Is Australia innovative?

Following a nationwide push for locally owned businesses at the dawn of the decade, there has been a rising atmosphere of nationalism in Australia. In efforts to support local jobs and businesses, even the simple, everyday task of supermarket shopping is now a deliberate effort, with home-grown brands proudly displaying badges that prove they call Australia home.

In the technology industry, however, even the most patriotic of consumers are turning to overseas produce. The mobile telephony sector is dominated by European behemoths such as Nokia of Finland and Ericsson of Sweden. For printers, there is no looking past the likes of Epson and Canon, which are both Japanese. And when it comes to software, two U.S. giants – Microsoft and Apple – continue to reign supreme.

Has Australia dropped out of the IT innovation race?

“In terms of technological innovation, I’m not quite sure if Australia is that innovative because we are so influenced by American technologies,” mused
Jean-Marc Annonier, IDC Australia’s research manager for IT Spending, Vertical Markets and SMEs.

“Especially now that everything regarding PCs, laptops and consumer devices are so commoditised, there is no way we can really create something that is innovative and bring it – with a competitive price – to market, when we’re competing with giants such as Microsoft and Apple, for example,” he said.

But while Australian technology may not play a major role in mainstream markets, the country’s hi-tech produce has certainly made an impact in verticals such as healthcare and mining. Annonier highlighted the example of Mincom, a Queensland-based software solutions provider that targets the mining, utilities, transport, defence, and government industries.

“In my opinion, Australian companies are very good at doing very specific, high-technology innovations,” he said. “Vertical-specific applications are probably the main forte of Australian companies.”

CSIRO executive Alex Zelinsky agrees. As a group chair of the organisation, as well as the director of its ICT Centre, Zelinsky said that the government-run organisation tends to focus on developments in autonomous systems, wireless technologies, network technologies, information engineering and e-health.

“Australia is a good niche global innovator in areas that it has competitive advantage,” he said.

Developing technology
In recent years, CSIRO scientists have produced medical imaging technology for modelling of plaque deposition in the brain of Alzheimer’s patients. The technology is expected to identify early warning signs of Alzheimer’s disease with the eventual aim of preventing, slowing down, or stopping disease progression.

The organisation is also credited with the development of the world’s largest outdoor simultaneous localisation and mapping technology, as well as a multigigabit link touted as the world’s fastest wireless connection with operational speeds of up to 6 gigabits per second.

Zelinsky attributes CSIRO’s innovative success to a combination of business partnerships and talent acquisition.

Similarly, Phil Robertson, chief operating officer of NICTA, considers talent to be one of the nation’s greatest innovative assets, and attributes many of the organisation’s innovative ideas to its highly educated researchers.

In addition to a strong educational basis, Australians also benefit from the country’s geographical positioning which, Robertson said, could promote a cultural awareness that is useful in an increasingly global market.

The pull of Australian scientists is so strong, in fact, that it is even drawing the interest of international corporations that are setting up research and development (R&D) laboratories in Australia.

Google’s 2006 launch of an R&D centre in Sydney is one example. The launch came after the company’s acquisition of its Google Maps technology from developers in Australia, and was expected to allow the search engine giant to attract talented computer scientists and engineers from within Australia and throughout the region.

Japanese IT and networking vendor NEC is another example of a multinational corporation looking for a share of Australian brainpower. The company maintains an R&D facility in Mulgrave, Victoria, which now functions as its global design and development centre for DSL and MSAN (Multiservice Access Node) broadband access products.

In addition to its Mulgrave facility, NEC also maintains an Australian Applications Centre, which was launched in December 2006 with an initial focus of taking technologies developed at other NEC R&D labs, and localising the services and offerings for the Australian market.

NEC employs a combined total of around 400 dedicated engineers and technical R&D staff across both practices.

According to John Del Papa, NEC Australia’s executive general manager of Telecommunications Network Systems, multinational corporations such as NEC are attracted to Australia for its globally competitive standard of technology and high calibre of researchers. An English-speaking, multicultural workforce, geographical closeness to Asia, as well as Australia’s economic and political stability were also mentioned as factors in NEC’s decision to invest in an Australian facility.

“The availability of skilled resources at globally competitive rates and a highly educated workforce were key to the decision to invest in R&D in Australia,” Del Papa said.

“The quality of our engineers, their broad skills base and the multi-language base were vital in choosing Mulgrave and Australia as our R&D base. The broad number of languages available in Melbourne means that we can undertake global programming and research far easier than many other parts of the world.

“This is an area that Australia should be extremely proud of,” he said.

