Ballarat Business Services Industry and Gap Analysis
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City of Ballarat FINAL REPORT Business Services Sector Capability and Gap Review December 2010
www.sedconsulting.com.au
November 2010
Ballarat Business Services Industry and Gap Analysis
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Disclaimer The Ballarat Business Services Sector Capability and Gap Review Report has been prepared specifically for the City of Ballarat as the client. The Ballarat Business Services Sector Analysis Report and its contents are not to be referred to, quoted or used by any party in any statement or application, other than the City of Ballarat, without written approval from SED Consulting. The information contained in this document has been derived from anecdotal evidence and research. It has been prepared in good faith and in conjunction with the City of Ballarat. Neither SED Consulting, nor its servants, consultants, agents or staff shall be responsible in any way whatsoever to any person in respect to the Report, including errors or omission therein, however caused. SED Consulting
International Standards Certifications Lic: QAC/R61/0760
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CONTENTS 1.
EXECUTIVE SUMMARY ................................................................................................... 6
2.
BACKGROUND ................................................................................................................. 8
3.
PROJECT OBJECTIVES................................................................................................... 8
4.
METHODOLOGY ............................................................................................................... 8
5.
BALLARAT BUSINESS SERVICES SECTOR OVERVIEW ............................................ 9
5.1
Definition ........................................................................................................................................................9
5.2
Key growth and emerging sectors in Ballarat .........................................................................................11
5.3
Occupations ...............................................................................................................................................12
6.
LITERATURE REVIEW ................................................................................................... 14
6.1
Literature review summary ........................................................................................................................15
6.2
Recommendations.....................................................................................................................................16
7.
INDUSTRY ANALYSIS .................................................................................................... 17
7.1
Economic analysis ......................................................................................................................................18
7.2
Recommendations.....................................................................................................................................32
7.3
Workforce analysis ......................................................................................................................................33
7.4
Recommendations.....................................................................................................................................45
7.5
Industry analysis ..........................................................................................................................................46
8.
CONSULTATIONS .......................................................................................................... 49
8.1
Consultation approach and model.........................................................................................................49
8.2
Demand side...............................................................................................................................................49
8.3
Supply side...................................................................................................................................................59
8.4
Recommendations.....................................................................................................................................67
9.
ROLE OF BALLARAT CITY COUNCIL .......................................................................... 68
9.1
Establish a strategic position in relation to industry development .......................................................68
9.2
Establish an appropriate governance model for the sector’s development.....................................69
9.3
Office accommodation and facilities .....................................................................................................70
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9.4
Build educational links ...............................................................................................................................70
9.5
Continue to work to attract a large PBS to the region ..........................................................................70
10.
APPENDIX A: PROJECT METHODOLOGY ................................................................. 71
11.
APPENDIX B: LITERATURE REVIEW .......................................................................... 72
12.
APPENDIX C: CONSULTATIONS LIST ......................................................................... 80
13. APPENDIX E: CAMBRIDGE UNIVERSITY PROFESSIONAL SERVICE FIRM COURSE .................................................................................................................................... 81 TABLES Table 1: Property and business services sub-sectors and key occupations (Ballarat) ...........................................10 Table 2: Finance and insurance services sub-sectors and key occupations (Ballarat)...........................................10 Table 3: Communication services sub-sectors and key occupations (Ballarat) ......................................................11 Table 4: Occupation definitions and contribution to Ballarat business services workforce .....................................13 Table 5: Literature review summary ........................................................................................................................16 Table 6: Output growth in business services sectors 2007-2010. ...........................................................................19 Table 7: Economic performance comparison of business services 2007-2010 ......................................................19 Table 8: Value of imports of business services by demand and supply sectors .....................................................23 Table 9: Total local spend by key purchase on 3 supply sectors ............................................................................24 Table 10: Economic analysis learnings and implications ........................................................................................32 Table 11: Workforce learnings and implications ......................................................................................................45 Table 12: Potential service gaps..............................................................................................................................57 Table 13: Consultation recommendations ...............................................................................................................68
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FIGURES Figure 1: Ballarat industry growth share matrix 2001-2006 ................................................................................11 Figure 2: Business services occupations in Ballarat ............................................................................................12 Figure 3: Output trends all sectors 2007-2010 .....................................................................................................18 Figure 4: Comparison of export as % of output all sectors 2007-2010 .............................................................21 Figure 5: Value of business services imported into Ballarat from Australia by sector....................................22 Figure 6: Output growth rate all sectors 2008-2010 - regional and state ........................................................25 Figure 7: Business services output growth in selected regions 2008-2010 .......................................................26 Figure 8: Value add analysis ................................................................................................................................27 Figure 9: Output analysis .......................................................................................................................................28 Figure 10: Business services contribution to regional economies by sectors..................................................29 Figure 11: Export as a % of output by key business services sectors across regional comparisons 2010 ....30 Figure 12: Employment all sectors 2001 - 2006 ...................................................................................................33 Figure 13: Comparison of employment for collective business services 2001-2006 ......................................34 Figure 14: Younger workforce profile - all sectors ..............................................................................................35 Figure 15: Workforce qualifications comparison across all industry sectors in Ballarat.................................36 Figure 16: Occupation comparison across all industry sectors in Ballarat .....................................................37 Figure 17: Male to female occupation comparison in business services sectors in Ballarat ........................38 Figure 18: Male to female age comparison ......................................................................................................39 Figure 19: Business services employment contribution by sectors across selected regions 2010 ................40 Figure 20: Business services age profile comparison .........................................................................................41 Figure 21: Regional comparison of business services qualifications ...............................................................42 Figure 22: Business services occupations comparisons: Ballarat, Bendigo and Geelong ............................43 Figure 23: PBS industry model ...............................................................................................................................49
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1. Executive Summary The Ballarat business services sector is a significant sector within the economy, contributing around 17% of local economic output. The sector has shown high rates of growth over recent years. There is some evidence that the sector is at or near full capacity, with exports declining as a percentage of output and imports increasing at a rate of almost double the sector’s growth rate. There is also sufficient evidence to suggest that many business service activities are imported due to the local sector not being sufficiently capable of meeting the demands of the market. The market is likely to continue to demand more sophisticated service provision. Whether the local market can respond to these changing requirements will be critical in determining whether the sector fulfils its potential. Despite the sector’s relatively young and well qualified workforce (both in its own right and compared to similar regional cities) there are pockets where ageing is an issue;
notably in the finance and
insurance sub-sector. Being able to access the older female skills market is an opportunity for the sector to introduce skills in the shorter term. Ensuring the continuation of an appropriately skilled and accessible workforce will be critical in ensuring the sector is in a position to continue to grow in both the near and longer term. The sectors’ economic contribution compares favourably with other major regional centres such as Bendigo and Geelong, with major service lines being locally accessible. However, compared to best practice benchmarks, if the sector can increase in size from its current 17% to 19%, output will increase by around $212m. Lifting economic value add to best practice benchmarks of $221.9k/employee from the current $203.3k/employee will increase economic output by a further $56.2m.
These represent
sizable opportunities for the sector and BCC. Key service gaps have been identified and include a broad range of opportunities. The most significant of these include higher end accounting, research and technical, higher end human resource management and recruitment, and a deepening of the skills supporting the construction and development industries (such as quantity surveyors, consulting engineers and architects).
Whether
these opportunities are seized depends entirely upon local firms acting to develop these markets or firms relocating to develop these markets. The literature review highlights the importance of the business services sector to regional economies and the trend towards niche service provision by business service firms. Underlying structural changes in ICT, newer business models, different approaches to skills acquisition and exporting of services are major drivers of change in the sector. The Ballarat sector is in a position to capitalise on these trends. Changes in key demand drivers such as increasing population, improved technologies and access to broadband, favourable Government (State and Federal) policies and a growing local economy all point to increasing demand for locally generated property and business services.
Improving the
marketing and relationship-building capabilities of the local industry will also result in increased sector
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output and capability development, and heighten the likelihood that the increased demand will be captured by local firms. The expected increase in demand needs to be serviced through improving the capability and capacity of the sector. The sector must become more sophisticated to continue to grow and develop export capabilities. Critical to achieving the necessary level of development will be to address the supply side requirements of the industry. This will ensure a pool of appropriately trained staff is accessible, facilities are developed that take advantage of the regions low cost advantages, relationships with the University, relocated Government departments and larger organisations within the region are leveraged, new technologies are available and the benefits they bring are appreciated by the sector.
Improving the linkages
between firms in the sector will also improve collaboration and promote new service offerings and capability development. Whilst much of the sector’s development must be driven by individual firms, the BCC has a key role to play in the development of the sector. Recommendations for the industry and BCC to consider are made throughout the report, with the following being specific to BCC: 1. Establishing a strategic position in relation to the industry’s development through increasing the output of the sector as a priority, developing the scientific, research and technical sector as a priority development and focussing on ICT and technology as the key enabler of the sector; 2. Establishing an appropriate governance model for the sector’s development; 3. Ensuring appropriate office accommodation and facilities are readily accessible without jeopardising the cost-related competitive advantage the region possesses in this area; 4. Building educational links to leverage a competitive strength the region possesses into a competitive advantage for the industry in relation to appropriateness and accessibility of skills and the size of the labour market; and 5. Continue to work to attract a large business service firm to the region
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2. Background The City of Ballarat commissioned the Ballarat Business Services Capability and Gap Review (BSCG) to help identify the growth and development issues and opportunities for the business services sector in Ballarat. The review of sector capabilities and gap analysis is also intended to help inform and support investment and skills attraction and development activities by key stakeholders.
3. Project objectives The main objectives of the BSCG are to: 1. Provide a clear definition of the business service sector in Ballarat; 2. Present clear information as to existing capabilities and major capability gaps; 3. Enhance Ballarat’s reputation as a business service centre through developing Ballarat’s regional role in business service provision; 4. Identify areas where business services could be used to further enhance innovation and business development within the Ballarat region; and 5. Provide recommendations for industry development aimed at reducing the current importation of business services and to attract entrants into the market. Consideration has been given to what barriers exist and comparative advantages Ballarat has as a business service centre, and what the City of Ballarat (Council) and other key stakeholders can do to enhance these advantages and reduce development barriers.
4. Methodology The process for developing the BSCG involved a structured methodology to ensure that final recommendations and considerations are evidence-based and take into account the economic environment and business characteristics of Ballarat. The methodology used included: 1. In-depth analysis of economic and workforce data using REMPlan economic modelling and other data sets, including ABS and ANZSIC, to establish sector and sub-sector trends and comparative sector profiles; 2. Review of local, national and international sector strategies and policies as well as Ballaratfocussed
strategic development documents to provide a picture of strategic thinking and
sector development opportunities from a broad perspective; 3. Consultations and interviews with representatives from a range of both supply and demand businesses and organisations to identify key issues, opportunities and potential responses for the BSCG; 4. Assessment of current and potential supply and value chains of the business services sectors and determination of key supply chain factors and their influence on potential sector growth; December 2010 S:\SED - Ballarat\Projects\OPEN\Regional Development\City of Ballarat\Ballarat Business services\Reports\111110_BCC_Gap Review_FINAL report.doc
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5. Identification of sector gaps and capabilities and responses to address gaps and build on capabilities; and 6. Development of final recommendations. The project methodology framework is provided in Appendix A: Project methodology.
5. Ballarat business services sector overview The business services sector in Ballarat is an integral part of the regional economy, providing a range of professional, expert and general services and products to all parts of the economy and community. As a major regional centre in western Victoria, Ballarat-based business and industry service a wide catchment area and the city is a major regional hub for health, education and government services. The Ballarat Economic Strategy 2010-2014 (EDS2010) describes business services as being on a growth trajectory (jobs growth predicted +2.2%/annum) and being of high value to the Ballarat economy. This sector is predicted to make an important contribution to Ballarat’s vision of becoming ‘Australia’s premier high tech and knowledge based regional economy’(pg 15). The business services sector is an identified a priority sector for Ballarat. 5.1
Definition
A review of Council REMPlan data was completed to identify the key sectors for the purpose of this project. REMPlan data uses 1993 Australia New Zealand Standard Industry Codes (ANZSIC) codes which have been replaced with revised industry codes by ABS in 2006. In order to maintain consistency and enable economic modelling to be undertaken using REMPlan, the BSCG has defined the supply sectors using 1993 ANZSIC1 information, which demonstrates three primary supply business services sectors and associated sub-sectors, namely: 5.1.1
Property and Business Services:
Includes all units predominantly engaged in renting and leasing assets as well as units engaged in providing a wide variety of business services.
Other property services
Legal, accounting, marketing and business management services
Commercial property operators and developers Real estate agents Non-financial asset investors Motor vehicle hiring Other transport equipment leasing Plant hiring or leasing Legal Accounting Advertising Commercial art and display services Market research Business administrative services Business management services
Sales workers Clerical and administration. Managers
Professionals Clerical and administrative workers Managers
1 http://www.abs.gov.au/ausstats/abs@.nsf/7d12b0f6763c78caca257061001cc588/e05f0987cd26abf0ca257122001ac9bc!OpenDocument
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Scientific research, technical and computer services
Other business services
Scientific research Architectural services Surveying services Consulting engineering Technical services Data processing services Information storage and retrieval Computer maintenance Computer consultancy Employment placement services Contract staff services Secretarial services Security and investigative services (except police) Pest control Cleaning services Contract packing services Business services
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Professionals Technicians and trades workers Clerical and administrative workers
Labourers Clerical and administrative workers Professionals
Table 1: Property and business services sub-sectors and key occupations (Ballarat)
5.1.2
Finance and Insurance:
Includes all units mainly engaged in the provision of finance, in investing money in predominantly financial assets, in providing services to lenders, borrowers and investors, in providing insurance cover of all types, and in providing services to insurance underwriters and to people or organisations seeking insurance including:
Services to finance, investment and insurance
Banking
Insurance
Non-bank-finance
Financial asset broking services Services to finance, investment and insurance Services to insurance Central bank Banks Life insurance Superannuation funds Health insurance General insurance Building societies Credit unions Money market dealers Deposit taking financiers Other financiers Financial asset investors
Professionals Clerical and administrative workers Managers Clerical and administrative workers Managers Professionals Clerical and administrative workers Sales workers Professionals Clerical and administrative workers Professionals Managers
Table 2: Finance and insurance services sub-sectors and key occupations (Ballarat)
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5.1.3
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Communication Services
Includes all units mainly engaged in providing postal, courier and telecommunication services. Postal services Courier services
Clerical and administrative workers Technicians and trades workers Sales workers
Communication services Telecommunication Table 3: Communication services sub-sectors and key occupations (Ballarat)
5.2
Key growth and emerging sectors in Ballarat
The EDS2010 presents an industry growth and specialisation matrix which identifies the expanding, emerging, transforming or transitioning industry sectors in the Ballarat economy. The matrix uses two measures, namely the share of jobs in Ballarat relative to the share of jobs in Victoria, and the growth in jobs by sector between 2001 and 2006.
