Australian IT Innovation – tanked?

Our Australian economic leaders have potentially such a poor regard for Australian built Information Technology, from an investment perspective, that it appears that they believe there is little value in building a vibrant local Australian IT based innovation economy into the future.

In a recent article, by Renai LeMay on zdnet.com.au, the Reserve Bank of Australia Governor, Glenn Stevens argues that there would be little impact if the IT community tanked in Australia. We seem to be doing well as a country from an economic perspective with having an "IT deficit": in short that Australia was a good user of IT goods but did not produce many.

It’s an interesting observation, and reflective of the decline I’ve seen in local Australian IT innovation over the last decade. Was the .com era to blame for this? I’d say not as that was mainly a US phenomenon.

I’ve been fortunate recently to see a presentation by Professor Jerry Engel, visiting from the Bay Area in San Fransisco. That actually shows the growth in real dollar values through US Venture Capital investment into commercialising technology innovation. Whilst there was a significant drop post the .com bubble, it has still grown significantly post .com. Before the GFC four yearly aggregate growth appears to match the .com bubble. There has also been a decline in US VC investment post GFC but it still exceeds the pre .com era before the mid 90s. Overall the trend is still increasing if you take the long view.

  PricewaterhouseCoopers/National Venture Capital Association, MoneyTree™ Report, Data: Thomson Reuters, Total U.S. Investments by Year Q1 1995 - Q3 2010  

I’ve created the above graph with source data from PriceWaterhouseCoopers:
MoneyTree Report site. It includes 2009 and 2010 (1st three quarters).

I found some data for Australian Venture Capital technology investment from the AVCAL website , which suggests that there has been a 7% decline in investment to $187 Million AUD per annum. If I was to plot that Australian VC investments on the above US graph, I do not believe it would register. Conversely, if you use VC investment in Australia, recognising that only a proportion of it will be invested in Australian IT innovation, as an indicator of activity you could argue that it has already tanked.

The use of data and information within the economy continues to grow with storage one of the higher growth areas. I’d be surprised to find a single IT professional or executive that would disagree. But we here in Australia now possess poor skills to process it to benefit the economy. This is not only as intrapeneurs but as entrepreneurs as we seek to commercialize ideas.

Yet if we don’t commercialize the ideas here, someone in the US or elsewhere will. They will leverage that capital to multiple of returns far higher then what can be achieved through shipping raw commodities such as iron ore or copper to China or elsewhere.

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