Follow global examples to build success stories

The Australian tech procurement paradox is that despite local providers being less costly and proven, overseas brands were preferred. The government must reform the procurement process.

Australian businesses are not asking for special favours, they are simply asking to be given a fair go, says TechnologyOne CEO Ed Chung

Picture this. Two blocks from your home is a locally owned Italian place. The food is great, and the family that owns it has lived in the neighbourhood for years.

Their kids go to the same school as yours, they sponsor the local footy team, they are always the first to volunteer at community events and a generation of local kids have earned their first wage as a “dish pig” there before learning hospitality skills. Plus, you see the owners buying their ingredients from the local farmers’ market a couple of times a week.

Two blocks in the other direction is a global Italian food chain. Their meals cost about the same, and taste the same as they do in every other branch of the brand because it has a “secret sauce”. The global chain is a household name because it advertises the brand constantly and gives away toys now and again to mobilise the “nag power” of youngsters against their parents.

For most of us, most of the time, the preferred restaurant would be clear.

In almost every country, governments buy things – especially technology – taking into account the bigger picture: what potential supplier gives back the most to the community? Indeed, in the US, it is explicitly seen as a patriotic – and legal – duty to favour American suppliers.

Australia has become the odd one out when it comes to buying technology.

A Senate inquiry earlier this year heard from Australian businesses producing outstanding technology who shared story after story of being overlooked in favour of big overseas companies. Repeatedly, the Australian providers were not only less costly, they were proven. Yet, overseas tech brands were preferred to them. It was clear to everyone there was an endemic “cultural cringe” when it came to technology buying choices by departments and agencies.

A recently released report by Insight Economics captures how costly this will be to our future as a country if not addressed. And it also shows in painful detail how out of step our treatment of technology procurements is with the rest of the world and with how we treat other industries.

“No major mining proposal, transport project or health infrastructure receives the green light without robust economic analysis; but in ICT, major investment decisions are made in the absence of an economic impact assessment”, the paper says.

The paper details a strong and growing ICT sector is more important than ever to a country’s success. The ICT sector grew more than three times faster than the wider economy in OECD countries in the past decade. Not surprisingly, countries with strong ICT sectors grew 10 per cent more than those without.

So how important is procurement in building success?

The report surveys the US, Canada and the UK and finds all had procurement arrangements specifically designed to give local technology providers a leg up when selling to government.

Australian businesses are not asking for special favours. They are simply asking to be given a fair go. Part of that is having their contribution to the things taxpayers care about properly valued.

None of this discriminates against competing offers from overseas companies. But if Australian companies are paying tax in Australia and the companies they are competing against are not, how is that fair? Doesn’t that mean the lack of guidelines disadvantage locals for doing the right thing? The same is true of spending on R&D. Spending the money to nurture new ideas and turn them into products in Australia is something everyone agrees is a positive, and the research backs it up. Shouldn’t that be valued when taxpayers’ money is being spent?

The Insight Economics report makes some practical recommendations to help buyers ask the right questions and measure the outcomes.

There is a growing awareness and sense of urgency in some parts of the federal and state governments that our procurement systems need fixing, and some steps have been taken.

But we have a very long way to go before we can say the competitive playing field is equal.

And to give some idea of the magnitude of the potential impact, consider the value of federal government procurement of ICT products and services.

The government has trumpeted its commitment of $15bn into the National Reconstruction Fund to drive new and emerging industries in Australia. Yet in 2022/23, the federal government spent $8bn on ICT. In just one year. That’ a pretty big potential tool to keep sitting in the policy toolbox.

Ed Chung is CEO of TechnologyOne.

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This content was produced in association with TechnologyOne. Read our policy on commercial content here.

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