Kiwi firms play it smart in growth explosion

00:41, Jan 17 2013

We all know the education payroll is administered by Talent2's Novopay system, right? As information technology cock-ups go, it would be a hard one to have missed.

But who knows who used to administer teachers' pay? It was in fact Datacom, one of New Zealand's biggest companies you've never heard of. Datacom seems to like it that way, even though it employs more than 3800 people and turned over $788 million last year in New Zealand.

Ranked second in the TIN100 list of high growth, high-tech New Zealand companies, Datacom would be a poster child if it weren't so publicity-shy, for the innovation wave the Government so dearly hopes can be built into something greater than the sum of its existing parts.

What's interesting is that growth explosion appears to be starting, irrespective of government ambitions, or the piddly support programmes available to help make it so.

Not only are Datacom products and services spread through a blue-chip list of New Zealand's top companies and a brace of key government agencies who have never hit the headlines for IT blunders, but the company is growing fast in Australia and has a presence in Malaysia, Shanghai and Silicon Valley.

As such a big player, Datacom is an outlier. But in recent weeks there's been a rush of announcements from smaller IT development firms, all bolstering the increasingly credible proposition that New Zealand can foot it with anywhere when it comes to developing high quality, software-dependent systems.


Take the apparently left-field announcement by the New Zealand and British ministers of foreign affairs Murray McCully and William Hague on Tuesday of a high-level pact on cyber-security.

For Wynyard Group, the New Zealand and London-based software company selling its intelligence-gathering software to banks, secret services and police forces around the globe, the response was quite different: the agreement represents opportunity.

"This is not a fight government can win on its own," says Craig Richardson, chief executive of Wynyard.

"It needs the knowledge and resources of the private sector. We are seeing major changes in Wellington that support this agenda and it's encouraging they are inviting local companies like us to discuss future capability needs."

The cyber-security pact also cited potential for deeper commercial engagement for New Zealand and UK firms in one another's businesses.

This in itself bears the mark of the current British High Commissioner to New Zealand, Vicki Treadell, who is making a more commercially focused UK/New Zealand trade agenda her personal mission.

For example, New Zealand Trade and Enterprise is finding doors are opening more easily in the UK to New Zealand public health software as the British National Health Service modernises.

Of course, anything involving national security also strays into the sensitive realm of internet governance, not to mention cyber warfare. The cyber-pact was notable for citing intellectual property issues, not traditionally the purview of cyber-security, and worryingly made no mention of privacy among "core principles of liberty, transparency, freedom of expression and the rule of law".

While that may have been an oversight, it may also be a step too far for governments signing up to agreements which also link with the telecommunications spy network run by the US, UK, Canada, Australia and New Zealand, and the US lead on cyber-crime and terrorism.

Nevertheless, it is both legal and potentially lucrative for New Zealand companies to get on the Western global paranoia bandwagon. There are clearly some big opportunities for smart, nimble companies using smart, well-trained and trustworthy people.

Wynyard, for example, recruits almost all its programmers from New Zealand universities - a far less expensive labour pool than Silicon Valley.

Other examples are starting to abound. Just this week the corporate board services software business Diligent reported more sales in the last 12 months than in the previous five years. It is sitting on a US$33.4 million cash-pile, and seems poised for takeoff.

The Auckland and New York-based company's software model means high margin profits start flowing with minimal additional capital or operating expenses once the product starts finding its market.

The company's share price hit record highs this week, at $5.61 a share, up more than 150 per cent in 12 months.

Then there's Endace, Auckland-based and listed on London's AIM exchange, which is subject to a tastily priced takeover bid from a smart US operator, Emulex, which sees the global potential in Endace's network visibility software.

Or WhosOnLocation, a start-up online visitor registration system that is taking off here and attracting serious global interest.

Xero, the home-grown online accounting platform, is targeting the same success. The fact two US private investment groups tipped a further $82 million into the company last November, even though it has yet to turn a profit, suggests it's on its way.

At the start of a year in which the local economic debate is already tediously familiar - house prices and currency too high, calls to subsidise marginal rail lines and not to subsidise film-making - these are the sorts of companies to watch if you're looking for something to lift the mood. More power to them.