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Scaling Tech Growth Hurdles

If Hawke’s Bay is to become a centre of digital expertise – capable of meeting our immediate hi-tech needs and capturing new opportunities for growth – we’ll need out-of-the-box thinking and a more collaborative and co-ordinated strategy.

Keith Newman01 June 2019

BB47

During national Techweek, 20-26 May 2019, Business HB will attempt to showcase the best the region has to offer in robotics, automation and leading edge software to bolster local awareness and hopefully draw the attention of outside investors and innovators. 

Tech advances are clicking along more quickly than our educational institutions or local authorities are able to grasp, and our region is only one contender among many trying to stay on the up-side of the digital divide.

Wellington and Tauranga, for example, are making significant investments pitching to tech trojans, skilful software designers and intellectual property (IP) creators, and even Gisborne is claiming Rocket Lab in its tech hub marketing hype.

The latest EIT-Business HB research suggests Hawke’s Bay has an almost desperate need for technical skills to cope with a rapidly changing workplace where innovation is the norm and quick thinkers with digital era skills are in hot demand.

Barry Soutar, CEO of Māori nonprofit organisation Te Tira Toi Whakangao (T3W), on a mission to create 100 Māori tech companies by 2023, says we can no longer build economies solely on horticulture or dairying and our regional challenges are even more basic than diversification. 

Upping digital stakes

“We have no choice; tech is involved in every industry and forecast to replace dairy as our second largest export earner before 2022.”

Soutar, a director of Orawa, which plans a hi-tech accelerator for Hawke’s Bay, and the brains behind this year’s hackathon, says that seismic economic shift is coming at us quicker than we imagine.

He claims we’ve passed “peak cow”, with dairying growing at less than 1% on a $40 billion base, while tech is growing at around 12.5% on a $12 billion GDP base.

And Soutar says we’ve also passed “peak tourism” in many parts of the country. “The carrying capacity of the asset can no longer sustain the volume of tourists, so you have to increase the quality of the experience, for example using technology for better story-telling, so they’ll pay you more.”

There’s no question Hawke’s Bay has come a long way in the past five years. There’s been significant progress overcoming geographic isolation through airline competition and reduced fares. And the regional rollout of the Ultrafast fibre optic broadband digital highway is expected to be completed by 2020.

With good broadband, groupware, videoconferencing and cloud-based computing, digital entrepreneurs with valuable IP can work with virtual teams across the region or anywhere around the world.

A catalyst for collaboration has been the HB Business Hub in Ahuriri, a co-location centre for 18 different agencies including Business HB, the economic development arms of Wairoa, Central Hawke’s Bay, Napier and Hastings councils, and representatives of Callaghan Innovation employed by the Hawke’s Bay Regional Council. The HB Chamber of Commerce also lives there. 

Another group hosted at the hub and focused on attracting business includes Napier Port, Hawke’s Bay Airport and five council economic development managers.

Business HB CEO, Carolyn Neville, says this relatively recent coordinated approach means customers no longer have to run around five different offices and it’s a distinct advantage for her team as they try to generate a buzz for the Bay as a place of innovation and entrepreneurship. 

Just down the road from the Business Hub is Wallace Development’s Tech Collective, a hive of activity that gives a glimpse of the kind of work environment that attracts hi-tech talent. 

Here, local success stories including global cloud accounting maven Xero, telco and tech solutions firm NOW and software developer Webfox are clustered in purpose-built workplaces around an open plan area with a coffee shop, meeting rooms and other shared facilities. Another key tenant is international cloud-based property management software company Re-Leased which plans to more than double its team of 60 software developers over the next three years. Its $10 million investment, including a $5000 incentive to attract candidates and even help train them, will help it meet the demand coming from clients in 40 countries. 

“Businesses who need experience and specialist skills which are more abundant in big cities might need to start paying big city salaries.”
HAMISH WHITE,
NOW CHIEF EXECUTIVE

The Tech Collective also has a hot-desking centre in Havelock North and plans for another facility in Hastings designed to promote networking and collaboration among those in this critical sector.

The tech sector is not always visible given that software development in particular is often embedded in everything from business systems to robotics, automation and fruit sorting

While it’s not difficult to come up with a couple of dozen extraordinary regional companies who have developed world class systems, it’s more difficult to quantify the unseen scores of smart software coders, designers and engineers working from their home offices.

One idea to build and support local capacity is to create an informal co-working space where a growing number of freelancers working on contracts in the ‘gig economy’ can share skills or collaborate and support each other.

Business HB’s Carolyn Neville notes, there’s a clear gap in tech support across the growing area of food processing and definitely room for growth in all areas of the primary sector and niche areas like hemp, where “disruptive ideas and technology can break new ground”.

While the Business Hub is “a nice asset”, says Fingermark CEO Luke Irving, the councils’ joint initiative needs to go much further. “You have to have a scheme and strategy; to be brave and go into the cities and say we want your business in Hawke’s Bay and this is what we’re going to give you as an incentive.” 

