Australian tech sector gets $326m investment boost from international giants
Originally posted by Paul Smith @ afr.com
The rapid adoption of cloud computing services to drive corporate and government digital transformation programs across Australia has led to three international tech companies targeting the country for expansion, with fresh investments totalling $326 million.
US data centre giant Equinix is investing $225 million in a new Sydney facility to meet increased demand for computing capacity, while networking stalwart Cisco is pouring $61 million into a new plan to invest in local start-ups, develop critical infrastructure and help digitise government departments.
Less well known, but fast-growing Indian software industry disrupter Zoho, led by local managing director Timothy Kasbe, is spending upwards of $40 million to establish itself in Australia, and is bringing jobs to the regions, by choosing to base itself away from the major cities in Byron Bay.
The three new investments highlight the potential importance to the future of Australia's economy of harnessing the surging demand for technology-led innovation.
The new investments come as figures compiled by KPMG show that deals totalling $842 million were struck related to Australian fintech companies last year. The firm's fintech industry head Ian Pollari also predicted that much more is to come during 2019, as new open banking laws come into effect and open fresh opportunities for entrepreneurial tech-based companies.
The announcement of such a dramatic influx of overseas tech investment on one day, will come as a timely boost to MPs on both sides of politics, who have recently stood accused of disregarding the potential of the local technology industry, by railroading through unpopular encryption laws and dramatically cracking down on software-based companies' claims for research and development tax incentives. The thrust of these criticisms, from the tech sector, has been that Canberra is getting in the way of local companies looking to grow, by both starving them of funds and eroding trust in Australian-based tech products overseas.
Cisco Australia and New Zealand boss Ken Boal said Australia had proved its willingness to adopt advanced technology, and was the sixth or seventh biggest contributor to Cisco's bottom line, despite being only the 14th largest economy it operates in.
He said he was able to secure the investment from head office, despite the company's leadership having serious concerns about the new encryption laws.
"The anti-encryption bill raised eyebrows and there were concerns about the whole bill. It is viewed with curiosity and there are serious concern from all software and IT companies," he said.
Nasdaq-listed data centre provider Equinix is able to invest such huge sums in building new facilities here because it is on the front line for gauging the exploding adoption of new cloud-based services across business and the public sector.
Its local managing director, Jeremy Deutsch, said that, in addition to providing the data centre space to help drive the local operations of the likes of Amazon Web Services and Microsoft Azure, it was the digital transformation programs under way in companies of all sizes across Australia, which was driving up spending on computing power.
"In our existing data centres you are talking about hundreds of customers, hundreds of different organisations ... all interconnecting with each other, and as you create that ecosystem it works like a network effect so that the next customer gets the benefit of the existing ones that are there," Mr Deutsch said.
"While Australia is definitely moving on the digital transformation journey, I think there are still a large number of organisations that are yet to take the leap. We are seeing that entire trend accelerating."
Zoho's Mr Kasbe said his company viewed Australia as one of its top five markets in the world, due to the speed of adoption among local businesses. He also said the emergence of 5G this year would have a huge impact in enabling people to use business software anywhere via mobile.
The company's decision to eschew Sydney or Melbourne in favour of Byron Bay, is an indication of the potential for tech companies to offer new employment opportunities away from the big cities, and Mr Kasbe said it had been a successful strategy for Zoho elsewhere in the world already.
Initially the company expects to hire about 20 people for its Byron Bay office, but that will expand notably if its local endeavours succeed.
In the US it has offices in Pleasanton, California, and Austin, Texas. In India it set up in Chennai, while it chose Utrecht in the Netherlands.
"Byron Bay was selected as our Australian HQ because it is a regional hub with strong transport links and proximity to universities," Mr Kasbe said. "It means we can offer staff a good work-life balance, and we have the highest staff retention rate in our industry."
While the investments announced on Tuesday do not let the government off the hook on either of those two scores, they do show that any fears of overseas tech players winding back their interest in targeting the Australian market are premature.
They also highlight that the growth in demand for tech-based products and innovation (and the resultant jobs it brings,) means it is the tech-led economy that offers by far the biggest opportunity for growth for most economies.