TECH SECTOR STRATEGY 2016
Executive summary Grow Wellington is part of the Wellington Regional Economic Development Agency (WREDA). We accelerate the growth of export-focused sectors by growing sector scale and globally competitive businesses. The tech sector contributes $2.1B or 7% to the Wellington regional economy. It is one of the region’s largest employers and attracts a relatively high level of investment compared to other sectors. It also aligns with the region’s strength as a knowledge and innovation based economy. This strategy profiles the growth opportunities for the tech sector, and Grow Wellington’s approach to developing the sector.
Our vision is that Wellington’s tech sector will be renowned for its tech specialisations and will operate on a global scale. Leading global tech sectors have renowned specialisations supported by access to skills, capital, global markets, infrastructure, and a quality lifestyle. Our strategy focuses on three priority areas: • Connectedness - ensuring connections to local and global markets. • Capability - developing globally competitive expertise. • Capital - providing better access to investment options.
VISION Wellington’s tech sector will be renowned for its tech specialisations and will operate on a global scale
2
CONNECTEDNESS
CAPABILITY
CAPITAL
Local and global connections
Globally competitive expertise
Investment for growth
Facilitate partnerships
Develop skills pathways
Build investment capability
Leverage tech specialisations
Mobilise regional knowledge
Deepen investor pool
Attract business and talent
Enable digital capabilities
Encourage R&D investment
Wellington tech sector – economic impact The tech sector is a key contributor to the Wellington regional economy and one of the region’s largest employers, generating nearly 16,000 jobs1. The sector makes a relatively high contribution to exports, research and development spend, and attracts a relatively high level of private and public sector investment.
1
7
6
5
4 3
2
WELLINGTON
Over the previous 10 years the Wellington region’s tech sector GDP (gross domestic product) has grown 25%. However, over the same period the New Zealand tech sector has grown 40%. The tech sector is capable of achieving greater growth by leveraging its considerable strengths.
8
NEW ZEALAND
The impact of tech is pervasive in society and the economy. This makes it difficult to define the sector and capture its full economic impact. We are working with industry and government organisations to better measure its economic impact. In this strategy, the tech sector refers to businesses that predominantly derive revenue from ICT and digital products or services.2
9
GDP ($ BILLION)
The sector aligns with the region’s strength as a knowledge and innovation based economy. It also strengthens the capability and economic impact of key sectors in the region such as manufacturing, screen and government.
10
1
2006 Wellington’s tech sector has grown 25% over the 2015
Statistics NZ, 2015.
Using the Organisation for Economic Cooperation and Development (OECD) definition of information and communications technology (ICT). 2
$2.1B GDP
last 10 years (Statistics NZ, 2015).
16,000 jobs
Export-focused
Stimulates R&D investment
4,000 businesses
Attracts investment
The economic impact of Wellington’s tech sector on the region.
3
The global tech sector In the global context, Wellington’s sector is a small, young player that can learn from other tech sectors. Silicon Valley, Boston and Tel Aviv have taken decades to become globally renowned tech sectors. It will take time for the region’s tech sector to achieve scale, global connectedness, deep levels of capital, globally experienced entrepreneurs and renowned tech specialisations. Many regions around the globe are investing heavily to grow their tech sectors. The US alone has many regions globally renowned for their sophistication and innovative businesses across many tech specialisations. Tel Aviv attracts the most capital outside of the US and is renowned for enterprise software, security and networking. London’s Tech City is fast growing and is the largest tech sector in Europe, with expertise in e-commerce and finance
technology (FinTech). Singapore is a leading tech sector in Asia, with opportunity to leverage its top financial centres. Sydney is Australia’s most developed tech sector. Leading tech sectors share common elements to reach a global scale: renowned tech specialisations, skilled talent, access to capital, solid infrastructure, access to local and global markets, and a high quality of living. However, Wellington should not seek to strictly replicate other leading tech sectors. Wellington can differentiate itself by leveraging its existing tech sector specialisations. It also has a unique combination of ease of doing business, lower costs relative to other cities, a collaborative business culture, and highly rated quality of living. Silicon Valley New York Los Angeles Boston
Tel Aviv London Chicago Seattle Berlin Singapore
Sydney
Wellington’s tech sector is small compared to leading global tech sectors, however the region offers a unique combination of advantages.
4
Wellington tech sector – where are we now? Wellington is internationally recognised for its capability in software development. There is diverse product and services expertise in web development, mobile development, game development, cybersecurity, data analytics and open source. Within the tech sector, software development has the highest growth rate and makes the greatest contribution to GDP, employment and exports. Historically, the sector has had a strong base of businesses delivering consultancy and software development services. In recent years, we have seen significant growth in startups that are globally focused, pursuing high-growth plans with large investment needs.
Emerging and established businesses are applying their expertise in government, software as a service (SaaS), digital entertainment, education, financial services, health and social entrepreneurship. Startups and SMEs (small and medium enterprises) make up 97% of Wellington’s tech sector. At the other end of the scale, there are large local and foreign owned businesses, with 24 businesses employing 100 or more staff. A promising sign is that the region has the fastest rate of new tech businesses and the highest concentration of web and digital businesses in New Zealand. However, the sector needs a higher proportion of larger businesses with the scale to be successful in global markets.