As shown in Figure 1, property and business services and
finance and insurance are in the emerging stage quadrant and communication services in the high growth, regionally significant quadrant.
Figure 1: Ballarat industry growth share matrix 2001-2006
Source: City of Ballarat Economic Strategy 2010-2014 pg 6
Emerging stage businesses are described as having a higher than average employment growth rate but a current lower concentration of jobs. Expanding businesses are described as also having a higher than average employment growth rate but high specialisation and/or workforce numbers. This report has reviewed the property and business services, finance and insurance and communications services sectors and sub-sectors. The report aims to lay the necessary foundations and provide the necessary information to develop these sectors and therefore move these sub-sectors up and to the right in the growth share matrix.
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5.3
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Occupations
Definitions of occupations have been developed using the Australian and New Zealand Standard Classification of Occupations (ANZSCO) and associated workforce profile data from REMPlan.
A
detailed analysis of the workforce profile of the business services sector is contained in Section 7.3. As can be seen in Figure 2, the main occupations in business services in Ballarat are clerical and administrative workers and professionals; collectively comprising 62.7% of the sector’s workforce.
Figure 2: Business services occupations in Ballarat
The following table provides the definitions of each main occupation category under ANZSCO. Occupation
% of sector workforce
Definition
Sub-groups
Clerical and administrative workers
Provide support to Managers, Professionals and organisations by organising, storing, manipulating and retrieving information.
Office Managers and Program Administrators. Personal Assistants and Secretaries. General Clerical Workers. Inquiry Clerks and Receptionists. Numerical Clerks. Clerical and Office Support Workers. Other Clerical and Administrative Workers.
36.3%
Professionals
Perform analytical, conceptual and creative tasks through the application of theoretical knowledge and experience in the fields of the arts, media, business, design, engineering, the physical and life sciences, transport, education, health, information and communication technology, the law, social sciences and social welfare.
Arts and Media Professionals. Business, Human Resource and Marketing Professionals. Design, Engineering, Science and Transport Professionals. Education Professionals. Health Professionals. ICT Professionals. Legal, Social and Welfare Professionals.
26.4%
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% of sector workforce
Occupation
Definition
Sub-groups
Technicians and trades workers
Perform a variety of skilled tasks, applying broad or in-depth technical, trade or industry specific knowledge, often in support of scientific, engineering, building and manufacturing activities.
Engineering, ICT and Science Technicians. Automotive and Engineering Trades Workers. Construction Trades Workers. Electro technology and Telecommunications Trades Workers. Food Trades Workers. Skilled Animal and Horticultural Workers. Other Technicians and Trades Workers.
10.5%
Chief Executives, General Managers and Legislators. Farmers and Farm Managers. Specialist Managers. Hospitality, Retail and Service Managers.
8.8%
Sales Representatives and Agents. Sales Assistants and Salespersons. Sales Support Workers.
7.5%
Cleaners and Laundry Workers. Construction and Mining Labourers. Factory Process Workers. Farm, Forestry and Garden Workers. Food Preparation Assistants. Other Labourers.
6.5%
Health and Welfare Support Workers. Carers and Aides. Hospitality Workers. Protective Service Workers. Sports and Personal Service Workers.
2.1%
Managers
Sales workers
Labourers
Community and personal service workers
Machinery operators and drivers
Plan, organise, direct, control, coordinate and review the operations of government, commercial, agricultural, industrial, non-profit and other organisations, and departments. Sell goods, services and property, and provide sales support in areas such as operating cash registers and displaying and demonstrating goods. Perform a variety of routine and repetitive physical tasks using hand and power tools, and machines either as an individual or as part of a team assisting more skilled workers such as Trades Workers, and Machinery Operators and Drivers. Assist Health Professionals in the provision of patient care, provide information and support on a range of social welfare matters, and provide other services in the areas of aged care and childcare, education support, hospitality, defence, policing and emergency services, security, travel and tourism, fitness, sports and personal services. Operate machines, plant, vehicles and other equipment to perform a range of agricultural, manufacturing and construction functions, move materials, and transport passengers and freight.
Machine and Stationary Plant Operators. Mobile Plant Operators. Road and Rail Drivers. Storepersons.
1%
Table 4: Occupation definitions and contribution to Ballarat business services workforce
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6. Literature review As part of the situation analysis for the BSCG review project for the City of Ballarat, a desk top review was completed of key policy, strategy and development strategies related to business services. A summary of findings is provided here, with a more detailed analysis provided in Appendix B: Literature review, which provides a list of documents reviewed and other sources used for the development of the BSCG. The literature review revealed a range of accepted and potential trends within the business services sector and how and to whom those services are provided. The imperative of identifying emerging market opportunities and the sector being positioned to respond to those opportunities are seen as key success factors for business services over the medium term.
The UK’s West Midlands Business and
Professional Services Cluster 3 Year Plan 2008-2011 states that the cluster will ‘identify and focus on particular strengths in its existing markets. In addition a number of target emerging markets are proposed’ (pg 8). This direction is in response to the recognition that although the West Midlands region has strength in professional services, ‘it does not have a distinctive reputation in any particular area, nor any evident unique points’ (pg 3). In many ways, the same could be said of the sector in Ballarat. The literature describes market opportunities as being changes in global financial regulations and structures, globalised foreign investment, carbon trading and reporting, professional services needs of an ageing population, more complex e-commerce and knowledge management.
Each of these
opportunities is equally relevant to the Ballarat and broader market. The need to identify and pursue export markets by the sector are priority directions in a number of strategies. The reliance on local economies by the business services sector may reduce the capacity of businesses to increase expertise, raise productivity and value-add, and for regions to attract investment and skilled workers. Export-orientated firms are generally regarded as being more innovative, creating higher value employment and services and more focussed on building expertise. These factors can greatly contribute to increased value-add within a business and / or industry sector generating higher levels of economic performance. There is recognition that higher levels of expertise, skills, marketing and collaboration will be needed to achieve a competitive market position.
Moreover, these elements are prerequisites for a high
performing business services industry to develop critical mass. The importance of brand and reputation from regional, local and individual business perspectives are also seen as important components of sector development.
A strong brand/reputation should support both the capture of market
opportunities and also create avenues for increasing service provision to existing clients. Technology, ICT and IT systems are viewed as critical supporters and drivers of business service delivery and market development. Technology itself will not provide a skills or expertise solution, but will allow for more complex knowledge management, information flows and faster transactions.
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It is anticipated that technology will increasingly integrate services and products between the business sector and clients and will be able to provide tailored technology solutions. As more businesses divest themselves of internal management of technology systems and processes, it is anticipated that cloud computing (internet-based computing where shared resources, software and information are provided on demand) will also create new development partnerships between business users and ICT providers. Ballarat’s strong ICT sector provides a strong base from which opportunities of this kind could be exploited by the local business services sector. Developing high level capabilities within the sector through both the attraction of skilled professionals and greater collaboration between businesses is a common theme. Ballarat has a strong industry, business and education framework upon which to build business services cluster activity.
6.1
Literature review summary
Key learning Regional
Implication
economies
are
increasingly
recognising the importance of business services and developing strategic responses to encourage sector growth and grow market share.
The development of the BSCG is a timely opportunity for Ballarat to define its current and potential positioning as a business services centre. As part of this process, it will be important for key stakeholders to be actively engaged in the development of the sector.
Identification or the development of niche
Ballarat does not have a strong brand or profile as a
expertise will assist Ballarat’s positioning as a
business services sector. Identification and marketing
business
for
of core capabilities will assist the capture of new
targeted investment attraction that builds
markets for businesses and create a focus for targeted
on identified business services strengths.
investment attraction that aligns to market strengths.
Export market opportunities are seen as
If the industry wishes to increase export market share, it
growth opportunities for business services
will need to identify existing or potential niche
and this can be a strategic development
expertise
opportunity for Ballarat businesses.
Collaboration and skills sharing may need to be
services
sector
and
allow
that
align
to
identified
opportunities.
fostered. The business services sector needs to improve
The City of Ballarat can play a key role in developing an
how it communicates and markets itself.
In
evidence-based marketing strategy for the business
particular, improved marketing of service
services sector that would support and encourage
value-add to clients can help to mitigate
individual business marketing activities and promote
threats
Ballarat as a business services investment location.
from
‘distance-based’
service
providers and strengthen customer relations.
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Key learning
Implication
Structural changes are expected to occur
Technology systems and delivery structures are expected
within the ICT sector as businesses seek new
to be key drivers of business growth. This will need to be
ICT
information
supported by increased collaboration and partnerships
management services and systems that assist
between the technology and business services sectors to
productivity gains.
ensure that technology-based service delivery outcomes
service
provision,
are responsive to the needs of the business services sector
and
their
clients.
Leveraging
ICT
Ballarat’s
knowledge into the local business services sector will be needed if growth based on a technology platform is to be achieved. The
development
capability mechanism
based for
of
industry
clusters
supporting
is
or
Key stakeholders such as the Council, the University,
strategic
business services providers and industry organisations
and a
/
sector growth.
should
commence
a
strategic
process
for
the
Clusters provide a platform for encouraging
development of a Ballarat business services cluster
collaboration across sector supply chains,
framework.
creating physical and virtual linkages and enhancing skills and innovation. Table 5: Literature review summary
6.2
Recommendations
A business services reference group should be convened with key stakeholders to support the implementation of the BSCG. The City of Ballarat, in partnership with the key stakeholders, should develop a Ballarat business services brand and marketing strategy based on identified growth sector strengths to encourage internal and external investment and support skilled workforce attraction and retention. Export market entry facilitation and assistance should be provided to companies that wish to pursue export markets. Consideration should be given to a positive transition program (that is, on focussing on high performance business rather than underperforming or mature businesses) for business services that exhibit the desire and possess the capabilities to become high value – added service providers. Ballarat ICT Ltd can play a strategic role in developing linkages between business services and the local ICT sector, including improved understanding of technology systems and frameworks that provide value to business services activity. Development of business service cluster models in Ballarat to assist with the capacity development of the sector should be progressed by key stakeholders.
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7. Industry analysis REMPlan data was used to determine the economic value, structures and workforce profile of the business services sectors in Ballarat. As described previously, three key sectors under ANZSIC coding were analysed, namely: Property and business services: o
Other property services;
o
Legal, accounting, marketing and business management services;
o
Scientific research, technical and computer services;
o
Other business services;
Finance and insurance: o
Services to finance, investment and insurances;
o
Banking;
o
Insurance;
o
Non-bank finance; and
Communication services, which includes postal, courier and telecommunication services.
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7.1
Economic analysis
7.1.1
Ballarat profile
Property and business services: Creates over $1bn in output (9.7% of the Ballarat economy); Second most important output contributor in the Ballarat economy; Output has grown by $387.5m over the past 3 years; Finance and insurance is worth $420.5m (3.7%); Communication services $406.1m (3.6%); Total output of the Ballarat economy is $11.4bn; and Total output value of the business services sectors to the Ballarat economy is $1.9bn or 16.6% of Ballarat economic output.
Figure 3: Output trends all sectors 2007-2010
November 2010
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Ballarat Business Services Industry and Gap Analysis
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Table 6 shows the growth in business services sub-sectors output since 2007. Significant growth has been witnessed across all major subsectors. These sectors start to emerge as competitive strengths of the Ballarat economy. Industry Sector
Apr 2007 $M
May 2010 $M
Growth %
Scientific research, technical and computer services
112.7
244.9
117.3%
Insurance
56.6
103.7
83.2%
Communication services
244.4
406.1
66.2%
Services to finance, investment and insurance
83.3
133.2
60.0%
Legal, accounting, marketing and business management services
188.5
288.2
53.0%
Banking
114.8
164.7
43.5%
Other property services
261.7
367.0
40.0%
Other business services
156.5
206.8
32.1%
Non-bank finance
14.9
18.8
26.2%
$1,233.4
$1,933.4
56.6%
Total Table 6: Output growth in business services sectors 2007-2010.
