When good IT goes bad

Last year ended with us wondering about ICT, information and communications technology, and whether we could build a sector worth $10 billion by 2012, boasting 100 companies turning over $100 million each, as a high-powered taskforce suggested.

Last year ended with us wondering about ICT, information and communications technology, and whether we could build a sector worth $10 billion by 2012, boasting 100 companies turning over $100 million each, as a high-powered taskforce suggested.

Perennial have-his-sayer Roger Kerr was quoted as saying the ICT taskforce's targets were "implausible and incoherent", though Jade’s Sir Gil Simpson was reportedly more bullish: "There's no reason why we can't be a little software Switzerland”. It will spread our resources too thinly, said Intergen head Tony Stewart, suggesting instead 10 billion-dollar companies. “It’s bullshit,” one industry head told me when I brought up the subject, “but don’t quote me on that". (We presume, when people say this, they almost always mean don’t name them.)

A thousand $10 million companies might be more do-able, I would have thought. Even a perfunctory look at our history and business culture suggests a national effort to build such relatively huge companies in a decade is a considerably bigger ask than, say, lifting the rugby world cup again. We are no Singapore (hands-all-over government), Israel (US bankrolling) or even Ireland (300 million-plus people on its doorstep). Think Big Software, perhaps? I doubt the Labour-led government has the stomach for getting so involved, quite frankly, and apart from Paul Swain, no one in power appears to have much of a clue about our industry.

The local market is by itself too small to support any large ICT vendor, unless you produce a product that is -- a la The Warehouse -- put in the hands of every New Zealander. So it's got to be export-focused. Anything hardware is tough going, given our cost-challenging isolation, and the economies of scale, cheap labour and cutting edge fabrication facilities needed. So that means software. Niche or mass market? Now you’re asking.

In telecomms software we broke ground early, but it has mostly been bad news since then – viz Telemedia (reincarnated as billing specialist Argent Networks) and CommSoft. We can do utilities and email software, and Jade shows what’s possible large-scale with a good product and a tonne of grit. (Perhaps we can move faster on open source software and services? If Microsoft's really worried about it, it must have great potential.)

We all know the challenges: you have to raise capital, either private or public, and given the lack of ready cash here and a tiny stockmarket-that-could, your company is likely to end up being owned overseas (Marshall Software, Ghost). See Bryan Dollery column, for ways around this. While you're waiting for the cash, you have to develop distribution arms, so do you go through the expensive process of setting up branches in key cities or the expensive process of setting up in partnership? And how much of your intellectual property will you own at the end of that? You have to build a brand. The award-festooned Navman, it has been said, inevitably spent a fair whack establishing its name overseas and still has a fight ahead to get into protective US markets.

But, I ask you, and only semi-facetiously, do we really want the issues of policing and management that go with breeding massive companies? I feel I only need to whisper one word: Enron. I mention it because over the holidays I read a sobering (appropriate, some might say) little book called How Companies Lie: Why Enron is Just the Tip of the Iceberg (Crown Business). Noted as employing questionable accounting techniques are several names that have appeared in these pages over the years: Lernout and Hauspie, Microstrategy, CA, Nortel, 3Com.

The dot-com boom itself allowed some crazy business management, say the authors. “This technology sector, the arena of high-tech precision, became the arena of slick marketing and half-baked ideas. Business plans, on average, were half true. Investors were left to figure out which half.”

Even in mainstream business IT can be both a means to enlighten or obfuscate, to enable deception and to track it down. “How the next generation of technology will affect the abilities of global corporations to escape securities rules and the laws of commerce is a very large question market today.” Superior transactional analysis may allow firms to get a jump on their competitors, but also give the watchdogs real-time detection of potentially fraudulent transactions. Alongside, the internet “has become the fastest-growing instrument of business fraud, lies and deception in every conceivable category” and allow corporate identity theft to soon follow that of individuals’.

CFOs were surveyed a few years back on whether they had ever been asked to use accounting rules to cast reporting in a better light – 78% said they had, and 38% had complied. CIOs, who are often on the executive these days, are surely a sturdier bunch.

Broatch is Computerworld's deputy editor. Send letters for publication to Computerworld Letters.

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