He says local authorities and their officers need to start “thinking outside the box” and become more engaged in not only attracting hi-tech companies but helping existing ones innovate and grow. 

He was disappointed his proposal for a tech campus in the middle of a Hastings vineyard – “with a real point of difference” to attract other businesses – was denied. 

“As soon as you scratch under the surface, the Heretaunga Plains zone is all tied up … They make it too hard … while they liked the idea, there was no offer of help and no-one was going to make any concessions.”

The response was, “If we let you do it everyone’s going to want to do it.” But he asks, “Is that such a bad thing?” 

Therein lies the challenge of competing land use and whether there can be compromise to allow rural-commercial co-existence.

Support systems lacking

Fingermark has been widely promoted as the poster child to attract hi-tech businesses to Hawke’s Bay. [See BayBuzz, Sep/Oct 2017, Bom dia Fingermark]

Irving was recently asked to contribute to workshops encouraging businesses like his to come here, but after thinking about it he withdrew. 

“I couldn’t do it … the council needs to get behind it … they’re not providing the support or incentives … businesses don’t just move here off their own bat.”

Although that’s exactly what Irving did when he moved to Havelock North three years ago, closely followed by 15 of his Auckland-based staff who are mostly internationals.

Fingermark works in the healthcare and hospitality sectors using “world-breaking computer vision stuff”, the Internet of Things (IoT) and artificial intelligence to solve problems for four of the top ten biggest fast food brands in the world, including KFC and McDonalds.

It collaborates with global tech giants including Intel and NCR using data from drive through signage and security cameras to streamline service provision. 

Fingermark has a development office in Brazil and locally employs about 35 staff, 12 involved in software development and coding, with that number expected to double this year. 

Irving says companies like Fingermark bring huge benefits to places like Havelock North, where “28 people buy coffees, lunch, go to restaurants and the pub on a Friday”. 

Barry Soutar, CEO T3W. Photo: Rebecca Zephyr Thomas

He’s now creating a co-working space in Hastings for robotics, computer vision and machine learning that may open opportunities for EIT students and help stem the post-high school exodus from the region. 

This design-thinking lab could allow students to see how Fingermark’s business operates, including how it negotiates with McDonalds and KFC globally. This kind of collaboration and lab space, Irving suggests, could attract more technology businesses looking for graduates. 

Collaborate locally

Rather than putting energy into attracting new players to the region, we might be better off supporting and growing existing businesses with unrealised growth potential, says NOW chief executive Hamish White.

He says we clearly need to lift our game in the weightless economy and for some businesses that might involve thinking differently; becoming part of an ecosystem of collaboration, collegiality and industry partnerships.

White cites software development, software as a service (SaaS) and gaming success stories evolving around Weta Digital and Xero in Wellington which have attracted talent that related industries can draw from. 

While that potential exists in Hawke’s Bay, it’s still “pretty boutique”. 

White says technology is an enabler, accelerating change in every business. “Business as usual is not an option. You have to ask, how do you remain relevant and efficient while constantly anticipating how you can innovate to meet the needs of customers.”

NOW is growing well beyond the industry curve at 20% revenue growth per annum, with 90% of that coming from outside the region – mostly from competitors – and it partners extensively to integrate new services and support its internet provision business.

While councils might have to look at zoning and other ways of removing barriers to growth, White reckons the biggest challenge will be getting access to the talent and experience pool.

That will require a mindset shift to attract people away from their existing networks of friends and collaborators. “Businesses who need experience and specialist skills which are more abundant in big cities might need to start paying big city salaries.”

Why Hawke’s Bay?

While lifestyle and a place to raise a family are drawcards for new companies, skilled people and entrepreneurs, Xero chief executive Craig Hudson says this needs to be balanced by real business opportunities.

He suggests Hawke’s Bay needs to tell its story better, including evidence that local authorities are helping to grow existing businesses, something that’s pivotal for new players looking to set up shop. 

“When I was looking to come back from the UK, I wanted to dig around under the hood and see where the awesome companies were that excited me.”

The next step, suggests Hudson, is to explore the lifestyle options and “see if your wife and family fall in love with an area”.

Xero, still majority-owned by local entrepreneur Rod Drury, expects to add another 20 people to the 39 already employed in Hawke’s Bay support roles over the next year. 

The majority are local hires, with seven internal transfers so far; some, says Hudson, are grateful they could afford to buy a home, something they could never have imagined in Auckland or Wellington. 

With so many cities pitching to host tech companies, Hudson says the big question will always be “why Hawke’s Bay?” 

Keeping profits local 

But hi-tech business isn’t always reliant on having local talent. In an increasingly virtual world you can be a global competitor from a modest office in the Tuki Vineyard, on the outskirts of Havelock North. 

That’s where Sportsground.co.nz owner Mike Purchas runs a massive on-line sports publishing company, which registers half a million people for organised sport, including draws, and records results. 