It should be noted that although output is a measure of a sector’s performance, the output data available does not allow for analysis as to whether this revenue growth is based on increased productivity, increased volumes and/or higher-end prices. The following table shows the performance of the
Business services
combined business services sectors compared to the wider Ballarat economy between 2007 and 2010. Total output
Jobs (persons)
Wages salaries
Local sales
Regional exports
Local expenditure
Regional imports
Value add
2007 ($M)
1,233
3,792
316.6
$735.3
257.1
471.0
149.1
613.4
2010 ($M)
1,933
4,652
500.9
$1,307
244.8
686.8
301.1
945.6
700
860
184.3
571.7
-12.3
215.8
152
332.2
% change
56.8%
18.5%
58.0%
77.8%
-4.8%
45.8%
102%
54.2%
Ballarat economy
44.6%
12.3%
61.3%
26.5%
61.3%
25.6%
48.6%
Variance $M
47.2%
Table 7: Economic performance comparison of business services 2007-2010
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Ballarat Business Services Industry and Gap Analysis
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The business service sector in Ballarat has performed well compared to Ballarat averages and has demonstrated a high degree of resilience over the period of the global financial crisis, an event to which it would be expected to be directly and unfavourably exposed. Against this positive it should be noted that: Export activity has fallen slightly (5%); Regional imports by the sector have also grown significantly (102%) above average, potentially indicating lack of supply and / or capability for required services and products by the sector in Ballarat; and Total demand for businesses services within the local economy totalled $1.98bn, compared to total supply for services provided by the local industry to within and outside Ballarat totalling $1.93bn. Even if there were no export or imports of business services, local demand exceeds local supply by $56m. Other business services include companies involved in employment services, secretarial, security, cleaning, contract packaging and auctioneers and valuation services. It can be surmised that these businesses would have been more greatly affected than others by the GFC and general tightening within the economy. The effects of the GFC would also be expected to have impacted upon the non-bank finance sector.
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Ballarat Business Services Industry and Gap Analysis
7.1.2
Page 21 of 81
Regional exports
Regional exports represent only 12.7% of total business services sector output. A comparison of export to output % across all sectors is provided in Figure 4. Local sales by the business services sectors of $1.3bn in 2010 indicates that business services are highly reliant on (or serve) the local economy. While this is not unhealthy in itself, it does prima facie indicate a significant opportunity for growth in the sector.
2010 average export to output %: 34.9%
Significant declines in export activity were evidenced in other property services, other business services and nonbank finance, whilst the other sectors generally showed good growth, particularly communication services, insurance and banking. The decline in the export data is contradictory to the growth exhibited across the sector generally. This indicates that perhaps the reasons for the decline are not demand conditions, but rather supply-related conditions. The significant increase in imports (refer 7.1.3) provides further evidence that supply-related issues are contributing to the decline in exports.
Figure 4: Comparison of export as % of output all sectors 2007-2010
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Ballarat Business Services Industry and Gap Analysis
7.1.3
Page 22 of 81
Regional imports
In 2010, over $372m of business services were imported into Ballarat from the rest of Australia (as shown in Figure 5). The data shows that 15% of the total property and business services sector in Ballarat is serviced through imported services. Other major importers of business services include the manufacturing, retail and construction sectors. The key services imported are legal, accounting, marketing and business management services ($101m) and other business services ($76.2m). The main importers of these 2 sub-sectors are again the business services, manufacturing, retail and construction sectors. The amount ($301m) of imported business services and the rate of growth (102%) in this figure indicate significant opportunities for import replacement. There are opportunities across all sub-sectors within the business services sector and within all major industries to reduce imports.
Figure 5: Value of business services imported into Ballarat from Australia by sector
The following table provides a breakdown of business services imported into Ballarat by demand and supply sectors:
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Ballarat Business Services Industry and Gap Analysis
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Supply sectors $M (imports)
Opportunity for import replacement. Imports >$5m per annum
Legal, accounting, marketing & business managemen t
Other business services
Other property services
Scientific research, technical & computer
Services to finance, investment & insurance
Banking
Non-bank finance
Insurance
Communicat ion services
Total ($M)
Property and business services
19.59
15.65
16.62
9.55
0.74
5.70
6.74
3.19
0.06
$77.83
Manufacturing
15.96
20.81
6.87
5.91
0.63
2.56
3.96
4.88
0.04
$61.61
Retail trade
17.34
10.66
3.89
0.48
0.34
3.42
2.35
2.52
0.06
$41.06
Construction
9.28
5.47
4.85
2.19
6.15
1.69
2.31
3.97
0.02
$35.92
Finance and insurance
3.43
1.60
0.78
0.48
23.53
2.79
2.14
0.44
0.01
$35.20
Wholesale trade
8.49
3.47
5.24
0.90
0.37
2.22
2.06
1.82
0.03
$24.59
Government admin and defence
4.10
2.11
0.53
2.35
2.89
1.13
1.26
0.29
0.03
$14.68
Cultural and recreational services
4.02
3.68
2.03
0.34
0.18
1.20
1.04
1.60
0.02
$14.11
Health and community services
4.04
3.44
0.51
0.25
0.25
2.55
1.01
0.71
0.02
$12.78
Transport and storage
4.35
1.78
1.95
1.33
0.11
0.84
1.13
0.56
0.02
$12.06
Communication services
1.75
1.66
4.05
0.77
0.43
1.15
1.08
0.58
0.02
$11.49
Accom, cafes and restaurants
2.85
1.68
1.71
0.39
0.12
0.61
0.82
1.30
0.01
$9.47
Electricity, gas and water
2.08
0.60
0.21
0.15
0.16
2.10
1.36
0.03
0.01
$6.68
Education
1.28
1.10
0.27
0.28
0.13
1.70
0.61
0.10
0.02
$5.48
Personal and other services
1.20
1.77
0.31
0.34
0.08
0.38
0.35
0.19
0.01
$4.63
Mining
0.78
0.65
0.16
1.34
0.21
0.36
0.30
0.17
0.00
$3.97
Agriculture, forestry, fishing
0.39
0.03
0.11
0.06
0.07
0.35
0.20
0.11
0.00
$1.31
$100.92
$76.15
$50.05
$27.07
$36.39
$30.73
$28.70
$22.47
$0.37
$372.85
Demand sector (purchasers)
Total ($M)
Table 8: Value of imports of business services by demand and supply sectors
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A review of REMPlan data was undertaken to determine the key sectors that purchase business services from within the local economy. The business services sectors sell a total of $1,307m of services within the local economy. For 2010, the key purchase sectors of business services within the Ballarat economy are presented in Table 9. Key purchase sectors
Local spend on local business services($M)
Property & business services
297.2
Manufacturing
201.8
Retail trade
133.2
Construction
116.5
Communication services
106.1
Wholesale trade
92.8
Government administration and defence
58.5
Other
301.0
Total
$1,307.0
Table 9: Total local spend by key purchase on 3 supply sectors
The data indicates the property and business services sector is the largest purchaser of collective business services within the local economy followed by manufacturing, retail and construction. 7.1.4
Regional comparisons
Using REMPlan data for Ballarat, Bendigo, Geelong, non-metro Victoria and all of Victoria, a wider comparison of some key economic performance indicators was completed. It should noted that the data available across all these regions covers the period 2008 – 2010, unlike the Ballarat-specific data whereby information from 2007 was available.
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Figure 6 shows a comparison of output growth rates across all sectors for 2008-2010. The Ballarat economy has performed on par with all selected regions at 18.7%, apart from Geelong where output has grown by 23.7%.
Figure 6: Output growth rate all sectors 2008-2010 - regional and state
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Output growth within the business services sector (Figure 7) shows consistent performance by regions, with a noticeable increase in output by the insurance sector. Non-bank finance suffered on average a 26% decline over this period which can be attributed to the GFC.
Figure 7: Business services output growth in selected regions 2008-2010
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Ballarat Business Services Industry and Gap Analysis
Figure 8 shows an analysis of value added per employee; the Ballarat sector is below the non-metro average and also behind Bendigo, but ahead of Geelong.
There is opportunity to improve value add / employee as a metric and, therefore, the contribution to the local economy by $86.5m, if Ballarat was to be able to increase value add / employee to $221.9k as achieved by Bendigo (from Ballarat’s $203.3k). This will only be achieved if Ballarat develops a critical mass at the higher end of the PBS market.
Value Add Analysis - Property and business service industries 230,000 225,000 Value add / employee
This reaffirms that much of Ballarat’s business services sector is generalist, with a gap in the higher end of the business services market. The impact of the Bendigo bank, Rural Finance and Bendigo Telco are also evident in these figures, with Ballarat’s finance and insurance and communications sub-sectors have value add / employee significantly below Bendigo. However, the property and business services sub-sector has a higher value add than Bendigo, but below Geelong.
Page 27 of 81
220,000 215,000
Ballarat Geelong Bendigo Non Metro
210,000 205,000 200,000 195,000 10.0%
12.0%
14.0%
16.0% % of output
Figure 8: Value add analysis
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18.0%
20.0%
Ballarat Business Services Industry and Gap Analysis
Figure 9 demonstrates that compared to other similar regional centres, Ballarat’s output per employee in the business services industry is significantly above Geelong and the non-metro average, and the business services sector makes a more substantial contribution to output.
Page 28 of 81
Output Analysis - Property and business service industries 430,000
Ballarat
Against Bendigo, however, the sector makes a smaller contribution to total output and has lower output per employee.
425,000
Given the undoubted impact that Bendigo Bank, Rural Finance and the Bendigo Telco have on the local PBS in Bendigo, it is reasonable to note that the Ballarat sector performs well in relation to other comparable locations.
420,000
Geelong Bendigo Non Metro
415,000
The analysis does further highlight: 1.
2.
The benefits that a significant business services firm (or sub-sector) can bring to a region. If Ballarat was to grow its business services sector to the same relative size that Bendigo has achieved (18.9%), it would be worth an additional $212m in economic output. It is unlikely such growth could be achieved without a major firm locating to Ballarat That the Ballarat business services sector can improve output per employee as a performance metric. Increasing output / employee to Bendigo’s level ($423k) would increase the local economy by $27.5m per annum.
410,000 405,000 400,000 10.0%
12.0%
14.0%
% of output
16.0%
Figure 9: Output analysis
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18.0%
20.0%
Ballarat Business Services Industry and Gap Analysis
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An analysis of the contribution made by business services sectors within regional Victoria, as presented in Figure 10, shows that Ballarat has strong economic activity across most sectors and particularly in other property services, scientific research, technical and computer services, services to finance, investment and insurance, and insurance. The relative size of Ballarat’s technical and scientific services sub-sector highlights the importance of the University and also presents as a competitive advantage for Ballarat, in much the same way as banking does for Bendigo. Bendigo demonstrates strong economic activity in communication services, legal, accounting, marketing and business management, and is also very strong in banking, largely due to the presence of the Bendigo Bank, Rural Finance and the Bendigo Telco. This banking strength will undoubtedly have positive economic flow-on benefits and linkages into other business services sectors for Bendigo. On balance, Ballarat business services’ output compares favourably within the selected regions with no major or obvious service gaps. The analysis highlights the impact a major organisation can have on the local economy. Figure 10: Business services contribution to regional economies by sectors
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Bendigo has strong export activity within communication services and finance and insurance This can be attributed to the presence of some major companies and organisations within these sectors. Ballarat’s export activity is also strong in communication services and shows overall parity with the other selected sectors and regions, as seen in Figure 11. The analysis shows that there is prima facie room to grow through export sectors in legal, accounting, marketing, business management, scientific research and other business services.
Figure 11: Export as a % of output by key business services sectors across regional comparisons 2010
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Ballarat Business Services Industry and Gap Analysis
7.1.5
Page 31 of 81
Economic analysis summary
Key learning
Implications
Business services sector output growth has been
REMPlan data analysis would suggest that
greater than the average rate for the Ballarat
Ballarat has competitive strengths in these key
economy as a whole. Particularly strong growth has
sub-sectors and they should form the basis for
been witnessed in the sub-sectors of scientific
developing a sector brand and supporting
research,
services,
marketing strategy to attract skills and new
insurance, communication services, services to
investment that complement and value-add to
finance and legal, accounting, marketing and
these sectors.
technical
and
computer
business management services. Ballarat business services sector output contribution
Ballarat can regard itself as an important
to
regional business centre that can use this profile
the
economy
compares
favourably
with
selected comparison regions with areas of evident
to attract new investment.
It can be seen,
strengths.
however, that developing specific capability and investment such as banking in Bendigo can deliver significant positive economic benefits.
Exports by the business services represent just 12.7%
The collective business services sector is highly
of output, well below Ballarat’s overall industry
reliant upon the local economy which presents
average of 34.9%, although only 3 of the presented
some risk to the sector from vagaries within
15
local economic performance.
industry
sectors
percentage average.
in
Ballarat
exceed
this
In addition, the business
In addition, it
would appear the sector has not developed a
services sector sells 67.7% of its products and
strong
export
capability
or
has
services within the local economy compared to
sought/secured export market opportunities.
not
Ballarat’s overall industry average of 31.3%. The Ballarat business services sector imports just over
If all sectors in the Ballarat economy replaced
$300m of products and services from outside the
just 10% of externally sourced business services,
Ballarat economy with the main products / services
this would equate to the creation of 226 jobs
purchased from property and business services,
and an increase in overall output of $66m within
manufacturing and finance and insurance.
Ballarat economy. Of this, within the business
The Ballarat economy imports over $370m of business services with property and business services
services sectors in Ballarat, there would be an additional 53 jobs created and an increase in output of $22.3m.
being the main import at $77.9m.
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Ballarat Business Services Industry and Gap Analysis
Page 32 of 81
Key learning
Implications
Ballarat’s business services sector ranks quite well
The Ballarat business services sector can grow
against other comparable regional economies in
through improving both its size as percentage
terms of the size of the sectors and also its value
of the total economy and also the value
add. Improving the underlying performance of the
added. Achieving best practice in this area will
sector to best practice levels can potentially
require
increase the output of the sector by over $239m
development of a competitive advantage in a
and the value add by $86m.
particular sub-sector with high end skills and an
a
large
firm
to
relocate,
the
improvement in the general capability of the sector. Table 10: Economic analysis learnings and implications
7.2
Recommendations
Growth capacity should be regularly monitored to help create a growth ready, development environment for existing and potential businesses. Sectors that make a high contribution to economic activity should be leveraged as competitive strengths for investment attraction activities. Opportunities to increase export activities need to be encouraged and fostered within the business services sector and include utilisation of technologies, skills development, regional collaboration and identification of high value, niche markets. Greater awareness of local expertise and experience within the local business services sector by other industry sectors in Ballarat may assist with import replacement targets.
