Analysis: Budget 2014 - dream killer

The dust has settled, the verdict is in and, in general, ICT industry leaders are unimpressed by what the Federal Budget 2014 did, and didn't bring to the table.

When Salesforce.com executive, Dan Bognar, sat down in his living room with his nine-year-old son to watch the Budget recently, it was with disappointment that he revealed an uncomfortable truth about the future of ICT in Australia to his son.

“I told him you can forget about a career in IT,” he said.

“Maybe you should go into construction or medicine, because that’s really where the government is suggesting our future is with this budget.”

Bognar, Salesforce.com vice-president, Asia-Pacific, is just one in a long line of tech industry leaders and channel experts who have described the Budget’s impact on ICT as, at best, a “missed opportunity” and, at worst,  a “sickening” budget that robs the country of an opportunity to play a part in the information technology revolution.

Most of the industry squealing has been brought on by the axing of eight start-up programs and organisations including Commercialisation Australia and the Innovation Investment Fund.

It has also pulled the plug on $84.9 million in current funding for research and commercialisation outfit NICTA and cut $124.7 million of funding from clean technology programs. This was against the advice of the National Commission of Audit.

As part of his magic act, Treasurer, Joe Hockey, has also kicked in $484 million over five years for the introduction of the Entrepreneurs’ Infrastructure Program, in place of  the disappearing innovation programs.

However, with the abolition of other programs also accessed by start-ups and venture capitalists, which trims $845 million over five years, the net effect to the ecosystem is a loss of $361 million.

There was also no mention of the government’s “Cloud-first policy”, however, there still looks to be opportunity for channel players in that space with government agencies looking to achieve efficiencies, according to experts.

Communications minister, Malcolm Turnbull, told ARN the Government remained committed to better leveraging the benefits of Cloud computing, but would not reveal the reasoning behind the savage cuts to innovation funding.

“The Department of Finance has recently commenced public consultation on the development of a new Cloud procurement panel – expected to be in operation by December 2014,” he said.

Turnbull said the Department of Finance would also release a revised Cloud Computing Policy in the coming months. “The Cloud Computing Policy will make it mandatory for agencies to adopt a Cloud first approach, consistent with the Government’s E-Government Policy.

“The Department of Communications, the Department of Finance and the Attorney-General’s Department are also working to streamline the current data storage policy and guidelines. He said the government had also developed a series of small business guides to help small businesses take advantage of Cloud services. They will be published on the www.digitalbusiness.gov.au website.

“The Department of Communications has also developed a Cloud Computing Regulatory Stock Take [RST}, which provides a detailed overview of the regulation affecting the Australian Cloud services market,” he said. The RST will be published soon.

No incentives to invest

Distribution Central chief executive, Nick Verykios, said the government was robbing the country of innovative opportunity in an attempt to follow accounting process.

“As a CEO I am livid, there is no point hiding behind the truth,” he said.“Accounting does not run companies, just like accounting does not run countries.

“This government has no clue when it comes to the outcomes of investment. They have taken away all the incentives left to invest in this country. Successful businesses have always been the ones who have invested ahead of the curve.”

Verykios said questions regarding business confidence were being asked very early in the piece. He reiterated his call for the government to invest in the country’s future.

“I hope common sense prevails and that the people who thought this was all a good idea are held accountable,” he said. “Imagine if I ran my business that way, I would be crucified.

“I would like to see them investing significantly in making sure Australia is not an afterthought in the information revolution. I have spoken to a lot of people and the common theme is ‘why would you bother to stay here as a company?’”

Treasurer, Joe Hockey, said the government’s focus would be on strengthening the overall business environment so that enterprises “large or small” could create more jobs in Australia.

Despite this, the government is also yet to move on flagged changes to the Employee Share Share Scheme, which would benefit startups.But, in a rare bright spot, the government not only ignored the National Commission of Audit’s recommendation to scrap the Export Market Development grant but also increased funding of the program by $50 million.

Australian Information Industry Association (AIIA) president, Suzanne Campbell was disappointed the government didn't announce any changes to the current Employee Share Scheme.

“In relation to innovation, while applauding the creation of the world’s largest medical research endowment fund, the AIIA is seeking to better understand how the establishment of the Entrepreneurs’ Infrastructure Programme will redress the abolition of programs including Commercialisation Australia, Enterprise Connect, Industry Innovation Precincts and Industry Innovation Funds, to ensure that Australia is well positioned to create sustainable prosperity and meet emerging global competition.”

Data#3 managing director, John Grant  said the abolition of the innovation programs would impact the sector, but also cited the need to encourage the private sector to invest more in startups.

“Predictably, they took some big knives to the whole innovation budget, but it’s a pity there weren’t more incentives for the private sector.

“We should be fuelling the creation of new products and services to take to market and this budget doesn’t do any of that.

“One would hope they start to leverage some of the levers around incentivising business and venture capital to invest in ICT.”

Grant said the extra spending in infrastructure, the increase inmedical research funding from the $7 Medicare co-payment and the 1.5 per cent reduction in company tax, would all have a positive flow-on effect for the economy.

“At the end of the day it’s about companies generating more profit and individuals earning more income and paying more tax, and I don’t think that was addressed in this budget,” he said.

“The only way it’s really going to change our balance sheet is by revenue growth.”

He said the consolidation of government agencies and the continued move to Cloud and IT-as-a-service would help drive the industry. “There’s going to be some reductions in the spend in relation to the implementation of staff reductions and spending cuts.

“But there will be an increase in spend around Cloud and outsourcing opportunities. Service providers need to re-orient around areas where the spend is going to be and that’s something that the channel is very good at.

“There’s been a big government agency consolidation, and that will mean consolidation of IT systems, which will generate opportunity for the industry.”

Increase efficiencies

Kaseya managing director, Dermott McCann, said the budget was a bit of a non-event and urged the channel to show the market and government how to increase efficiencies through Cloud adoption.

“If we are going to have to try and do more with less the opportunity is for our channel partners to work closely with the government departments and those other businesses that are affected by the more challenging circumstances,” he said.

“Channel partners need to promote Cloud solutions that you can manage remotely, and automate everything.”

McCann said the IT management area was continuing to grow. “We don’t want to see people losing their jobs but the IT industry needs to speed up the innovative technologies with Cloud automation and that’s an opportunity as well as a challenge.”

He said it was a shame there was no attempt to close loopholes big tech companies use to avoid paying higher levels of tax.

“The technology challenges people faced before the budget are no different to what they are today. Resellers need to work closely with their vendors to understand what’s changing and why it’s changing, and it’s an opportunity for everyone.

“ICT is a significant contributor to the nation. If we can dramatically reduce costs then perhaps the powers that be might look at the next budget and consider investing more in technology and in training up the next generation of IT professionals.”