Government backs software venture targeting UK

Funding of $1.26 million was awarded today for a joint venture of five New Zealand software services companies looking to expand their outsourcing business in the United Kingdom. The funding was announced by the Minister for Industry and Regional Development Jim Anderton.

"The Labour Progressive Government has invested in the joint venture, which has a working name of Outsource to New Zealand Ltd (O2NZ), because it believes there will be a significant return on the investment through new foreign exchange earnings and high-value jobs.

“This joint venture also gives these companies the increased scale they need to position themselves for larger contract work than previously possible. It will also help raise the profile of New Zealand IT in the UK and elsewhere," Jim Anderton said.

The five JV partners (Synergy International, CGNZ, Optimation, Black Coffee Software and Catylist IT) are investing $1.95 million in the new business over the first two years.

The Government’s investment is being made through Investment New Zealand’s Strategic Investment Fund (SIF), and it is dependent upon the joint venture creating new jobs and further investment being made by the partners.

Payment of the grant will be made in three tranches, contingent on milestones such as the establishment of a legal joint venture entity, further investment by the partners and business targets such as key staff appointments.

"Government support has played a key role in the success of outsourcing in countries such as Ireland and India. While growth in our information and communications technology (ICT) industry has slowed down, the Indian IT services industry today enjoys growth in excess of 30 percent, due in part to Government support post Y2K.

“Country branding in the outsourcing market is critical because clients usually select a country first according to the needs of a project and then a company from that country.

"If New Zealand ICT companies are to take advantage of global outsourcing opportunities, the country needs to establish a name for itself as a productive, reliable and innovative supplier of hi-tech services," Jim Anderton said.

Gartner Research last year said New Zealand’s best opportunities are at the higher end of the application development life cycle, such as research and development, and architecture design.

They also said the UK represented the strongest immediate opportunity for New Zealand because of strong ties between the two markets and the growth in the UK outsourcing market.

"The benefits of the Government’s investment in the joint venture will flow through to other New Zealand ICT companies thanks to increased awareness of New Zealand ICT offshore, keeping graduates in New Zealand (or working for Kiwi companies offshore), building up intellectual property, bringing to New Zealand valuable international industry knowledge and establishing a network of domestic suppliers," Jim Anderton said.

A brand name for the joint venture will be announced in the UK before September.

Editor’s note

The Strategic Investment Fund is administered by Investment New Zealand and is designed to supplement and facilitate investments that create either 200 new jobs and/or attract $50 million in new investment. For more information on Outsource2NewZealand, visit www.o2nz.com For more information on Investment New Zealand visit www.investnewzealand.govt.nz

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