In addition, attraction of
externally-based businesses currently providing products / services into Ballarat should be a focus of economic development activity by Council and other key stakeholders. Further consideration should be given to developing the scientific and technical services sub-sector as a central plank of the development of the business services sector more broadly. This sector has both export appeal and with the University located in the region, together with immediate opportunities to develop markets within the broader region, this sub-sector appears to have a competitive advantage that can be leveraged.
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Ballarat Business Services Industry and Gap Analysis
7.3
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Workforce analysis 7.3.1
Ballarat profile
Figure 12 demonstrates that the 3 business services sectors have experienced employment growth between 2001 and 2006: Property and business services sector has grown from 2,375 persons to 2,998 ( 26.2%); Finance and insurance from 785 to 856 ( 9%); Communication services from 632 to 798 persons ( 26.3%) The average employment growth rate across all sectors is 12.3%.
Figure 12: Employment all sectors 2001 - 2006
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Ballarat Business Services Industry and Gap Analysis
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Figure 13 shows a comparison of employment growth of collective business services: Scientific research, technical and computer services showing the largest growth rate at 59.7%. The business services sectors employ 4,652 people and showed an overall growth rate of 22.7% between 2001 and 2006. Should this employment growth trend continue it can be estimated that 5,700 people will be employed in the business services sectors by 2011, 7000 people by 2016 and 8,600 by 2021.
Figure 13: Comparison of employment for collective business services 2001-2006
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Figure 14 demonstrates that: The business services sector has a generally younger age profile; this places the sector in a relatively positive position to manage an ageing workforce.
Average of workforce aged under 44: 62%
The finance and insurance sector, however, presents an older workforce profile of the 3 sectors; this may present skills and workforce capacity issues for the sector unless this issue is proactively addressed.
Figure 14: Younger workforce profile - all sectors
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Figure 15 shows that: Across the Ballarat workforce, some 56% of the property and business services workforce has a nonschool qualification. 41% of the finance and insurance and communication services workforce has a formal qualification. This indicates that there is significant capacity within these sectors to increase the existing skills base within the workforce.
Figure 15: Workforce qualifications comparison across all industry sectors in Ballarat
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An analysis of occupations within the Ballarat workforce presented in Figure 16 demonstrates that: Finance and insurance and communication services have higher levels of clerical and administration staff than any other sector; this is slightly lower than average professional occupations. Property and business services have a higher of number of professionals than many sectors in Ballarat and slightly lower levels of clerical and administration staff.
Figure 16: Occupation comparison across all industry sectors in Ballarat
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Figure 17 shows that: The Ballarat business services workforce comprises 52.5% male and 47.4% female workers. Of the 1,634 managers and professionals working in business services, 69% are male and 31% female. When an analysis is made of the male / female representation in these 2 occupations for Ballarat, data shows that across the entire Ballarat workforce, 51% of managers and professionals are male and 49% are female. This occupation profile is reflected in the higher education profile of male and female workers; 63% of males vs 37% of females possess a tertiary qualification.
Figure 17: Male to female occupation comparison in business services sectors in Ballarat
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Figure 18 demonstrates that: Up to the age of 44, there are more females in the business services sector than males, and from 45 years and over, more males than females. This may indicate loss of female workers from the sector, attraction of older male workers, potentially some imbalances in career path development for males and females within the business service sector, and / or a need to develop more flexible workplaces.
Figure 18: Male to female age comparison
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Ballarat Business Services Industry and Gap Analysis
7.3.2
Page 40 of 81
Regional and national workforce comparisons
Figure 19 shows that: Employment numbers in Ballarat are high in legal, accounting, marketing and business management services, scientific research, technical and computer services, communication and other business services.
Figure 19: Business services employment contribution by sectors across selected regions 2010
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The data in Figure 20 demonstrates that: Collectively, the business services sector has a generally younger age profile compared to Victoria and Australia; this provides a positive position for mitigating an ageing workforce. The finance and insurance sector, however, presents an older workforce profile of the 3 sectors; this (as discussed previously) may present skills and workforce capacity issues for the sector.
Figure 20: Business services age profile comparison
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When compared to Bendigo and Geelong as in Figure 21, Ballarat contains a generally higher level of qualifications within its business services workforce.
Figure 21: Regional comparison of business services qualifications
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Ballarat Business Services Industry and Gap Analysis
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However, despite this qualification profile, the occupation comparison in Figure 22 shows that in Ballarat there are fewer people in ‘higher level’ occupations than in Bendigo and Geelong.
Figure 22: Business services occupations comparisons: Ballarat, Bendigo and Geelong
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Ballarat Business Services Industry and Gap Analysis
7.3.3
Business services workforce summary
Key learning The
Page 44 of 81
business
Implication services
sector
has
The sector appears generally well positioned to grow its
enjoyed strong employment growth
workforce due to its relatively positive younger age profile as
and it is anticipated that by 2011 a
well as the average level of wages and salaries the sector
further 1,000 people will have been
provides.
employed compared to 2006 and by
‘knowledge-based’ sectors within Australia and overseas,
2016 an additional 1,300 people will be
attraction and retention of skilled workers will become more
employed.
competitive. An issue for the sector will be how it responds to
However, with widely anticipated growth in
this increasingly competitive environment. The finance and insurance sector has
How the sector manages its ageing workforce will become of
an older workforce profile than other
increasing strategic importance. This will include workforce
business services when compared to
and employment structures to retain skills within the sector
local, state and national workforce
and the ability to attract new skilled workers. This capacity
profiles.
will be influenced, to some extent, by perceptions of the industry as a career choice.
The age profile for property and
This profile may indicate that these sectors have good
business and communication services
capacity to attract a younger workforce (possibly graduate
shows a strong younger workforce
based) but need to enhance attraction and retention of skills
percentage within the 15 – 34 age
in the older workforce demographic.
brackets.
However, the age profile
percentage decreases at 34+ years. Employment trends within the sectors
Skills gaps and shortages may impact on the growth
would suggest that technical skills will
capacity of certain sectors, such as scientific research,
be increasingly in demand if the
technical and computer services and
demonstrated
services. Ballarat has pursued these sectors as competitive
growth
in
relevant
business services sectors continues.
communication
investment opportunities and may need to assess sources of future skills.
When compared to state and national
Up-skilling and professional development of existing staff will
profiles, Ballarat business services have
assist all sectors with potential tightening of workforce
a lower proportion of higher education
availability
qualifications higher
but,
qualification
into
the
future.
In
addition,
continuous
overall,
slightly
improvement in skills and knowledge within business services
levels
when
will assist the industry to remain competitive and to develop
compared to Bendigo and Geelong.
and secure new market opportunities.
November 2010
Ballarat Business Services Industry and Gap Analysis
Page 45 of 81
Key learning
Implication
When compared to state and national
Ballarat may lose some competitive advantages to
profiles, Ballarat business services have a
other regions and reduce opportunities to build and
lower
capture new market opportunities based on the
proportion
of
higher
skilled
occupations and higher levels of mid to low skills.
This
occupation
profile
is
expertise of its business services workforce.
also
reflected when compared to Bendigo and Geelong. When the male to female occupations,
Career path development for female workers and
age profiles and incomes are considered, it
attracting
would appear that the business services
avenues for business services to address.
sector may need to broaden its appeal to
may also need to be supported by innovative and
female workers.
flexible employment and workplace practices.
qualified
female
professionals
may
be
This process
Table 11: Workforce learnings and implications
7.4
Recommendations
Collaborative workforce attraction and retention strategies should be developed by key stakeholders that focus on skills needed to support the desired future positioning of the sector in Ballarat. Linkages between the University of Ballarat, other training providers and the business services sector should be strengthened so that information flows on skill needs and training can be fostered, appropriate programs and curriculum developed and employability of graduates enhanced. The role of businesses in developing skills and capabilities within the existing workforce needs to be promoted and information on training and development programs more widely promoted. Case studies on workforce best practice within the business services sector should be developed and marketed as part of the wider workforce and skills development recommendations framework.
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Industry analysis
Industries are typically structured along a value or supply chain. The Property and Business Services (PBS) sector, however, does not use a high value of externally sourced inputs other than labour, with most value being created by the interactions of people, processes and technology within the PBS firm itself. PBS firms are inherently creators of intangible outcomes. This can be contrasted to other industries which are creators of tangible outcomes that require a large portion of externally sourced inputs added or modified to create value for end users. This fundamental difference requires a different approach to analysing the industry and what makes it develop, as the emphasis shifts to the way value is created internally within a PBS firm as well as to the external inputs (supply) and the market (demand) that exists for the services. Development of the industry requires a focus on enhancing the way the firms operate internally and providing them with the necessary infrastructure and environment to provide solutions for customers. This is a much more supply-driven approach to industry development compared to other industries that are driven from the market or customer side. This is not to reduce the importance of demand for services as being critical for industry development or success, merely to recognise that the fundamental difference in what is being produced (intangible versus tangible assets) requires a fuller consideration of supply-side considerations which can impact upon industry development. This structure is further complicated by variations between sub-sectors within the sector; for example, accounting firms will have different value chains to scientific and research service chains (accounting firms will have numerous clients, whereas scientific firms tend to have a smaller number of large customers).
Notwithstanding this, the principal activity occurring with a PBS firm is the creation of
intangible solutions for clients. 7.5.1
Demand side drivers
There are several major demand drivers on the industry. These drivers principally result in an increased market or market-based opportunity for PBS within the Ballarat region. Population Increases in population increase demand for PBS as many PBS exist to service the needs of people; for example real estate agents, accountants and lawyers. Increasing population boosts demand for these services. Broadband and ICT The nature of intangible assets means that they can be accessed through the internet and over networks. This means that some or all of the services can be obtained through increased access to, and use of, broadband and ICT. Broadband and ICT effectively create another distribution channel for PBS firms to deliver their services. This distribution channel requires consideration of the following demand side considerations: December 2010 S:\SED - Ballarat\Projects\OPEN\Regional Development\City of Ballarat\Ballarat Business services\Reports\111110_BCC_Gap Review_FINAL report.doc
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Customers can be sourced and services delivered to clients from outside the immediate geographical region; New services can be developed and delivered using broadband and ICT; The costs of the PBS can be reduced through the use of the technology; and Access to understanding of, confidence in and reliability of ICT (supply-side considerations) and broadband become key components of market demand. Regionalism, decentralisation and outsourcing The decentralisation of Government and the associated policy position of regionalism can impact demand at two levels: first, through increasing the local population, and secondly, and potentially more profoundly, through the relocated Government services / departments, using local PBS firms. The opportunity for Government to outsource functions directly to the local private sector would increase the market for locally-based PBS. Marketing and client relationships Perhaps the single largest latent demand driver rests with the PBS firms themselves. This driver relates to the firms’ ability to professionally market their services and capabilities within and outside the immediate region. Tapping into larger local firms such as the hospitals, universities, councils and larger private companies, presents significant potential for local firms, as does accessing markets outside the region where skills exist that will be valued by clients in these regions; likewise taking advantage of the relatively lower costs structures (for example land and buildings) incurred by PBS operating out of Ballarat. Growth of the local economy and market size The ongoing and continued growth of the local economy will drive demand for business services. Introducing new investment and companies into the local economy is seen as critical to increasing the market for PBS within Ballarat. The ability of local firms to grow their businesses through capturing ongoing growth in the local economy and through exporting services to other markets, particularly Melbourne, will increase the size of the local industry, adding scale and capabilities to the sector. Quasi-government competition The growth in quasi-government competition through Government programs and not for profit industry associations is reducing the available market size that can be accessed by the private sector. Firm and local reputation Improving the reputation of the firm and the region will increase the markets available to be serviced by local PBS firms.
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Supply-side considerations
Supply-side considerations act to not only increase the efficiency and therefore profitability of the industry, but in the case of PBS, act to increase the potential market that the industry can service. In the PBS industry, supply constraints can (and do) act as barriers to growth and, therefore, curtail development of the industry. Improving the supply side of the industry acts to improve both profitability and potentially increase market opportunities as the firms develop improved capabilities. Skills and training Increasing the skills and training of people will increase the sophistication of the services offered and enable newer markets to be serviced. As PBS clients develop and they become more sophisticated, the demand for higher level services will increase. Attraction and retention of skills PBS rely on people which, unlike capital equipment, can only work for a given number of hours in any given period, so the throughput of any PBS firm is limited by the capacity of the workforce, regardless of market size. A critical barrier to the development and growth of PBS industry is, therefore, the pool of appropriately skilled and available labour. Office facilities A major cost to the PBS industry is access to appropriate (size, location, layout) and cost effective office facilities. PBS firms operating under traditional business models need to source space for staff and for the delivery of services. A cost effective and appropriate office facility improves the profitability of the firm as well as improving its ability to service clients. Ballarat has potential comparative advantages in this area compared to other regional and metropolitan centres. Linkages to other firms A significant number of clients serviced by a PBS firm will have the need for more than one service. The ability of the firm to provide or access services required by a client, but not provided directly by it, will improve serviceability and reduce the likelihood that necessary services will be provided by a service provider outside the region. Encouragement of relocation of service providers / new entrants The encouragement of the relocation of new service providers to the region would increase the size of the industry. Moreover, encouraging service development where perceived gaps in the market exist would not only increase the size of the industry but also boost the potential pool of available skills and staff within the region. Broadband and ICT Improvements in broadband and ICT technologies would improve the efficiency and profitability of the local PBS sector, as well as open up new opportunities for local firms to service new markets outside the
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region that cannot be profitably or effectively serviced using traditional business and service approaches. Bringing these points together would provide a model for the industry and, from this, a basis from which to further analyse industry gaps and opportunities. This model is shown in Figure 23.