Wellington’s tech specialisations
ICT SERVICES
SaaS WEB
MOBILE
DIGITAL ENTERTAINMENT GAME DEVELOPMENT
DATA
OPEN SOURCE
CYBER SECURITY
Established
Emerging
5
Wellington region strengths and weaknesses STRENGTHS • Wellington software-based businesses have diverse product and service offerings, and internationally-recognised solutions in government, software as a service (SaaS), media, digital entertainment, financial services, education, health and social entrepreneurship. • A favourable business environment and lifestyle: compact CBD, collaborative business culture, accessibility to private and public decision makers, lower business costs relative to global cities, highest rated quality of living in New Zealand.
S
• Knowledge intensive workforce including New Zealand’s most highly educated workforce.
WEAKNESSES • Talent shortages with global expertise in entrepreneurship, technology and business. • Shallow investor pool with limited options at most stages of capital raising.
W
• Lack of global scale and connectedness, both at sector and company level, makes it more difficult to attract talent and investment.
THREATS • Other global regions are investing heavily to grow their tech sectors. • Overseas talent choosing other tech regions, and migration of businesses and talent out of Wellington. • As government is a major purchaser of tech product and services, the sector is exposed if spending priorities change e.g. change of government or public sentiment influences policy.
6
T
Opportunities – where could we go? CONNECTEDNESS • Leverage tech sector specialisations to take advantage of global tech trends. Wellington is well positioned to deliver solutions in digital entertainment and immersive user experiences, SaaS, mobile devices, internet of (every)thing, cybersecurity, cloud solutions, big data and predictive analytics. • Position the region as an innovative market for R&D, testing new technologies and product development. Wellington’s tech specialisations, small market and fast technology adoption rate provide an ideal environment for testing innovations. • Improve the sector’s connectedness to global markets and other tech sectors to meet increasing needs for digital solutions. • Raise the profile of the sector to attract businesses and talent, ultimately increasing sector scale. Wellington offers a compelling combination of a highly rated quality of living, favourable business conditions, and collaborative business culture.
CAPABILITY
O
• Use tech sector expertise to enhance the digital capability and business models of complementary sectors in the region e.g. manufacturing, screen, government, education, financial services. Connections between the tech sector and complementary sectors improve the region’s capability and lead to innovations. • Create a pipeline that raises the skill levels of the region’s workforce and improves the culture of entrepreneurship. This can be done by increasing linkages between the sector, government and education.
CAPITAL • Attract more investment into the sector to deepen investor pools, and broaden capital raising options particularly post-early stage investment. • Improve sector productivity and innovation rates through a focus on R&D.
7
How Grow Wellington can help Grow Wellington’s role is to develop sector scale by focusing on the critical elements where we can have the greatest influence. Our role is to stimulate an economic environment that enhances the region’s strengths, whilst overcoming barriers to sector growth.
and education organisations to support a globally competitive tech sector focused on exports and innovation. Our strategy focuses on three priorities: to improve the connectedness, capability and capital of the region’s tech sector.
We take a partnership approach and work with national and international industry, government
CONNECTEDNESS
CAPABILITY
CAPITAL
Local and global connections
Globally competitive expertise
Investment for growth
Facilitate partnerships
Develop skills pathways
Build investment capability
Support access to local and global networks, particularly in the Australia and the US markets e.g. export programmes, trade events.
Work with industry, education institutions and government to identify talent shortages and facilitate skills initiatives e.g. skills audits, internships, mentorships, scholarships, academies.
Support access to investment information resources and expertise to enable businesses to grow global scale e.g. capital raising seminars, mapping investment options.
Leverage tech specialisations Create opportunities for collaboration and leveraging sector specialisations e.g. events, showcases, forums for developing tech innovations.
Attract business and talent Market the sector, and amplify major tech events with potential to attract global audiences e.g. Wellington Tech Week, global entrepreneur competition, position Wellington as a test market. 8
Mobilise regional knowledge Develop capability programmes for businesses focused on increasing export revenues and global scale e.g. strategy, sales and marketing, digital strategy, governance.
Enable digital capabilities Enhance the digital competencies and existing business models of the region’s complementary sectors e.g. manufacturing, screen, government.
Deepen investor pool Provide access to investment options e.g. high net worth investors, international investors and funds.
Encourage R&D investment Make programmes accessible to businesses to improve their commercialisation opportunities e.g. R&D programmes, multi-national corporations investing more into R&D.
What would success look like? We aim to achieve the following outcomes for the region’s tech sector through implementation of this strategy:
GDP and jobs
Exports
Profile
Tech sector makes a greater contribution to the region’s economy through an increase in GDP and jobs
Tech sector has a higher level of export earnings
A higher profile for the tech sector attracts more talent, investment and global exposure
Connections
Skilled workforce
Investment
Greater connections for the tech sector to local and global markets provides more partnership opportunities
Tech businesses have easier access to a skilled workforce
Tech businesses have access to a greater range of investment options to meet their growth needs
9
Get in touch
We are open to suggestions and partnerships that help to grow the Wellington region economy. If you would like to be involved please contact us: Contact Phone Email Web
Tan Huynh +64 4 382 0072 tan.huynh@growwellington.co.nz www.growwellington.co.nz
Level 5, 50 Manners Street, Wellington 6011 PO Box 10-347, Wellington 6143, New Zealand