Stories by Claire McEntee, The Dominion Post

Tech firms form breakaway lobby

Kiwi-owned technology firms unhappy with government procurement reforms are mobilising to set up their own industry body. About 12 firms, including Wellington open source software companies Catalyst IT and Silverstripe, and web design firm 3months, have lined up to join the breakaway lobby group, currently called "NZ Rise". The reforms aim to streamline procurement processes, centralise the purchasing of commodity items such as PCs and stationery and deliver "shared services" to government departments. Don Christie, founder of Catalyst IT, said the procurement reforms would disadvantage homegrown companies but that message had not been clearly stated by umbrella industry group NZICT – which was dominated by its "tier one" or higher paying members, which include Hewlett-Packard, IBM and Microsoft. "Massive contracts by their nature will exclude New Zealand companies. Some of the big multi-national integrators are going to get a huge advantage." Another bone of contention had been NZICT's strong support of software patents – to which a number of firms were opposed. "There's a feeling among a lot of New Zealand companies that we need to have that voice." NZ Rise had met with NZICT. "There are times we will work together in the interests of the industry and there are times we will have different messages. "There's no big battle and it seems entirely reasonable companies could belong to both organisations." NZICT chief executive Brett O'Riley said it did not support centralised procurement. "What the Government is talking about is a shared services strategy which has agencies collaborating. The only centralised procurement there's been has been around hardware and there's a recognition that that was low-hanging fruit. "We represent about 300 companies. It's not in our interests to advocate for something which would just benefit a few. "We should be looking to collaborate around the areas where we do agree and that is driving domestic productivity and increasing foreign exchange opportunities for New Zealand."

NZ authorities considering investigation of Google

Google could face a criminal investigation for collecting personal wireless internet data from New Zealanders while filming for its Street View project. The privacy scandal has sparked fears that Google intercepted personal banking details and could link people's internet behaviour to home addresses. Assistant Privacy Commissioner Katrine Evans said her office would discuss with the police today whether Google should be investigated for breaching the Crimes Act. It was already working with privacy commissioners in other countries, including Australia and Canada, to determine whether the internet search giant had breached the Privacy Act. Matt Sumpter, a partner at law firm Chapman Tripp, said it was illegal under the Crimes Act to intentionally intercept a private communication with an interception device, although certain organisations such as the police and the SIS were exempt. "On the face of things there certainly is reason for the privacy commissioner to be concerned, and every reason for the commissioner to be discussing what is potentially a very serious issue with the police." The usual penalty was up to two years' imprisonment, but courts could instead impose a fine and must take into account the financial capacity of the offender, he said. "You're looking here at a very, very large organisation and the depth of its pockets would be a material factor." The Australian Federal Police is investigating possible breaches of that country's Telecommunications Interceptions Act. Federal Communications Minister Stephen Conroy said Google could have "hoovered" up data from banking transactions, but the company has denied this. Evans said it was not known what information Google had collected. "It's all pretty speculative at the moment. We don't know whether it's the actual content of communications or [data saying] this computer spoke to this computer at this time." Google had "locked down" the data while affected countries investigated the matter. If the office found Google had breached the Privacy Act, it could request the company make various undertakings about how it behaved in future, and compensate any individuals who were harmed by the breach, she said. If Google refused to observe the undertakings, the office could ask the Human Rights Review Tribunal to order it to do so. Google has admitted collecting public wi-fi data in more than 30 countries while it photographed streets and homes using cars equipped with 3-D cameras for its Street View mapping service. Spokeswoman Annie Baxter said it was "profoundly sorry" for its mistake, and would work with authorities to answer any questions they had. Baxter said the kind of information collected would have been limited because its cars were on the move and a person would have had to be using their wi-fi network when Google drove by. It had not collected encrypted data, which usually includes bank transaction data.

Small firms could miss out on funding

The information technology industry has given the Government’s research and development scheme the thumbs up, but warns that smaller technology firms could be left out in the cold. More money is needed to help businesses export their ideas and technology and how research and development is defined will be crucial, one source says. Businesses with revenues of at least $3 million a year, a strong R&D record and that spend 5 percent of their turnover on R&D will be eligible for a three-year grant covering 20 percent of their R&D spend, or up to $2.4 million a year. Those grants will add up to $189.5 million over four years, with $22.5 million to be awarded in 2010-11. Firms without internal R&D capability can apply for vouchers worth between $100,000 and $1 million to fund 50 percent of their R&D projects, by commissioning accredited research organisations to work for them. The Government will spend $20 million over four years on the vouchers, including $5 million over 2010-11. The Budget initiatives are in addition to funding provided by TechNZ – the Foundation for Research, Science and Technology's business investment programme. They replace a previous scheme that let businesses claim 15 cents in tax breaks back for every dollar they spent on R&D and was scrapped in 2008. That prompted Auckland software firms Wherescape and Endace to warn they might move their R&D overseas. Michael Whitehead, chief executive of Wherescape, which develops datawarehouse software, says well-established companies such as his can take advantage of the new grants, but smaller firms, particularly smaller software firms, appear to have been overlooked. "If we were starting off, the TechNZ scheme would be a better option than the vouchers. For companies like us, software companies, the assistance we need is from international experts, not from Crown research institutes." New Zealand Trade and Enterprise last year slashed export and commercialisation grants for 2009 to 2011 by $40 million – about half. It appears that shortfall has not been made up and the Government has not indicated more assistance is on the way, he says. "The big problem New Zealand has got is the commercialisation of the research. They're not talking about the fact they took $30 million out of it, they seem to be forgetting that." A lot will depend on how research and development is defined, Whitehead says. If it is defined as "ground-breaking" and does not include work to improve on existing research or products, software firms could lose out. Wherescape has received $310,232 from TechNZ, which will half-fund the development of a new product, and the company will stick with the TechNZ scheme where it can. The new grants allow for only 20 percent funding, but the money is not project-specific or dependent, which is a bonus, he says. "Overall I think it's a great start." Mike Riley, chief executive of data monitoring software firm Endace, says the new scheme will funnel money into commercially viable R&D "rather than just putting money into science for the sake of science". The old tax credit system was of no practical use to high-growth firms that were not yet profitable and did not pay tax, he says. Endace is eligible for the new grants and will make use of the voucher system. The Government's focus on proven firms is sure to disappoint some smaller early-stage firms but is understandable. "It's hard for a government to act as an angel investor and put small amounts of money into large numbers of firms and get any kind of reliable outcome." Brett O'Riley, chief executive of industry group NZICT, says the new grants scheme is an improvement as it should target investment at the right firms and ideas. The old tax-breaks scheme was appealing because it was simple to operate, but undeserving companies could cash in, he says. "Given we're in a very fiscally constrained environment, what this does is ensure the dollars are more likely to be matched against the best opportunities and those opportunities will be determined by the experts rather than the accountants." Any smaller companies that did not qualify for the grants could still snap up the vouchers, which would give younger firms access to highly skilled people, or TechNZ grants, he says. The extra $11 million earmarked to commercialise the work of research organisations will help New Zealand cash in on its innovation, he says.