DEMAND SIDE CONSIDERATIONS ↑ Population ↑ Broadband & ICT ↑ Government policy ↑ Marketing & relationships ↑ Local economy & market size ↓ Quasi-government competition
BALLARAT PROPERTY & BUSINESS SERVICES INDUSTRY
SUPPLY SIDE CONSIDERATIONS ↑ Skills and training ↑ Pool of appropriate staff ↑ Office facilities ↑ Intra-firm linkages ↑ Encouragement of new entrants ↑ Broadband & ICT
Figure 23: PBS industry model
8. Consultations 8.1
Consultation approach and model
The industry model shown in Figure 23 was used as the basis for industry consultation. This allowed consistency in approach as well as the identification of key issues as either demand or supply-related and, therefore, able to be analysed further for detailed recommendations. A detailed consultation listing is included at Appendix C: Consultations list. The list represents both demand (buyers of PBS) and suppliers (providers of PBS) within Ballarat. Suppliers represent participants across a range of business services. 8.2
Demand Side 8.2.1
Population
Strengths Population increases are seen as overwhelmingly positive and beneficial for the sector, particularly those PBS whose services are required by the majority of individuals and businesses; for example, compliance taxation and accounting, some legal, real estate and IT. Being the largest centre in the Western region provides some reputational benefits, enabling some firms to actively source clients from smaller regional areas. Weaknesses Ballarat’s relatively small population results in small local markets for some services, to the point where there is a perception that the market lacks critical mass. The relatively small size of the local market results in many higher-end, less frequently used services being sourced from outside the region, particularly Melbourne.
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The profile of the PBS industry is one of good generalists, with a range of sound, smaller and mediumsized firms without the capability or capacity to deliver higher value add services, nor with specific industry level expertise (which is generally sourced outside the region). Opportunities Ballarat PBS firms can: Improve linkages with Melbourne firms to provide higher value, but lesser used services on a subcontract or shared basis (this was a common practice, but the incidence of formal linkages to metro firms has diminished over time); Become industry experts in a specific industry, rather than concentrating on being generalists; Develop markets outside Ballarat to build capability and capacity; and Increase the rate at which relocated population takes up or moves PBS requirements to local firms. Threats The population growth is not supported through industry development. Should this occur, the majority of the demand to stem from population growth will be for householder service needs. These needs tend to be for lower level, rather than higher level service provision. Demand for this level of service provision will grow the sector but not result in higher level industry capabilities being developed. Relocated population continues to use out of town PBS. Enablers Ensuring relocated population engages with local PBS firms and business and industry growth to accompany population growth. To ensure the household component of the local market benefits from the relocated population, there must be a link created between the relocated population and local PBS providers. Commentary Increasing population will benefit the PBS industry, as much of the incoming population will need to use a PBS firm.
There will be some natural relocation of these services to local firms, however, many
relocated people will continue to source PBS from their existing (and out of town) providers. Marketing the benefits of using local PBS providers to newly-located people will act to increase the rate at which relocated population takes up with local PBS providers. Ensuring industry develops alongside the expected increases in population is also important. 8.2.2
Government policy and regionalism
Strengths Relocation of government and quasi-government departments to Ballarat has provided a positive boost to the population. The recent emphasis placed on Ballarat and other regional centres as part of a
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broader policy of regionalism and decentralisation of population will further increase population at higher than average levels. Weaknesses The use of local PBS firms by these departments is perceived (either rightly or wrongly) as being minimal, with any significant engagements being sourced or controlled from Melbourne. These departments are seen as being branch offices whose contribution to economic activity is limited to population increases. There was a reasonably strongly held view that quasi-government bodies did not play an active role in promoting local firms as local firms had been overlooked where there was no apparent skills difference or deficiency and locally delivered services would be price competitive. Opportunities There are several key opportunities to increase the demand for local PBS arising from this area: 1. Being able to leverage relocated and locally-based Government departments to use local service providers; 2. Amending the Local Government quasi-government instrumentality policy in relation to PBS to include local content provisions; equivalent to recent changes made to construction and infrastructure projects; 3. Conducting audits of relocated Government departments and PBS needs and matching these opportunities to local capabilities; 4. Actively using local PBS during the planning and investigation phases of Government relocations. This action provides the additional benefit of allowing the PBS firms to engage with these departments and the people working in them from an early stage to form commercial relationships; and 5. Facilitate the meeting of PBS firms with key representatives from Local, State and Federal Government in a ‘trade show’ type forum. Threats Relocated Government departments continue to utilise Melbourne-based PBS providers, limiting the exposure of local firms to issues relevant to these departments. This will not only increase the amount of imported PBS, but also limit the skills and capability development of the sector. There are also reputational issues for BCC and State Government if the perception that the relocated Government departments continue to use Melbourne-based firms for their PBS requirements because local PBS firms are reputedly inadequate. Enablers Ensure local PBS meet relocated Government department decision makers when they move to Ballarat to allow the formation of commercial relationships from an early stage.
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Local PBS providers must be prepared to market to these departments so that decision makers are aware of the services and capabilities on offer. Commentary This issue presents a significant opportunity for the sector to not only grow through increased demand, but also, and just as critically, develop skills and capabilities. To enable local firms to access these opportunities: 1. Relationships must be formed with incoming decision makers; 2. Incoming departments must be prepared to utilise local PBS firms and have the demand for these services; 3. Local PBS firms must be prepared to market to the relocated firms. For these activities to occur, BCC will need to play a facilitation role and may consider taking a leadership role via the amendment of its procurement policies to include local content provisions consistent with construction tenders. 8.2.3
Broadband and ICT
Strengths There was generally a good understanding of broadband and IT within the PBS, indicating a high level of take-up within the PBS community of these technologies. Weaknesses The limited broadband access within the local area and broader (Western) region limits any broadband and IT-related development by the industry. There are low levels of awareness of the possibilities to use IT and broadband as a new distribution channel to market and also of leveraging these technologies to develop / tailor new service offerings. There is no Wi-Fi / internet capacity on the Melbourne – Ballarat train service. Opportunities There are a number of opportunities to increase demand for PBS arising from broadband and ICT adoption: 1. Ensuring internet access is available on local train services to and from Melbourne, increasing the attractiveness of Ballarat to Melbourne and actively promoting our proximity; 2. Providing information to PBS of the possibilities for business development through the use of IT and broadband (case studies, workshops, general information); 3. Working with local Federal Government representatives to secure NBN access to the Ballarat and wider Western region; and 4. Linking ICT into the PBS community to advocate and market the benefits of broadband and ICT.
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Threats The development of national (and international) IT infrastructure makes location less critical.
This
increases the prospect of heightened competition from non-Ballarat service providers. Ballarat PBS firms fail to develop IT-related capabilities and fall behind techniques being employed by other PBS with regard to IT and broadband. Any potential relocated firm would prefer and possibly demand high speed broadband access. Enablers To be able to leverage technology, several key enablers will need to be in place: 1. The technology must be available and accessible; 2. Relevant skills must be in place within the PBS industry to adopt and leverage IT and broadband technologies; 3. PBS industry must understand how to use IT and broadband to improve organisational efficiency and develop new services using the technology; 4. Not being able to access Wi-Fi / internet on the train service reduces the proximity advantages Ballarat enjoys over other regional areas. Securing this addition to the service would be of significant advantage to local firms, and make a stronger case for any potential relocation. Commentary Broadband and IT-related technologies provide a significant opportunity for the existing sector to improve profitability, grow the size of the sector outside of Ballarat, explore new employment and subcontractor business models and offer new services. Having access to these technologies locally and on the Melbourne-Ballarat train service would make Ballarat a significantly more attractive location for a professional service firm to establish or relocate. 8.2.4
Marketing and relationships
Strengths The importance of commercial relationships was well understood by the majority of PBS firms consulted. Many PBS enjoyed long lasting relationships with clients.
These situations resulted in high levels of
‘implicit trust’. These relationships have provided the industry with a sound base as well as surety, as clients are perceived to be loyal to the PBS firms they engage. The relationships have also acted as a barrier to entry for newer firms, which protect the local industry, but also reduce competition and capability development within the PBS sector. The strength of many firms’ brands was high within the local community, but not necessarily outside the local economy.
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Weaknesses A consistent theme identified through the consultations was that many local firms are considered poor marketers within the local community and, to a greater extent, outside of the local economy.
A
reliance on long standing clients (an industry strength) rather than a necessity to grow businesses through new client acquisition has resulted in this capability gap. The weakness in this area was evident at several levels: 1. Not being able (or aware of the need) to clearly articulate their capabilities and, more specifically, their high level capabilities; 2. Inability to market and develop capabilities to market to larger firms within the region, including hospitals, universities, schools and larger private organisations; and 3. Expecting larger providers to ‘buy local’ as their buying criterion rather than understanding that these firms choose providers based on capability, not location. There was evidence from some of the buyers of PBS that the ability of the providers to understand their specific needs was less than ideal and that outcomes received as a result of using local PBS was tarnishing their view of such firms. Poor succession planning (and the broader awareness of the importance of this issue by firms) and ensuring continuity of service providers within the firms themselves was highlighted as being a significant potential future risk. It was noted that clients often take the opportunity to renew their PBS relationships upon the retirement or departure of their principal contact within that firm. There was a lack of ‘Ballarat brand’ in relation to PBS providers. Opportunities Based on our consultations, we would be of the view that an improvement in the marketing abilities of the PBS generally would produce significant benefits to the sector. There is also an opportunity to raise the profile of the Ballarat PBS sector regionally and nationally through organising a highly targeted marketing campaign within the immediate region, and in the wider market, to promote specific PBS strengths and expertise. Threats “Melbourne is virtually local now” with competition for PBS work coming from outside Ballarat. Failure to develop marketing capabilities within the local region will limit the ability of local firms to secure work outside Ballarat. Failure to undertake appropriate succession planning and managing the existing (and strong) relationships that exist between clients and individual providers will:
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1. Reduce the existing barriers to entry, increasing the risk of out-of-town service providers securing these clients; and 2. Limited relationship-building capability development of staff. These factors, if left unmanaged, will lead to a weakening of the broader PBS industry. Enablers Improved marketing capabilities with a particular emphasis on brand development across the entire sector will improve the likelihood that the sector develops in terms of both scale and capability. Undertaking appropriate succession planning by PBS will mitigate risks to the industry. Commentary The ability of local PBS firms to compete in marketing capabilities as well as service delivery is critical to the sector’s development. There may be an element of complacency within the sector in relation to marketing, as much of the work being completed by the sector comes from long-standing relationships. Failure to undertake appropriate succession planning by existing providers represents medium to longer term risks for the industry. 8.2.5
Local economy and market size
Strengths The recent growth in output of the local economy has been positive for the local PBS sector. The sector has a core of PBS in place with a diversified range of providers across a wide range of industries. The majority of PBS needs can be accessed within Ballarat. Weaknesses Some firms reported that there had been increasing concerns because of bad debts and slow debtors over the past 2 years. This is attributable to the GFC and also highlights the dependence many firms have on the local economy and specific sectors within the economy. Ballarat does not have a reputation for PBS provision, with no ‘big names’ located in town. Ballarat firms do not carry the reputational weight needed to compete in some markets. There is a perception that Ballarat (and other regional) providers are inferior when competing with larger and metropolitan-based firms. This perception is reinforced when Government and quasi-government work leaves Ballarat. A partner in a Melbourne-based firm consulted for this review believed that ‘going national’ was the single biggest factor in his firm’s growth. This was initially managed through an affiliation, not through any formal structure. The need for PBS firms to have a national capability was a common theme from larger organisations possessing national customers and suppliers. There is a significant amount of business service work ($307m, or around 15% of total demand) being imported, principally from Melbourne. The reasons identified for this include: Procurement policies of larger companies; for example, external and statutory audit service requiring local firms to use externally-located PBS firms; December 2010 S:\SED - Ballarat\Projects\OPEN\Regional Development\City of Ballarat\Ballarat Business services\Reports\111110_BCC_Gap Review_FINAL report.doc
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Higher value and more specialist work being undertaken by Melbourne firms. There was a range of reasons identified for this occurring, including the: ≈ Need to access skills that were perceived to be unavailable within Ballarat; for example, many standard accreditation-related issues such as ISO14001 and ISO9001, CE Marking and compliance; ≈ Access to national firms with national exposure and specific industry expertise; ≈ Highly specialised or seasonal skills that were just not available in Ballarat, despite the services not being of particularly high value; for example, seed and some forms of agricultural testing; and ≈ Perceived issues surrounding potential conflicts of interest, breaches of confidentiality and privacy and reputational issues of Melbourne-based firms in the eyes of important stakeholders such as banks, financiers and Government. In addition, it was identified that: Many larger firms have the in-house capabilities to complete much of the work that many PBS firms complete for smaller organisations; and Due to a lack of a local provider, some firms retain or outsource work to Melbourne in-house functions when they would otherwise outsource the work to local providers; for example, payroll management. Opportunities Increased outsourcing of routine functions by larger organisations is more likely if the potential outsourcing organisations have confidence in the capabilities of the local sector. This may be achieved through the development of a formal cluster. The following service types were identified as being deficient and / or not accessible within Ballarat:
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Service type
Comment
Market size
Opportunity
Payroll bureau
Outsourcing opportunity, presently engaging Melbourne providers
+
++
Top end / higher end accounting
Although we are of the view that these capabilities do generally exist but are not recognised, there are some gaps in niche areas such as indirect taxation expertise where the local market is unlikely to be able to support this capability.
