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Western Australia - The morning after the mining boom

With an economy trailing a nation, how can the channel avoid market struggles in Western Australia?

Once a booming, rich, mining state, Western Australia is now waking up with a monumental economic hangover.

As the excavators exit the state, the entire western third of the country is facing a new reality, a reality that requires new ways to boost business confidence and prosperity.

With performance reflecting the ending of the mining construction boom, WA continues to lag other economies, with annual growth rates remaining below national averages on all indicators.

According to CommSec State of the State report findings, key indicators include economic growth; retail spending; business investment; unemployment; construction work done; population growth; housing finance and dwelling commencements.

And the numbers don’t make for good reading in WA, with business investment down 10.3 per cent, behind Northern Territory (down 9.8 per cent) and South Australia (down 8.7 per cent).

“This state has seen a bigger drop in business investment than any other in recent years,” Deloitte Western Australia managing partner Michael McNulty observed.

Dominated by its resources and services sector and largely driven by the export of iron-ore, gold, liquefied natural gas and agricultural commodities such as wheat, in 2017, WA now trails a nation.

But despite a struggling economy — and a bleak forecast ahead — channel partners can ill afford to sit back and wait for a return of the status quo.

“And it would be a mistake to let uncertainty continue to weigh too heavily on our future decisions, leading to lost opportunities,” McNulty cautioned. “We can do better than that.”

Central to the future success of WA will be technology, specifically, digital. Labelled by many industry observers as the “new mining”, digital technology is well placed to challenge an economy traditionally insulated from disruption.

But to leverage untapped potential for the state, digital must step away from the sidelines, and instead take a central stage through policy, economic influencers and education system initiatives.

Success in this space will determine whether WA can transform into a technology focused state, a state capable of attracting new start- ups and entrepreneurs.

Encouragingly, the WA Government has laid out plans to deploy a digitally driven ICT strategy by 2020, designed to lower the cost of services for taxpayers.

Developed in consultation with the public sector and ICT industry, the roadmap will help lay the foundations for future digital growth across the state, providing a platform for future WA-based innovation.

“Government services will increasingly become digital, delivered online and conveniently accessible through a single whole of government portal,” WA Government CIO Giles Nunis said. “Change is needed because ICT is no longer only about information and communication technology, boxes and wires, programs and processes.

“Technology and the need for information have pervaded every aspect of the modern and increasingly digital world.”

With mobile devices and social media playing an increasing role in both professional and private lives, cloud computing and data analytics are also providing capabilities previously only available to large governments and corporations into every home or office.

“The Internet of Things [IoT], consumer robotics and automation will multiply people’s ability to control or collect data about their world,” Nunis explained. “Businesses are being disrupted and created through the sharing economy.”

Consequently, the state’s first whole of government ICT Strategy — labelled Digital WA — highlights
a shift in focus for the economy, emphasising the importance of WA exploring new and emerging technologies to trigger market growth.

Selling smarts

Now, the onus is on technology providers to take charge and sell smart.

“Western Australia has had considerable success in selling rocks and crops to the world,” McNulty observed. “But this scenario is about selling smarts, and it is a wake-up call on the importance of widening the state’s economic base in the years to come.

“It is only by understanding how risks and opportunities will affect the economy that businesses and policymakers can properly prepare for the inevitable uncertainty that the future will bring.”

In assessing both the channel landscape, Satalyst CEO Todd Elliott believes digital will be delivered through integration and workflow technologies, as customer conversations evolve.

“Depending on what the solution is, automation is high on business agendas,” Elliott said. “Being a business that specialises in IoT, we’re seeing more of an uptake on machine learning and advanced analytics.

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“Customers are beginning to explore that more and we are using that framework in several industries to process data.”

As a cloud-first digital transformation business, Satalyst leverages Microsoft and open source technology to build, integrate and support digital business solutions.

Specialising in advanced data analytics, IoT, software development, system integration and cloud solutions, the Perth-based business has chalked up key digital customer wins across agriculture and insurance sectors.

“Going digital is about reducing time to value and rolling out situations in six to eight weeks instead of six to eight months,” Elliott explained. “Essentially, we want to have roll outs done progressively instead of doing it in one chunk so that companies are getting maximum value out of their investments.”

Through adopting a digital stance locally, Satalyst is also breathing new life into the mining sector in response to the industry’s desire to extract every market dollar now available.

“We’re starting to see a few green shoots over here, more so in the newer technology space such as machine learning and IoT,” Elliott said. “We’re doing more work in mining than we did during the boom because companies in this vertical are starting to look to machine learning to try and find ways to optimise their business more than they did in the past.

“They have a digital transformation agenda in trying to automate things in their businesses as much as possible.”

Yet for Elliott, a lack of digitally savvy specialists continues to hamper partners seeking to leverage new technologies across the state.

“That’s always going to be the case,” he acknowledged. “It’s always going to be hard to find people when you are a business that is forward thinking.”

In a direct address to local businesses, Elliott also advocated the usage of bots and automation to help drive internal and external innovation for organisations.

“There’s an awareness that things are moving fast, but not a lot of companies are able to execute on that need,” he said. “There needs to be a move into areas such as bots to manage customer interactions and automation.

“But moving an idea into a proof of concept and then reality isn’t as easy as it appears, which is where partners such as Satalyst come in.”