As a Japanese company operating in Australia, NEC aims to leverage its multicultural workforce by using its Australian facility as a base for the development of multi-lingual input and display software for mobile phones. The facility has already developed Chinese, Japanese, Greek, Russian, Hebrew and Turkish modules in-house.

Using a team of 20 engineers, leaders and managers who speak a combined total of 14 languages, NEC Australia is currently working on integrating Japanese, English and Chinese character input software into its Linux-based mobile phone operating system.

U.S.-owned security software vendor CA is another multinational corporation that operates an R&D lab in Australia. The company’s security management lab in Melbourne is the second largest of its six major R&D centres worldwide, according to the company’s senior vice president of Development, Eugene Dozortsev.

The focus of the Melbourne R&D lab’s development is around identity management and directory technologies that underpin all of the products in CA’s identity and access management portfolio, thus constituting an important part of CA’s global IT security management products.

More than 40 international patents have been filed for directory technology, which has been entirely developed within Australia.

Like NEC’s Del Papa, CA’s Dozortsev mentioned cost benefits as well as the quality of Australian researchers as major factors in the company’s continued investment in its Melbourne facility.

“CA appreciates the quality of innovation and quality of staff that you can hire in Australia,” he said. “CA’s Melbourne lab has a strong delivery track of records.

“The CA Australian R&D team has also benefited from being in a lower cost development environment than its US and European counterparts, while having similar legal structures and culture.”

The human resource demands of Australia-based multinational corporations could only be contributing to the widely touted skills shortage in today’s IT industry. However, IDC’s Annonier views foreign investment in Australian researchers as a benefit to the nation.

“You do have multiple examples of global companies that are using Australia as a hub for research. The quality of scientists in Australia is very high, and there is a very good pool of innovation that is used by American companies.

“Of course, all these companies are owned by foreign entities, so most of the revenue goes back to these countries, [but] it’s at the benefit of the country for employment, and recognition by global companies that Australia is very good at producing high quality scientists.”

Bringing innovation to market
Of course, the processes of innovating new technology, and successfully bringing that technology to market, generate two different problems altogether. Annonier brought up the example of wireless technology that was patented by the CSIRO in 1993. In recent times, the technology has been the subject of legal disputes over its alleged use in the 802.11n wireless networking standard.

Although CSIRO’s lawsuit against companies such as Apple, Intel, Microsoft, Dell, HP and Netgear has been the subject of some controversy, Annonier bluntly described CSIRO’s wireless technology as having been “hijacked by U.S. markets”.

According to NICTA’s Robertson, however, taking Australian innovations overseas might be the best current method of bringing the new technologies to market. Robertson attributed the issue to a lack of Australian IT companies, which has resulted in what he called an “innovation system gap” between researchers and marketable technology.

“We call this the innovation system gap in ICT between the research side and the actual products and services, because we don’t have the companies who would normally take up university research based in Australia,” he said.

“I think this gap is the reason why a lot of Australian innovation hasn’t found its way into global products. Organisations such as NICTA were set up because of this gap, to try and set up more of that transition capability into the market for research.”

In an attempt to bridge the innovation system gap, the government-funded research institute employs a meticulous procedure in growing its developments from their initial, conceptual stages, to eventual commercialisation. NICTA’s focus, according to its online mission statement, involves a combination of research, commercialisation, education and collaboration, which Robertson expects will pave the way for transition of innovative concepts to the market.

Now approaching its sixth year in operation, NICTA employs around 350 staff from universities and the industry, and enrols around 300 students each year. Research in the organisation centres around four broad categories: embedded systems; network systems; making sense of data; and managing information technology.

NICTA has been credited for the development of technologies such as OKL4, which is an advanced microkernel and virtualisation technology that is now used by manufacturers such as Toshiba. The code allows users to run multiple operating systems, in user mode, on the same processor core, which dramatically reduces the amount of code in the development of subsystems.

The result of research work from NICTA’s Embedded, Real-time, and Operating Systems Research Program, OKL4 is now marketed by a spin-off company, Open Kernel Labs. While a bulk of its R&D work remains in Australia, Open Kernel Labs has established its worldwide headquarters in the U.S., from which its chief executive and marketing department operate.

“What we probably have to recognise is that in the ICT space, we don’t have a large number of existing technology companies that the U.S., Europe, Japan or Korea have, based on our own shores,” he said.

“Our challenge is to find a way to bridge that gap, to either work with offshore companies, or to build our
own spin outs.