+++
+++
Insolvency
Some local practitioners exist but are not active. Questions as to whether local market could support an office. Privacy and confidentiality issues are relevant in this industry.
+
+
High end commercial law and litigation services
Sector does not seem to have critical mass. Many firms are relocating / setting up Melbourne offices. Larger jobs going to Melbourne. Confidentiality remains an issue.
++
++
Standards accreditation
ISO9001 and ISO14001 accreditation as well as a range of the accreditation-related services are performed by out of town providers.
+
+++
Export Market Development Grant application
Largely completed by Melbourne-based consultants that have relationships with local businesses.
+
++
Broader grant preparation
Limited knowledge of opportunities and limited capacity within the region to complete the applications to the necessary standards.
++
+
Recruitment
An excess of low level recruitment with a significant gap in abilities to recruit to senior positions, with comments pertaining to using old methods, lack of understanding of needs, expertise and contacts readily made.
++
+++
Marketing and advertising
High value work from the majority of users (regardless of size) undertaken outside of Ballarat.
++
+
+++
+++
The majority of the low value / standard work as well as higher end work from larger organisations going to agencies in Melbourne or Sydney. Research and technical
Multiple niche opportunities across a range of areas such as seed testing, research
Quantity surveyor
None in Ballarat.
++
++
Consulting engineers
Minimal experience or personnel within Ballarat.
++
++
Architectural
Supply does not meet perceived demand.
++
++
Statutory and strategic planning
Supply does not meet perceived demand.
++
+++
Training
Much of the need for specialised training (for example sales training) is sourced from Melbourne.
+
+
Higher end Human Resource Management
OH&S and industrial relations skills are also limited.
++
+++
Table 12: Potential service gaps
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Threats Failure to increase firms’ exposure to industries outside the local economy may reduce the ability of the firms to grow from a funding and finance perspective. This risk will remain if major sectors such as retail, construction and manufacturing (which are major customers of the local PBS sector) remain flat and low in confidence. Firms not acting to close the gaps in the market will mean: 1. These services will continue to be sourced outside Ballarat; 2. Capabilities will not be established in these sub-sectors; 3. When firms leave Ballarat to secure these services, firms located outside Ballarat and offering broader service offerings effectively compete with local firms for other work where the capability to complete the work exists in Ballarat; and 4. Firms will not be able to effectively collaborate to provide a broader service offering while these gaps exist. Enablers Highlight and quantify service gaps within the market and bring this information to the existing local service providers. Encourage local service providers to form collaborative arrangements with non-Ballarat firms that offer services where an identified gap exists to reduce the threat of competition. Commentary The local economy demands around $56m more of business services than can currently be supplied, with over $300m of PBS being imported. Some of the imported products exist due to market gaps in the local service offering; however, it is our view that while this gap is likely to be significant, by far the larger portion of the imported services is due to: 1. Lack of real underlying capability of local firms in terms of both high end service provision and national coverage / exposure; 2. A perceived view that local firms do not have the underlying capability to complete high value service provision; and 3. Demands for ‘named’ providers, particularly when the service provision required is needed for issues surrounding the confidence of finance providers and / or government tenders. These are essentially market related issues and can be overcome and exploited by the firms themselves. 8.2.6
Quasi-government and not-for-profit based competition
Strengths Competition was seen as being healthy within the consultation group.
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Weaknesses Providers did not feel they were competing on an equal footing where such competition was from quasi –government; for example, Tourism Victoria, UB or the not-for-profit sector, such as VECCI, AI Group. Opportunities Outsource services where competition exists.
Develop partnership arrangements with competing
organisations to build capabilities and build revenues. Threats Competition becomes more intense, resulting in lesser returns for commercial enterprise and the extent of the competition becomes broader. Enablers Limited, encourage PBS to view the competition as an opportunity rather than a threat and build relationships with the aim of revenue sharing, collaboration and securing outsourcing opportunities. Commentary There is a perception that there has been an increase in competition from quasi-government and notfor-profit organisations in recent years. These organisations provide a range of services, including legal, training, OH&S and marketing. There is little that can be done in this regard; perhaps only to enforce issues surrounding competitive neutrality and encourage outsourcing and partnership building. 8.3
Supply side 8.3.1
Skills and training
Strengths There are some skill areas where Ballarat is gaining advantages, particularly around ICT. Graduates are generally seen as competent and willing to learn. Weaknesses There is limited: 1. In house training and development programs (with some notable and successful exceptions); 2. Interaction between the School of Business and the broader sector; and 3. Opportunities for specialist PBS skills training and development within the Ballarat region. Opportunities The UB / IBM program was repeatedly identified as being a successful program that could be repeated provided there were employment options available for students with the PBS sector. This will require a closer engagement between UB, BCC and the PBS industry. December 2010 S:\SED - Ballarat\Projects\OPEN\Regional Development\City of Ballarat\Ballarat Business services\Reports\111110_BCC_Gap Review_FINAL report.doc
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The development of case studies on training would be useful; however, the firms that have successfully engaged in in-house training would rightfully consider this as intellectual property of some value and therefore may not be inclined to share information about their programs. Threats PBS firms will lose competitive position unless they invest in training and development. There is a clear positive correlation between training and development budgets in the PBS sector and performance. Enablers Key enablers are access to programs and preparedness to complete higher level training within the PBS sector. The use of technology can assist in overcoming some access-related issues. The cost of higher level PBS development could be prohibitive for some. Commentary Improving the skill base of the industry will improve both the value and quantity of the work completed by the sector, as well as resulting in additional capabilities being developed. So long as clients search for higher level skills outside the region, there remains the opportunity for local PBS providers to develop the necessary skills and move in to fill the void. The critical issue is the preparedness of local providers to up skill. 8.3.2
Pool of appropriate staff
Strengths The location of UB in the region and the influx of many graduate age / experience level staff into Ballarat is a competitive advantage for the region. Being a major regional centre is an attractive lifestyle choice for many people, meaning many highly qualified and skilled people return to Ballarat later in life. Weaknesses Many potential ‘middle tier’ employees leave Ballarat for numerous reasons, typically after 3-4 years’ experience (early 20’s). People from metropolitan regions and metropolitan universities were seen as more likely to leave than those from other regional centres and regional universities. The lower level of wages paid by Ballarat firms is seen as a major disincentive to establishing a pool of experienced and qualified staff within the region. Improved transport and communications and flexible employment arrangements are making it easier for people to relocate to Ballarat yet work in Melbourne. A lot of the work being completed is ‘generalist’ in nature, limiting the scope for highly qualified and specialist skills to work in Ballarat. Many graduates are seen to have studied ‘softer’ subjects around management and marketing and do not leave UB with the more appropriate ‘harder’ technical skills. This acts to limit the pool of available staff.
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Opportunities Improve the knowledge of local business to new entrants to Ballarat so they can market their skills to business. A notice board or something (advertising) similar on the train would be a good place to start. Reducing the value of imported PBS and increasing the value of exported PBS should occur if the pool of available staff within the region grows. Threats Without a pool of readily available staff the industry will not develop a critical mass. There is some evidence that the PBS sector is at or near capacity and, therefore, importing many PBS needs. Unless there is a more substantial pool of appropriately qualified staff this situation is likely to continue. Enablers A more flexible attitude to employment relations may open up access to skills markets that are not currently accessible; for example, stay at home mothers, or mothers with school age children. Businesses that require highly skilled PBS firms to advise them or complete their work will drive the movement of these skills into the region. Improving the knowledge of the nature and types of firms that make up the local PBS within Ballarat will make it easier for appropriately skilled personnel to market to them. Improving the perception of the local industry would have some benefits in terms of growing the pool of available staff and skills. Using technologies to access skills is increasingly being seen as a method to overcome skills shortages. Commentary The size of the pool of available staff within the region is certainly limiting the size and development of the industry. There is a need to make both potential employees and employers aware of the issue and improve the interactions and linkages between these 2 groups. There is clearly a large potential group of employees travelling to Melbourne and, anecdotally, a group of skills stay at home mothers possess. Attitudes may need to change among some PBS firms to access these skills groups. Improving the reputation of the region as a centre of PBS and from a liveability perspective is important. Using technology to access appropriate skills should also be encouraged. 8.3.3
Office facilities
Strengths Ballarat’s existing stock of office facilities is low cost compared to Melbourne, and within easy (and improving) access to the CBD and airports. Many CBD sites are recognised as being sound financial investments.
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Weaknesses The majority of existing space in the CBD has significant heritage value, however this together with the age of the buildings makes establishing a new and dynamic culture more difficult.
This issue is of
increasing importance to many PBS and is likely to continue to be so into the foreseeable future. More modern facilities are available at locations such as Greenhill, however these can be difficult to access, are not considered long term and do not readily link with the broader CBD, rail links to Melbourne / airport and the industrial zones on the western edge of town. Existing facilities do not satisfy all uses, with no immediately accessible facility of significant size should firms wish to co-locate or cluster. Many of the existing office facilities are in older style buildings, which although carrying some prestige, do not represent best practice lay-outs and design, with considerable outlays required to convert them to best practice standards. Expectations amongst staff of car parking access at little or no cost are not likely to be met over the foreseeable future.
Parking within the CBD for clients was raised by several people as presenting
difficulties for them. The lack of a physical presence by UB (higher education) in the CBD region was considered to be a major weakness, limiting the ability of the PBS industry to access decision makers within the university, as well as limiting potential graduates to interact with the CBD during business hours. Opportunities The low cost nature of commercial office space within Ballarat clearly presents as a competitive advantage. This must be complemented with an improvement in the quality and range of the office facilities available. Threats The principal threat to this supply-side competitive advantage is that more modern facilities are not developed, thereby: 1. Resulting in increased rents for existing facilities; and 2. Continuing to widen the gap that exists between the quality of existing facilities and best practice facilities. Unless high quality facilities are readily available, it is less likely that a major firm would relocate or establish itself in the region. At present, no such facility exists. Uncertainty around the Civic Hall and other planning-related issues caused concern within the sector in that pursuing the development of such a facility would be difficult and presents higher than necessary risks. Enablers Low cost, well located facilities must also be of high quality to allow firms to be more productive and develop other unique characteristics, such as high performance cultures and staff morale.
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Co-location and physical clustering present an opportunity for firms to increase their markets through working together and increasing cross industry collaboration. Facilities must enable co-location and physical clustering to occur if the service providers wish to co-locate. Commentary With office space being a major cost for the majority of PBS firms, the ability to secure long term office space at considerable cost advantages would be attractive to potential market entrants.
Just as
important, however, is the quality of the facilities. There is a positive correlation between high quality facilities and factors such as firm productivity, staff morale, organisational culture and brand enhancement. These links becomes more pronounced for firms producing higher value services and those wishing to engage a younger, more dynamic workforce. Firms are increasingly recognising the benefits of co-location and collaboration.
There is limited
opportunity for this to occur at present. Proximity to UB is critical to certain sub-sectors, particularly those in the scientific and technical services. There are limited facilities for firms to locate at UB on a permanent basis. Creating more facilities within proximity of UB would be necessary for a continued expansion of service providers aiming to work closely with the university or organisations located in the Technology Park. 8.3.4
Intra-firm linkages
Strengths There have been some examples of successful collaborations with firms joint tendering, sharing information and providing joint service offerings to clients. Moreover, some firms have been successful in developing relationships with larger institutions and have secured work and contracts as a result. These examples should be highlighted to the sector. Weaknesses PBS firms are not seen to be overly collaborative and users therefore perceive service gaps. The sector is also perceived to be poorly linked into major local public organisations including UB, hospitals and the secondary school sector. While there is a view that these organisations have some responsibilities to make this process more accessible to local PBS firms, the sector itself was not perceived as being proactive in building links and understanding the needs of this market segment.
For example,
completing building programs within secondary schools are long term propositions, with local firms not prepared to work with potential clients for long periods of time to secure work or identify opportunities. Many PBS firms do not appreciate the capabilities that exist within Ballarat and therefore do not actively look to work collaboratively to reduce service gaps. There is a disjointed PBS industry network, with different industries represented by different industry associations.
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Opportunities There are opportunities for the sector to work collaboratively to develop intra-sector linkages to be in a better position to: 1. Provide a more complete service offering, thereby reducing leakage to non-local firms; 2. Work together to secure tenders that could not be attempted on a stand-alone basis; and 3. Co-locate to improve service delivery and referral opportunities. A virtual or online collaboration presents as a near term opportunity that can address firms not being colocated and improve the understanding the sector has of the existing capabilities that exist in Ballarat. Bringing together PBS as a group, rather than as disparate industry groups, would improve the understanding the sector has of itself, promote collaboration within the sector and enhance marketing of the sector to larger organisations. The aim of such a group would not necessarily be for firms to market services to potential clients that tend to be the focus of existing organisations and functions. Bendigo, for example, has a professional services group which aims to cover the spectrum of providers without attempting to provide technical and training support typically provided by specific industry associations. This model may be worth replicating in Ballarat. Detailing case studies of successful collaborations will aid the sector in understanding and appreciating these opportunities. Threats The PBS sector is not excluded from the broader trend for industries to work together to secure work through collaboration, clustering and broader product / service delivery. Enhanced intra-firm linkages is seen as critical to the success of such development. The industry will, over the longer term, lose its competitiveness to other regions that enjoy a greater degree of connectivity. Moreover, and of broader concern in the longer term, is that the role the PBS sector plays in supporting other industries within the economy may be diminished, and that these industries lose competitiveness as a result. Being able to point to a collaborative PBS sector to potential incoming companies is a competitive advantage for a region. There is a risk that the strength of the existing sector and the competitive advantages the industry presently exhibit are diminished over time if a higher level of collaborative behaviour is not developed. Enablers Improved industry network and group representation and linking of firms through technology will enhance collaboration and knowledge of the firms’ capabilities.