As digital technology drives some of the biggest changes in the present era, such change is significantly impacting consumers, workers, businesses and the broader economy.

Subsequently, digital disruption is bringing large-scale benefits to Australia, WA and the wider world, including increased living standards, higher workforce growth, improved efficiency for businesses and government agencies, alongside new opportunities for innovation.

The contribution of digital technologies to the Australian economy is forecast to be $139 billion by 2020, when it will equate to seven per cent of the country’s GDP.

According to Deloitte research, there has also been a boom in the growth of Australia’s ICT workforce in recent years, from around 600,000 workers in 2014 to more than 640,000 workers in 2016.

Furthermore, strong growth in the technology workforce is expected to continue, reaching 722,000 workers by 2022.

“The ongoing strong demand for ICT workers and skills is consistent with the significant role digital technologies will continue to play in driving Australia’s economic growth,” Deloitte partner John O’Mahony said.

“The increasing digitisation of Australian businesses’ operations across all sectors of the economy has resulted in greater integration between ICT functions and broader business operations.”

For example, 52 per cent of the current ICT workforce is employed outside ICT-related industries, in such areas as professional services, public administration and financial services.

Market conditions

Increased ICT workforces may help overcome traditional barriers around expertise and talent shortages, but despite the digital direction of travel becoming clearer, challenges in WA still remain.

With digital and cloud joined at the hip, the state’s dependency on migrating to the skies in a seamless manner threatens to be disrupted by a constant stumbling block forever hindering local organisations.

Because while the state understands the benefits of the cloud — backed by a cloud-first government policy — such appetite for adoption is restricted by the hit and miss nature of network providers across the state.

“We are such a remote city, most companies or customers that we sell and provide services to have bandwidth issues,” Cirrus Networks director Grahame Gilson said. “We’re limited by the network providers.

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“And you can’t just move to the cloud, you’ve got to do it intelligently and understand its impact on services. Businesses in WA are now more accepting of it because they know it’s a better way of getting things done.”

As a national system integrator headquartered in Perth, Cirrus Networks has a bird’s eye view of the wider Australian market, allowing the business to assess market enthusiasm around security, end-user computing, data centre and storage solutions, alongside convergence and unified communications.

“In WA, we need assurances around latency issues,” Gilson added. “The way businesses consume data and access that data in the quickest time fame possible is paramount. Meeting those requirements are important.”

The state is taking relevant measures to improve problems arising from networks however, but despite this, Gilson advised businesses to take careful consideration when aligning with providers.

“The problem is getting much better,” he acknowledged. “There are more network organisations and providers that are increasing their bandwidth and their availability. But for a lot of organisations that are running mission critical production environments, they need to think very carefully about who their providers are.”

Through building on the potential of cloud, Gilson believes the market must also further capitalise on emerging technologies such as IoT and big data.

The pledge comes as Tasmania embarks on becoming a Smart City, through an IoT-ready partnership between TasmaNet and Thinxtra.

Such a deal - designed to build a dedicated IoT network that will cover 95 per cent of the population - highlights the progress of other states and territories across Australia in leveraging new capabilities through technology, a stance WA must now take to keep pace.

“Especially for the WA market,” Gilson stressed. “Being able to take data that customers consume to drive proper value and differentiate them from the competitors is massively important.”

Due to the economic conditions of WA, Gilson said the state is heavily focused on cost benefits, creating opportunities for managed service providers (MSPs) through outsourcing.

“WA is a much smaller city compared to others so, getting talent can be an issue,” Gilson said. “Because of the economic down turn, people have been made redundant.

A lot of our graduates are also not looking at qualifications in IT, so it makes it more challenging.

“Because a lot of companies here can’t invest in their own resources, they need to look at other people doing it for them. Organisations that want to remove the cost of people internally within their organisations and give that to partners, that’s an opening in the market for us.”

To generate cost savings, Gilson said customers must assess wider business benefits and begin outside of the traditional box.

“For businesses in WA, you’ve got to think disruptively,” he said. “To be different in this marketplace, you’ve got to have a very different value proposition to customers.

“That involves the type of vendors that you work with, the type of services that you provide, and it also means that when you look at recommending solutions and delivering on them, you can rapidly mobilise them for customers to take advantage of.”

Naturally, Cirrus Networks still considers the mining and resources sector — including oil and gas — as a large part of the business. But in line with the slowing down of the industry, Gilson said partners are turning attention to other verticals and other states for new business opportunities.

For Gilson, the recent acquisitions of Amcom L7 solutions and NGage Technology Group has expanded the company’s reach outside of WA, into Canberra and Melbourne markets.

“In WA, the resources sector is slowing down but in other states, industries such as finance, agriculture, and other verticals are continuing to grow,” he said. “If we’re going to be able to provide value and offer value to customers, we’ve got to think very differently about how we’re going to do that.

“It’s very much around how we can provide solutions and services related to that for them to capitalise on value.” Looking back, rather than forward, WA enjoyed exceptional growth at a rapid rate, propelling the state into new levels of prosperity and progression.

This was a state riding the crest of the wave. Until recently however, with the mining boom over and gloom covering the otherwise sunny western skies.

But WA is not suffering a bust, with technology capable of providing a fresh pipeline for future growth.

“There are opportunities in the WA market,” Elliott added. “It just depends on where and how you look.”