“The reality is, it’s a global market for technology, and so it really depends on where the dominant market players are. We have several spin outs, and some of them will set up their head offices in the U.S. because that’s where the major customer companies are.”

Another recent NICTA development is the ANZA (Australia, New Zealand, and America) Technology Network, which aims to connect the three countries’ technology sectors for the export of innovation from burgeoning research organisations in Australia and
New Zealand, to the more mature U.S. market.

ANZA aims to connect innovative technology start-ups with executives, entrepreneurs and investors in the U.S. technology industry, as well as providing product analysis, legal advice and marketing support.

The export of Australian technologies due to a lack of local businesses is an issue that the government has been dealing with, Robertson said.

“I think we’re recognising that we’ve got a gap in this area,” he said. “We’ve talked with various people from government departments and political parties, and I think that they’re aware of it.”

“I think the reason for its [the government’s] strong support for NICTA is because of this awareness, and
I think this will continue.”

The Australian government’s support for NICTA reflects an industry demand for programs that link education and research facilities with both national and international businesses. Government support, according to NEC’s Del Papa, could be vital in keeping talented Australian researchers in the country, and focusing on strategic research to produce marketable products. “Government has a key role to play in ensuring Australia remains competitive in the global research market,” Del Papa said. “There is a real need for more government supported programs for the development of infrastructures.

“Closer links between industries and universities to enable collaborative research is also vital, especially in times of a national debate on the skills shortage in the country,” he said.

“It is important for federal and state governments to provide incentives to retain and/or attract talented researchers and engineers otherwise Australia is open to losing its best and smartest people to research facilities overseas.”

While CA’s Dozortsev agrees that government incentives for universities and companies are key to Australia’s continued innovative success, he also expressed a need to encourage high school students to pursue commonly overlooked subjects in science and engineering.

“One critical and overlooked group is Year 12 students,” Dozortsev said. “They are sometimes unaware that a bright, creative and exciting career awaits someone who chooses to do science, engineering or IT.

Such a career can reach the highest echelons of busin ss; CA’s own CEO trained as an engineer.”

“Recently the popularity of science- and computing-related courses diminished, which is related to some of the government policies in education.
To remain competitive as a country in the area of innovation the continuous investment in science and education should be made.”

Innovative opportunities
It may seem, to the casual consumer, that Australia is lagging behind in technological innovation. But according to Brian Prentice, research director of Emerging Trends and Technologies at Gartner Australia, a mainstream approach to innovation might be wrongly focused altogether.

“In terms of innovative strengths, I think there is a whole element of the IT discussion that we’re missing, because we often look at the industry itself,” he said. “We’re saying, what is it that Australians are innovating within the IT industry; so we look for providers and that type of stuff.”

While Australia lacks large businesses that produce, market, and own new technology, Prentice said that
the country’s innovative strength could lie in the application of imported technology. He used the Australian mining industry’s increasing use of automation and communication technologies as an example of local innovation.

Referencing a recent OECD report on patents and economic performance, Prentice said that up to 40 percent of R&D across all industries is expected to have a software-like outcome. The statistic reflects the increasing pervasion of applied technology – and, Prentice said, could be the future of the IT industry.

“Today, what we’re seeing is the ability of organisations to patent software, business processes or methods,” he said. “That means that without me having to become a software company, I could patent a certain method of doing business which comes from my innovation, and in turn license it to other organisations. I could even license it to a software vendor who could put that in their product and market it overseas, but it’s still my innovation.

“What will be interesting to see, is whether or not Australians start to understand what I would suggest is a changing dynamic in the way the IT industry is structured, in that you can now commercialise the value of some of these innovations without it being directly tied to your industry.”

The future of the IT industry is not without its challenges for the channel, Prentice said. As Australia’s cost advantages wane in comparison to developing markets such as India, Prentice expects a need for local resellers and system integrators to go beyond the traditional expertise and methodology offerings, and start thinking more about their intellectual property assets.

Along with a more product-oriented channel outlook comes the need to reconsider current business models and accounting structures, Prentice said. Describing recent conversations between himself and a number of resellers across the country, Prentice recommended that channel partners move away from traditional utilisation rates as an accounting metric.

“Services businesses tend to operate on utilisation rates, but when we start to think about more of an independent software environment, utilisation rates don’t really work,” he said. “You need to look at products, what you’re selling, how much you’re selling, and the margins you’re making.
“It’s a very tricky transition to make,” he said. “I’ve had conversations with numerous resellers around the country who are trying to make the transition away from just raw services to a product-centric type of business model. That will continue to accelerate and gain pace over the next two to three years.”