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Commentary There appears to be a relatively low level of intra-firm linkage within the sector, and also between the sector and other sectors such as ITC and education. There is clear evidence that improving these linkages would produce benefits in terms of increasing the demand for services, being more competitive and, therefore, securing work both in and outside the region as well as capability building. Improving collaboration virtually, physically and through a greater role of industry networks, can act to facilitate a greater level of intra-firm linkages. 8.3.5
Encouragement of new entrants
Strengths Significantly low cost facilities and expectations that the wage base will be lower than metropolitan regions are strengths. Road access to Melbourne, Geelong, Bendigo and the airport is a positive, as is train access to Melbourne CBD. For the right firm, potential access to Government departments and quasi-government departments (presently and relocated) would be seen as a positive, so to the university. Weaknesses Market size is limited and there are some question marks over the quality of office facilities. Pool of appropriately qualified staff is limited. Opportunities Ballarat is able to leverage its cost and location advantages to have a major PBS firm relocate or set up a branch office in Ballarat. Threats The most significant threat from this issue is that a PBS firm decides that it will relocate and do so to Bendigo or Geelong (Ballarat’s major competitors).
This would give those regions a competitive
advantage over Ballarat and an industry with more significant levels of critical mass. Enablers The key enablers for a firm to consider relocation or establishment in Ballarat would be: 1. Appropriate facilities (cost, location, linkages, quality); 2. Reducing the effective distance to Melbourne by ensuring Wi-Fi / internet access is available on the train service; 3. Access to ready pool of graduates and more senior staff; and 4. Confidence that local markets exist and can be accessed.
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Commentary There are some factors in place in Ballarat that would make it attractive for the relocation or establishment of a branch office in Ballarat, including low cost and access to Melbourne CBD. However, a major PBS firm would require that a pool of staff and graduates be accessible, as well as appropriate facilities. In this regard, a firm from the science and technical services area may have nearer-term potential as the facilities at the Technology Park, together with its proximity to UB, overcome some of the issues that would be encountered by a firm looking to set up in the CBD. 8.3.6
Broadband and ICT
Strengths Ballarat has a strong and developing ICT sector.
100MBP/sec technology is available locally but
awareness of this technology is limited. There is considered to be a high level of awareness within the sector of the potential for technologies to improve the demand side of the sector as well as potentially improving some supply and other resource related issues that are currently presenting some barriers to growth in the sector. Weaknesses Uncertainty around NBN limits investment and businesses investigating the use of new technologies in their businesses. Opportunities Securing a preferential roll-out for the Ballarat region of the NBN would give local firms the opportunity to explore this technology. Ensuring the PBS sector is aware of the opportunities for their businesses as a result of high speed broadband by having workshops and case studies of overseas examples using this technology. Threats Competitive regions such as Bendigo and Geelong gain an advantage by being able to access NBN technologies before Ballarat firms. Enablers Learning from overseas PBS firms which have previously accessed high speed broadband can fast track the sector seizing opportunities and growing the local sector. Ensuring the skills are accessible to local firms to take advantage of opportunities that NBN will provide. Commentary Being able to access cost effective broadband is a major change for the PBS industry and has the potential to impact the sector in a significant and positive fashion. Learning from overseas PBS firms that have accessed these technologies will be critical to the fast track development of these opportunities. December 2010 S:\SED - Ballarat\Projects\OPEN\Regional Development\City of Ballarat\Ballarat Business services\Reports\111110_BCC_Gap Review_FINAL report.doc
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Recommendations
The recommendations to arise from the consultations are highlighted in Table 13: Demand side The role of BCC in relation to demand-related issues is one based principally around facilitation, lobbying and information provision. Strategically, the development of the sector can be achieved through growth in volume or value. There is sufficient evidence to suggest that the sector will grow organically on the back of forecast population growth and business investment. The key to the long-term sustainability of the sector, and the greater opportunity for growth above organic rates lies, in our view, through the capability development of the sector. Develop linkages between the PBS sector and new population / relocations, new business entrants / relocations so opportunities can be identified and better understood. Consider changes to BCC procurement policies to include local content provisions for tendered works. Lobby larger firms within the region to consider using local PBS firms where possible. Develop linkages between the sector and other key economic sectors (ICT, Education, Manufacturing) relocated Government departments and UB so that opportunities and needs can be better understood. Consider organising a ‘trade show’ type day for PBS to market to larger organisations, Government departments and quasi-government organisations. Based on clearly defined sector strengths and positioning, develop a brand for Ballarat PBS firms to improve their reputation in the market place and position Ballarat as a centre of PBS firm excellence. Particular emphasis should be given to developing the science and technological services sub-sector in conjunction with UB and the Tech Park. Much of the demand side opportunities must be nurtured by the industry itself; BCC has a limited role to play in this area. However, BCC can develop case studies or a paper on key success factors for PBS firms around issues such as marketing, tendering, technology exploitation, opportunities (see Table 12), partnerships, in-house training and flexible employment arrangements. Supply side The role for BCC in relation to the supply side of the industry is to facilitate but also actively seek certain investments that will enable the industry to further develop from a capability perspective. There is a short term need to build capacity in the sector. Develop linkages between the sector and UB to improve the skills of graduates required for the industry. The IBM model provides a basis for the development of this area.
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Supply side cont…. Ensure that sufficient and appropriate office space is available both within the CBD and Tech Park. Facilitate the development of a PBS network which has a specific focus on PBS-related issues. Lobby for Ballarat to receive NBN access and also for internet access to be made available on trains. Encourage inter-firm collaboration and linkages where possible. Table 13: Consultation recommendations
9. Role of Ballarat City Council This report has highlighted a number of recommendations for further consideration for the sector and Government. The key recommendations for the Ballarat City Council are those where the BCC should focus its efforts in the near term.
Properly executed, they will have an impact on the industry’s
development in the near term as well as establish the structural framework for longer term development. These recommendations are also consistent with the broader regional economic framework and direction laid out in EDS2010 and other regional economic and strategic planning documents. 9.1
Establish a strategic position in relation to industry development
It is recommended that BCC takes a position on the key aspects of the strategy to grow the sector. These must be high level and set a framework that supports more specific actions. To this end the following is recommended as the key planks for the industry’s development: 9.1.1
Focus on growth of sector outputs
The analysis highlights that the industry has significant growth opportunities, principally through growth in the output of the industry and, secondly, through increasing the value add the industry contributes to the local economy. Compared to regional benchmarks, the upside for output growth through growing the size of the sector is $212m and the upside for value added growth through growing the value add / employee is $27.5m. Growth through value add is more difficult for BCC to influence, as the firm’s productivity is a major component, and this is determined largely through the actions of individual firms. Growth through industry output (which has a larger potential upside), however, can be more readily influenced by the actions of the BCC. To this end, it is recommended that the BCC take a strategic approach that focuses on increasing the output of the sector in the first instance (for example linking into relocated population, relocated government departments, running trade shows for local PBS to demonstrate capabilities), and the value add of the sector as a secondary consideration.
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Develop the scientific, research and technical sector as a priority sub-sectorsub-sector
The second plank of the strategic position should be to focus on developing a competitive position in a specific sub-sector of the broader PBS sector. Based on the findings of this report, Ballarat has a strong general sector, with advantages of being located close to Melbourne, cost advantages in facilities, and with a critical driver of competitive advantage (the linkage to UB and Technology Park) being underdeveloped.
Ballarat has a competitive advantage in terms of the size of the scientific and
research sub-sector and it is recommended that this sub-sector be specifically developed, in close consultation with UB and the Technology Park. 9.1.3
Focus on the development of technology and ICT
The third plank of the overall strategic positioning for the sector should be the adoption and take up of technology and ICT as drivers of demand and supply side opportunity for the sector. Ballarat’s strong ICT reputation and ICT sector provide a significant competitive strength that can be leveraged into the PBS sector. Establishing deeper linkages between the ICT and PBS sector will be critical to leveraging this strength, as will increasing awareness of the opportunities and ensuring the appropriate infrastructure and access is available to the industry. 9.2
Establish an appropriate governance model for the sector’s development
The disparate nature of local network and industry support is a significant structural shortcoming for the industry. There are several industry bodies playing some roles that would normally be undertaken by a representative body. However, there is no coordinated or structured approach to dealing with issues peculiar and specific to the PBS sector, particularly around supply-side issues and providing linkages from underdeveloped markets to the local sector. BCC should consider a range of governance models that could be used to form this representative body. Options include being either internally resourced, subcontracted to an external party, or the formation of an incorporated body, with a charter to promote local business services. Major objectives of the industry body should include: 1. Develop the industry in accordance with the agreed upon strategic positioning and growth expectations of BCC; 2. Implement the broader set of recommendations contained within this report; 3. Work to build a brand reputation for Ballarat as home of high quality PBS firms and service provision; 4. Ensure Ballarat’s PBS sector utilises technology as a key driver of demand opportunities and as a tool to overcome and improve supply-related issues. Working closely with the local ICT sector is seen as critical to achieving this outcome; and 5. Develop workforce planning strategies and linkages with UB to support the industries’ expected growth
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For this recommendation to be successful, it will be critical for PBS industry support. This will need to be garnered from an early stage. 9.3
Office accommodation and facilities
With additional office-based facilities just for the commercial, professional and business service sector needing to be 57,700m2 by 2021 and increasing to 105,100m2 by 2031, together with the recognition of the importance of the role office facilities play for PBS firms, BCC has a major role in ensuring this space is appropriate, available and retains the cost advantages that the local economy is currently able to provide to PBS firms. This reinforces the need for clustering of commercial activities and supports the development of commercial precincts such as Mair Street. 9.4
Build educational links
The necessity to build linkages from the educational sector (principally UB) to the broader PBS will be critical in developing an appropriate and accessible skills base for the sector over the medium to longer term. Ballarat has a competitive strength (UB) that could be turned into a competitive advantage (UB linked to the PBS sector providing appropriate and sufficiently skilled people) through improving the linkage. The linkage can be developed initially through greater engagement between UB and the local sector so that common issues can be further explored. Secondly (and over the more medium term), the program developed by IBM and UB is seen as a flagship development in the area of skills development and consideration should be given to replicating the program for the PBS sector. This would benefit UB as well as the sector should such a program be developed. The overriding issue around skills development and access at undergraduate level is common between the current needs of the PBS sector and those faced by IBM several years ago. For this to be successful, a well functioning industry body would be needed to represent the needs of the PBS. Ensuring this aim is realistic would be of considerable benefit to the sector and UB. 9.5
Continue to work to attract a large PBS to the region
The potential to bring scale, increase the pool of suitably skilled people and expose the local industry to best practice is significant and could be achieved through attracting a major PBS firm to the region. Ballarat has some competitive advantages that would be of interest to such a firm (low cost facilities, linkages to UB for graduates, access to western and south-western markets). However, issues around available facilities, broadband access on the train, community broadband, and improving the use of local firms by larger organisations, including government, would need to be addressed to make the case for a potential relocation more compelling.
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10. Appendix A: Project methodology
Literature review
Develop capabilities model Best practice Agree with client
Capability audit
Desktop capabilities audit undertaken Build database
Survey and consultation
Consult with key industry groups and stakeholders Min 25 Identify key capabilities Identify key capability gaps
Inform audit and consultations
Compare
Economic analysis
Size of sub-sectors Economic value and importance analysis Regional context Imports / exports
Link eg: gaps = imports
Industry / value chain analysis
Final report
Key sectors Obvious gaps Key supporting industries Identification of supply industry chains Map economic analysis
Outline of capabilities Detailed assessment of key capabilities / organisations Database Capability gaps Investment prospects Recommendations
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11. Appendix B: Literature review Introduction As part of the situation analysis for the Business Services Capability and Gap (BSCG) review project for the City of Ballarat, a desk top review was completed around key policy, strategy and development strategies related to business services. A summary of findings is provided here.
Local and regional policy and strategy City of Ballarat Economic Strategy 2010-2014 The City of Ballarat Economic Strategy 2010-2014 (EDS2010) defines business services as being property and business services and finance and insurance as defined by ABS ANZSIC codes.
The EDS2010
predicts that employment within the property and business services sectors will grow at an average of 2.2% per year, equating to an additional 1,600 jobs in the sector by 2026. Marginal growth is expected in finance and insurance sectors. The EDS2010 presents a number of issues and challenges for the business services sector, including: The Ballarat economy having significant scope to replace imported services and grow and diversify the local sector; Up-scaling of home-based and SME businesses in the sector and attracting new companies or branch offices of Melbourne-based businesses; Sourcing of a skilled workforce whilst facing wage competition from Melbourne; and Barriers to using local services by Ballarat-based industry. The EDS2010 lists 4 major goals for business services in Ballarat: Grow the sector and Ballarat’s role and profile as a business services centre and reduce the level of imported services into the economy; Establish Ballarat as a preferred location for skilled workers; Increase Ballarat’s attractiveness to new companies and investment; and Maximise the role of business services in supporting innovation across all industry sectors. The recommended initial response to achieve these goals is the completion of this BSCG.