The cloud-based competition management system covers most major codes from school to club and professional level sports and is now making inroads into Australia. 

It’s the digital partner for Netball NZ, NZ Rugby Union, Touch New Zealand and Football New Zealand. It also works with hockey. 

The revenue from Sportsground. co.nz comes back to Hawke’s Bay, but his two most senior full-time developers are based outside the region as are most of his clients. “We’re a regional exporter of services in a weightless economy. Much of our specialist labour don’t need to be here,” says Purchas. 

In recent months his company has worked on projects for Datacom with engineers and software developers based in Auckland, and senior developers in Brisbane. 

“We’re in constant contact, using modern project management and development tools so they’re more productive than being in an office with other noisy staff.” 

Sportsground.co.nz employs local helpdesk and sales people. Since Jetstar came to Hawke’s Bay, his salespeople are now based here, with only hot-desking in Auckland. 

The former Hawke’s Bay ‘old boy returned home’ can’t imagine working in an Auckland office and the productivity loss that would mean through travel and the cost of living. 

The quality of life and freshness of produce in Hawke’s Bay rate highly – “I’d never trade it in a million years.” 

Purchas believes one way to encourage more hi-tech businesses to Hawke’s Bay would be hosting tech expos every two years pitched at decision-makers from entrepreneurial companies. “Getting them here to see what’s possible might be a good start.” 

Hacking export answers 

A taste of what that might look like is being proposed through a 48-hour Hawke’s Bay hackathon run by T3W, which last year attracted new hi-tech business to Gisborne as part of its inaugural event. 

T3W executive Barry Soutar expects to attract “a broad spectrum of talent – commercial tech developers, design thinkers, creatives, entrepreneurs and investors – for an accelerated product activation opportunity”. 

He’s been meeting with CEOs of 13 local companies who’ve done global business to work out a five-year strategy to resolve the issues that “keep them awake at night” and match them with experts using leading edge solutions. 

So why would these mostly well-paid millennial tech high-flyers want to give up a week of their time to come to Hawke’s Bay? “They come for lifestyle, the tourism experience, culture and landscape and a greater purpose for the universe,” says Soutar. 

The idea is that their “intellectual input” into multiple projects will lead to a lift in prosperity for the region, helping generate wealth through the creation of IP that can be commercialised. 

He’s very specific that unless the company is focused on making millions and has at least one existing international market, he’s “not really interested”. 

During last year’s hackathon a woman running a global gaming design business feared she would be replaced by a robot or artificial intelligence that invents storylines. The underlying concern was that this would be done with no cultural awareness, making it completely inappropriate to Māori. 

Amazon Web Services brought in a box of its latest beta versions, including the Alexa AI engine, and they wrote a software solution in 48 hours, says Soutar. Following this year’s hackathon, new companies might be created and possibly even assisted by spin-off venture Orawa, which is about to establish a local business accelerator or hi-tech centre for innovation. 

Māori economic engine 

Orawa is conducting an inventory of mainly Māori resources – high calibre people, capital and experience – and how they’re “connected to the economic engine of the country and internationally”.

Soutar warns, innovation won’t happen in provincial New Zealand if you can’t provide a direct path for dealing with offshore tech companies. 

The accelerator, most likely in Hastings, will be about “management of deal flow, giving a centre of gravity for finding the right talent, matching opportunities, capital and the market,” he says. 

While elements of this are already in place, he says it’s not coordinated “so there isn’t single place for it to coalesce” in Hawke’s Bay. 

He claims an effective accelerator will bring tech to town and provide co-working spaces where companies can start to commercialise ideas with active participation of mentors as part of capability programmes. 

“In the lightweight digital economy you can be global pretty quickly on a lower asset base, but you have to have a stocktake of assets, IP and talent … and look at the future of work and where you should be going.” 

Working with existing success stories is only one part of the equation; another is how you get start-ups into growth phase so they employ, produce and contribute more to the region. 

As Xero’s Craig Hudson says, its often a chicken and egg situation. “A number of businesses in Hawke’s Bay could potentially scale much faster if they had better talent at a higher level, but they’re not going to attract that kind of talent unless they are growing. It’s a constant play-off.” 

The risk is those tasked with regional leadership may still need convincing that our backbone hort-agribusiness is under threat, or that diversification means something more than a different variety of animal, vegetable or fruit. 

To succeed as a tech hub we’ll need to get serious about growing existing businesses, paying people what they’re worth, and developing the entrepreneurial clout needed to convince cutting edge coders and innovators to base themselves in the Bay. 

Otherwise, some of the best ideas for boosting our economic fortunes may never see the light of day. 

NOW sponsors the BayBuzz Technology Series to enhance public understanding of our region’s technology achievements and opportunities. Analyses and views presented are those of BayBuzz and its editorial team.

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Keith Newman01 June 2019

BB47

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