention – it would be vastly cheaper to cut the code in Mumbai but Rod et al have made the decision to do it here – cutting code is not dissimilar as a role to working in a sewing factory – why is Xero applauded for doing it here while sewers are berated?
To which David said;
Code is core business for a software company. I wouldn’t expect a company that was innovating with code to sub it out – if only to protect IP
I then opened my RSS reader this morning to read that the strong dollar is pushing tech companies off shore in a bid to retain their margins. A number of examples were given about companies that were in this boat.
So… my question remains. If we’re no longer to have manufacturing in New Zealand, and the dollar is pushing our tech companies overseas (and a number are be brought out by offshore interests and shifted anyway thus the IP is lost) what are my two boys going to do for a living once they hit the workforce??????
I worry in a similar manner, I love it here in NZ and you have to believe there is a future outside self suffieciency.
Does technology outsourcing really work? Is it just a knee jerk reaction that is going to leave the door open to a new generation of technology entrepreneurs. I remember an interesting comment in the backlash against outsourcing to India.
If a business invests 20% of it’s revenue in software development, and it outsources that activity. It would expect to make a 50% saving, therefore making a real saving of 10%. Forget whether this 10% is actually achievable, but is the upheaval and loss of agility worth 10%? can you add 10% additional revenue by producing better products.
If my assertion isn’t valid though and in the technology sector we may have to take a leaf from the manufacturing book then we need to split out model in half and keep the innovation and design in NZ and push the final coding overseas. We will have to learn new management skills and we are going to lose some flexibility and agility.
Personally I think eventually we can create a vibrant technology market here in NZ, though we are going to have to reward the workers big time and raise their social status, we may even need to raise the value of the NZ$ to give them a better global buying power (iPods don’t come cheap). We need brains and drive though and we need to find global markets for our technology – we may even have to raise our prices.
Good comments John. And you are right – a simple cost saving play is often detrimental in terms of agility. Often this detriment far outweighs any cost savings. Answer?
– good governance
– good strategic vision
– good local investment in long term plays
– less knee jerk reactions (from many quarters)
– cheaper iPods!
There are always going to be technology companies in New Zealand, but what we are going through now is a period where employers predominantly want senior people. There are still jobs, there will be jobs in the future, but they’ll want people that are technically strong and also strong communicators and leaders.
Essentially, we need people here that can communicate with clients and lead technical teams overseas. But it is only large companies that operate like this and big companies have big overheads. Smaller New Zealand companies will be able to compete, especially if they are also strong communicators and leaders and can manage their teams from remote locations as well.
The phase of off shoring will pass, but it is going to take a long time for global economies to stabilise… and perhaps that will simply never be a reality.
alphafoobar:
You last paragraph reminds me that there are a couple of interesting forces at work here in the Tech Industry of NZ.
1) We are an off shoring destination. Locally for Australis but later for a much wider part of the English speaking world I would imagine.
2) We have our own Tech ventures and business who are looking to further off shore.
Case 1) encourages business leaders to invest in staff, skills and environments and long term builds something useful and sustainable in New Zealand. On the other hand case 2) potentially kills off what we have built so far.