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Ballarat Commercial Development Strategy: Issues and Discussion Paper 2009 The purpose of the Ballarat Commercial Development Strategy: Issues and Discussion Paper 2009 (BCDS) is to provide a policy framework for activity centres within the City of Ballarat. The BCDS analyses the existing retail and commercial system and activity centre networks and provides a range of directions to guide strategic work over the next 25 years. The BCDS identifies the business services regional functions of Ballarat as follows: Government and administrative services:
The City is home to a range of government and
administrative services that operate across the Western District. Ballarat as the central hub for a range of regional government offices, the Victorian Government has satellite branches of the Department of Planning and Community Development, Department of Industry, Innovation and Regional Development, Department of Human Services, Department of Transport and the Department of Education and Training in the City. In addition, there are a range of other government and administrative services in Ballarat, including Centrelink, Medicare, VicRoads and the Ballarat Law Courts. Commercial, professional and business services: Commercial, professional and business services in the City support businesses and communities across the Western District, with some services extending to the South Australian border and from the coast to the Murray River. Key services include accountants, financial services, lawyers, barristers and solicitors, telecommunications, banking, employment services, insurance agencies and various consultancies. The majority of these services are generally not represented in regional towns and villages in the RCA and where they do exist; do not necessarily offer the same sense of confidentiality and anonymity for customers due to the size of the community. Thus, some businesses / households will continue to visit metropolitan Melbourne for these services. Key issues and directions presented for office and commercial activity include: There is a significant demand for office floorspace to meet future development requirements and an appropriate location framework for office services and the role of the CBD to meet this demand, needs to be addressed; The choice of location for commercial, professional and business services is dependent upon their scale, role and function; In the majority of circumstances, small, medium and large professional offices will be concentrated in and around central business areas that offer a high-amenity setting with supporting business services, retailing and hospitality activities in close proximity to the business address; Small professional suites are typically located in the upper storeys of shopfront retail in activity centres; these act as incubators for small businesses that are too small to locate in central
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business areas or those transitioning from home-based businesses to professional office environments; Expansion of office / commercial infrastructure has been identified as part of the City’s proposed development of the aerodrome. The BCDS states that with a range of development styles, including multi-storey facilities, the proposed 85 hectare business park could provide between 40,000 and 80,000 sqm of office floorspace; The revised Commercial Development Strategy for the city must define the role and function of business park or campus-style office development; The business park setting should principally accommodate office developments that are colocated or integrated with light industrial and trades activity and not principally provide professional or commercial services (such as legal firms, accounting and finance, design and drafting, insurance etc); Flexibility should be given for the development of office floorspace that accommodates low-rent activities in the business park, such as call-centres, to provide an attractive investment environment for these activities in the City; and Where stand-alone office development is proposed in the precinct that is not part of a mixeduse industrial/office or trades/office development, minimum floor areas should be set; this allows for large-footprint office development that cannot be accommodated in the Central Business Area and other activity centres.
Central Highlands Regional Strategic Plan 2010 The Central Highlands Regional Strategic Plan 2010 (CHRSP) identifies a number of competitive advantages and drivers of the regional economy. When considering development of the business services sectors, these include: Sustained population growth; Strategic location and access to Melbourne; Regional Victoria’s strongest concentration of IT and computer services and capacity and ability to deliver at a regional scale, with sufficient depth to be able to diversify and compete globally; and A restructuring economy embracing new opportunities in such areas as IT, advanced manufacturing, education and tourism. The CHRSP states that Ballarat will continue to strengthen its role as a regional capital and expand its comprehensive health, education, retail, business, arts and cultural services. The City will restructure its role and relationship with Melbourne by capitalising on its proximity and access to Melbourne and will potentially be an alternative activity centre location for the expanding western suburbs of Melbourne. The strategy identifies the CBD and in particular the station precinct as playing more substantial activity
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centre roles and should build on local business clusters and comparative advantages in IT, computing industry specific research and programs.
Ready for Tomorrow: A Blueprint for Rural and Regional Victoria 2010 Ready for Tomorrow (RFT) is the current Victorian State Government’s development and funding framework for regional Victoria. RFT predicts regional jobs growth in financial services and business services as economies become more service based.
In addition, the State Government is also
considering further decentralisation of government agencies and public service functions out of Melbourne into regional centres. Programs and initiatives in RFT that may support the growth and development of the business services sector in Ballarat include: Industries for today and tomorrow to assist regional business expansion and generate more exports; Expansion of the Industry Capability Network’s services; Infrastructure development funding under the Regional Infrastructure Development Fund; and The Innovation through Clusters’ program that will support the development of supply chain management skills across a range of sectors.
State policy and strategy Apart from RFT, there is limited state-level strategic policy that relates to business services development in regional Victoria. A search of State Government industry development strategies shows that although there are some strategies that could be applied to regional Victoria, most have a strong focus upon economic activity in Melbourne, or take a very broad approach to industry development. Reports accessed are summarised as follows.
A Great Place to do Business: Growing Victoria’s Financial Services Sector 2009 There are 5 key action areas for growing the financial services sector in Victoria. Actions are listed under each key theme that may apply to industry development outside of Melbourne. Positioning Melbourne as a global centre of excellence in pension and funds management; Establishing Melbourne as a Carbon Market Hub for the Asia Pacific; Training the future workforce; o
Facilitate partnerships between the financial services industry and the education sector to meet skills gaps and strengthen intellectual capital in financial services in Victoria;
o
Work with education and training providers to develop and promote financial services training in the Asia Pacific region; and
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Through an Industry Engagement Group, provide opportunities for sector workers to gain new skills and have existing skills formally recognised.
Building on strengths: o
Promote Victoria to financial services firms domestically and abroad as a competitive location;
o
Facilitate new firms to visit Victoria for meetings with suitable business contacts and tailored information briefings;
o
Sponsor inbound and outbound international trade fairs and missions; and
o
Engage with expatriates and alumni working in the sector abroad.
Moving forward from the Global Financial Crisis. Under the Building on strengths’ section, the following statement is presented: “The Government has a strong commitment to driving economic development across the whole of Victoria and has led initiatives to expand the financial services sector outside Melbourne.
As the sector’s regional base
continues to grow, the Government will work with the sector to explore new ways of promoting Victoria’s major regional cities as locations for financial services” (pg 26).
It is therefore anticipated that regional strategic development plans such as the BSCG will provide an opportunity for regional industry, governments and the State Government to collectively progress this objective of growing financial services in regional centres.
Victorian Action Plan for Small Technologies 2010 The Victorian Action Plan for Small Technologies (VAPST) aims to increase the adoption of small technologies by business and industry, improve skills and training and increase the awareness of small technologies and their applications. Of relevance to the BSCG is the area of ICT, where potential small technologies applications are described as being: “(High capacity storage; flexible, lightweight displays; improved processors; quantum cryptography and computing; clothing electronics)”. Applications for business services industries in general are not presented in the VAPST.
Victorian ICT Action Plan: Information and Communication Technology Plan for Victoria’s Future 2010 The Victorian ICT Action Plan (VIAP) has a number of overarching objectives including: Strengthening the role ICT plays in driving innovation and productivity in Victoria; Renewing the focus on the use of innovative ICT in government and driving more market innovation; Increasing the focus of emerging ICT capabilities such as online media and digital publishing; and
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Broadening efforts to strengthen Victoria’s ICT and innovation skills base to meet changing demand. With Ballarat positioning as an ICT centre, the VIAP provides opportunities to increase the ICT capabilities, development and research, and to link business services into technology-based opportunities.
Other policies and strategies An online search was undertaken to identify business services related development policy and strategy with a review sample provided below.
The New South Wales Economy in 2020: Business Forum Discussion Paper April 2010 New South Wales Business Sector Growth Plan September 2010 The NSW Economy in 2020 discussion paper (NSW20) was developed as a precursor to the NSW Business Sector Growth Plan (NWS BSGP) and provides overview results of economic modelling and 10 year foresighting of the NSW economy. The paper investigated 12 key sectors, including professional services, finance and insurance and ICT, and identified sector opportunities: Professional services Potential to develop into one of the most important export sectors particularly in legal, accounting and management consulting; Climate change policies, carbon accounting and compliance and adjustment incentives will result in demands for professional services firms; Potential growth in foreign development investment in Australia will increase demand for ‘local’ professional services; Increased demand for a range of advisory services driven by the ageing population; and The ‘information economy’ will influence how professional services companies are managed and how they manage relationships with domestic and global customers. Finance and insurance The profile of Australia’s financial management structure and resilience were enhanced both during and post the global financial crisis; this should create domestic and global market opportunities; Superannuation implications associated with an ageing population will generate growth opportunities for funds management and possible carbon pricing may provide growth potential in relation to the trading of permits and related financial instruments; China and India, although still emerging as locations of best practice financial services, have a skills base and increasing market shares. Avenues to create co-operative partnerships with these emerging markets are seen as sector opportunities.
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ICT Providing services to support domestic businesses, government and household ICT systems is seen as the main growth opportunity for the ICT sector, including operating / managing their IT systems, support of intelligent knowledge systems and bespoke software; The National Broadband Network will significantly boost the ICT sector and should be a catalyst for significant changes in how businesses operate through new applications and content; This change in business operations and ICT applications will be a key driver of structural change within the ICT sector and the composition of sector growth will be important; and ICT developments will foster closer, faster links between businesses and customers and help drive productivity gains.
Cloud computing (internet-based computing where shared resources,
software and information are provided on demand) will create new development partnerships between business users and ICT providers.
Business and Professional Services Cluster 3 Year Plan 2008 – 2011 (West Midlands, UK) The West Midland Business and Professional Services Cluster Plan (WMBPS) provides some possible comparisons of the Ballarat business services sector and possible responses. The WMBPS notes that although the cluster region has undoubted strength in professional services, it does not have a ‘distinctive reputations in particular area, nor any evident unique points’ (pg 3). In many ways, the same can be said for Ballarat. The vision of the WMBPS is for the ‘regional BPS sector to become market leaders for professional innovation in a number of significant and growing markets, and as a result, develop a distinctive national reputation for the regional BPS sector.’ (pg 3). The report presents a number of market opportunities, including: Cyber business and ICT: the BSP cluster to work more closely with the ICT cluster, growth of local legal expertise in e-commerce law and increase in specialist knowledge of e-commerce within the BPS; Low carbon policies: increase environmental expertise as demonstrated by the architectural sector; Ageing population: personalised legal and financial advice, inheritance and tax planning, as well as increased demand for services related to the development, financial management and operations of aged care homes and services; and Multi-disciplinary consultancies: development of alliances between companies where synergies exists to help improve competitiveness. The WMBPS highlights a number of issues that need to be addressed to realise these opportunities, including: Developing reputations in target markets where there is potential to be a strong player;
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Assisting the BPS sector to identify and define the value of their services to clients to help them understand how BPS businesses can create and / or add value to their businesses; and Reducing risk from global competition and outsourcing by providing services which are more specialist, adding significant value and requiring the development and maintenance of ‘face to face’ customer relations. The WMBPS strategic responses are namely: Developing centres of excellence in emerging and existing markets; Increasing collaboration between the industry and other clusters; Developing more effective client management and relationship skills within the BPS sector; and Promoting the region as a good place for BPS staff to work and live.
Financial and Professional Services Strategy and Action Plan for England’s Northwest 2010 The Financial and Professional Services Strategy for England Northwest (FPSNW) has identified two key objectives for developing the business services sector, namely: Increase the gross value add (GVA) per head of the sector by encouraging higher, valueadded employment and raising sector innovation; and Increase employment in the sector by attracting new investment, fostering growth of existing businesses and encouraging start-ups. Key findings from a review of the sector found: The sector in the north west region is highly reliant on the local economy and needs to increase efforts to source new markets outside of the region; GVA per head varies extensively between sub-sectors, with banking and finance generating 54% more than other sub-sectors; GVA growth in these sub-sectors needs to be supported; The FPS sector has developed expertise in a number of niche areas and should to continue to differentiate its offerings; Greater efficiencies and profitability can be achieved through the development of new products, processes and services; and Improve co-operation between the FPS sectors and the recruitment and training sectors to attract skilled and talented workers, and enhance qualification levels within the sector to increase competitiveness.
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12. Appendix C: Consultations list Shane Manley
Ascet Group
Brendan Calleja
B&D Technologies
David Edwards
Ballarat Group Training (BGT)
Ian Fry
Ballarat ICT Ltd
Andrew Byrne
BJT Legal
Damien Butler
Butler Chartered Accountants
Glenn Kallio, Garry Davis, Ross Cowie and Ian Crossley
City of Ballarat
David Wright
Colliers International
Stephen Pinson
Commander Centre
Barb O'Dwyer / Jodie Gillett
Commerce Ballarat
Doug Lloyd
Committee for Ballarat
Phil Cunningham
Dolilita Investments / Home Loans
Stuart Benjamin
Elmstone Property Group
David Jellett
Garden State Insurance Brokers
Rodney Walton
Haymes Paint
Luke Dunne
Heinz and Partners
Graham Keating
JB Camerons
Jennifer Kelly
JK Personnel
George and Barbara Fong
Lateral Plains
David Abott
Molloy, Orr and Ronan
Alan Morton
Morton Dunn Architects
Colin Littlehohn
Neighbourhood Cable
Paul Stephens
Nevett Ford
David Young
Pet Stock
Neil Jens
PRD Jens Gaunt
Tony Stone & Jock Selkirk
Selkirk
Peter Le Lievre
Stephen Pasture Seeds
Darren Trigg
TGM
Mary Hollick
University of Ballarat
Mal Vallance
University of Ballarat (Technology Park)
Craig Whitfield
Viateck
Glenn Sharp
Sharp Accounting
Joe Dicks
PPB Advisory
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13. Appendix E: Cambridge University Professional Service Firm Course The following are some relevant excerpts from a Professional Service Firm Strategy and Leadership Program held at Cambridge University in December 2010 attended by 2 SED Partners. The excerpts provide further confirmation of the results and recommendations contained in this report. Drivers of strategic competition in the market: Inflows and mobility of capital (particularly in legal services) Technology advances The commoditisation of services Globalisation of clients Increases in the professionalism of technical buyers; and Global and regional labour costs Macro-economic considerations Trade and protectionism Financial market performance & engineering Banks and regulations Characteristics of long-lived professional service firms: Clear vision and strategies for getting there Deep client orientation Firms’ people are as important as clients High performance One-firms firm Strong culture / shared values Collaboration and partnership building Recruitment Development of professionals is at the core of firm beliefs and activities Committed to staying at the top
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