The thriving Australian economy is a double-edged sword for the IT sector – companies are growing, gaining new customers and enjoying new hardware, but the skills shortage is looming on the horizon.
The latest Dun & Bradstreet SmartCompany Industry Growth List for the IT sector shows smart companies are now gearing up for a tough year in the labour market, and are either searching for skilled workers or investing more into training.
The list is a varied one. There are multi-million corporations like Data#3, Fujitsu and Atlassian interspersed among smaller, niche-based IT firms. The top 10 are mostly a group of mid-range firms enjoying some solid growth during the financial recovery– ranging from a relatively small IT supplier and support company Saxxon, which takes top spot, to smart meter firm Energy One.
The total revenue of the top 50 comes to $4.04 billion, with an average growth rate of 103.4%. Average revenue came to $80 million.
But while the IT industry has recovered well from the financial crisis as larger companies begin to spend more on essential tech services, there are definitely some challenges ahead.
There are plenty of IT sectors doing well right now, but it’s the cloud providers that are really taking off. With so many businesses needing to cut costs, cloud software provides them with a cheap solution that doesn’t require top-of-the-line hardware to manage.
Local cloud software provider Ansarada has managed to become one of the fastest growing IT companies by leveraging this need for high-quality software that runs on any office machine.
“We’ve added on another six or seven staff, and revenue wise we’re hitting records every month. We’re increasing the number of clients we have and are hitting 100% client retention rates,” chief executive Sam Riley says.
“We’re also spending a lot of time at the corporate level gearing up to go into the US, along with domestic expansion.”
The company ranks 13th on the list, with 2010 revenue of $5 million, representing a growth rate of 57%.
Ansarada offers a type of software that allows companies involved in major mergers and acquisitions to share documents and other resources online in a secure environment without having to go through tons of meetings.
While larger corporations are often slow to adopt new technologies, Riley says the software is attractive because it relieves them from making lengthy business trips and sending documents back and forth.
“Our industry has always been pretty receptive to doing transactions in the cloud, because in effect there’s been no other way,” he says.
“If there are 10 parties involved all over the world, there are a lot of sensitive documents people need to look at. Anything that runs through a browser is naturally appealing to them.”
Not only is Ansarada well positioned as a cloud provider, but demand for its specific services will grow as the market for M&As expands along with the economy.
Riley will enter the United States next year, (where its major competitors are the same two companies it operates against here), and is also seeking some domestic expansion as well.
“There are more deals happening, a lot of governance and due diligence going on. People are also becoming more of risks which we can help reduce, but the challenges for us will include competing in a mature market like the US, and then being able to scale the business as quickly as possible. “
But of course, there are challenges with any growth plan. Fuelling that expansion plan takes time, money, and more importantly – staff, which are becoming more valuable as experienced workers jump ship for better offers. “As the industry grows there is definitely going to be a skills shortage in software developers,” he says.
On the one hand, Riley says Ansarada is able to minimise its staff expenditure by relying on new technology.
“We manage our own infrastructure, and the stuff that companies like VMware are bringing out, it’s becoming automatic and you don’t need as many staff to run it. As our business has scaled, we’re able to use technology like that,” he says.
But on the other, creating innovative software takes a solid amount of time and effort, and a team of experienced developers is needed. “Translating an idea into an innovative solution is largely still people-based and you need more people to do it,” he says.
Riley says the company is making efforts to ensure developers are doing as much as possible to minimise wasted time.
“We’ve taken a look at where the latest methodologies are for writing software, and the efficiencies we are able to utilise, so we can get one person doing much more without wasting more time on unnecessary tasks.”
“The skills shortage is definitely going to happen. We’re searching and find and learning so we can find new people.”
Riley says the company often has to accommodate for businesses that are slow to adopt new technologies, meaning some of their programs are designed to work on browsers as old as Internet Explorer 6.
“Corporates are the slowest to move with any sort of technology, and that’s challenging for us. You want to develop innovative software there and it makes it difficult to maintain compatibility.”
The nature of IT is that industry standards are constantly changing, especially with software codes and hardware. This presents a challenge to web development professionals, like Michael Cathie of Webplace, who says research and staying in line with industry trends are among his top priorities.
Web design is truly one of the most saturated markets in IT, so keeping on top of the competition is a key challenge for Cathie. He also says this is why training up staff, and making sure everyone is adapting to new technologies is absolutely a must.
“Ensuring that we are meeting industry standards, the client’s requirements and our own standards. As we grow, we are always reviewing what we are doing and ensuring that we are seeking to rectify any issues that may be occurring in the development process.”
“I think the knowledge of new technologies, emerging technologies and so on. Not just social media, but open source technologies. As they develop and move on, companies are using these systems. If a company can’t adapt to these types of things they may lose out in the long run, because an open source app is cheaper to implement and execute than a proprietary system.”
Webplace began after Cathie started the company in 2003. He teamed up with his business partner soon after, who brought some technical expertise to the business. Now, it operates as a development studio working in interface design, CMS and 2D/3D animations, counting Telstra, the CFA and Victoria Police as some clients.
The company ranks 4th on the list, with 2009 revenue of $263,563, with an estimate of $600,000 for the 2010 financial year, representing growth of 127%.
And while IT companies will be rushing to hire this year in order to snap up all the available talent before the competition finds them first, Cathie says his company isn’t moving too quickly – he says taking care of your existing staff is just as important.
“Everyone is motivated by money, really, but we ensure that we meet regularly with our employees to make sure they’re happy with what they’re doing if they need to expand their skill sets, or whatever.”
“We send them to training courses and pay for them to do that. We also make sure we’re flexible with times. If you need to arrive at 10, or have a day off here and there, as long as they’re doing their work then that’s fine.”
Cathie’s approach to hiring represents a lesson for other SMEs – don’t make yourself do more work than necessary. Webplace keeps a documented folder of job candidates, allowing it to have a ready resource of potential workers.
“We try and collect as much information as we can on people we’ve interviewed and retain those details. Good talent is hard to find, but we’re able to maintain a good list of people who are talented.”
IT is rife with competition, with many businesses fighting to deliver their perfect “all in one” solution. So it’s not often that you see a niche operator like Utilisoft, an energy software provider, thriving in such a saturated market.
The company ranks 8th on the list, with 2010 revenue of $3.7 million representing a growth rate of 86.3%.
Having operated in Australia for nine years, managing director Peter Norris says the company has been able to build up a good reputation for developing technology that manages data flows from the exploding popularity of smart meters.
“The focus we have is really on software solutions for utility companies and energy markets. The reason why we’re based both here and in Britain is because of the similarities between the two markets, given the deregulated industries. We are a very niche player though.”
And that’s exactly how they survive. Utilisoft focuses on managing the data flows between operators, retailers and then network distribution companies. They handle all the compliance, customer transfers and metre data.
Being a niche player can be tough, but Utilisoft has managed to build a good reputation by being one of the only operators in the business.
“We’ve been in Australia for about 10 years and we’ve built up a good base here. We are a trusted vendor in the market place,” he says.
But like any other company in the IT sector, Utilisoft is definitely fearing a skills shortage. And as such a niche player, it relies on well-trained and talented software developers and technicians to keep everything running smoothly.
“I think with the growth we’re experiencing, we’re going to need to hire more people. It is challenging, definitely,” he says.
Norris says the company responds, in part, to the skills shortage by ensuring each employee is given a flexible work/life balance.
“The energy world is changing considerably, and with the advent of smart technologies that’s only making our products more popular. But the key is handling all that information – and that’s where we come in.”
“One of the things we need to focus on as an organisation are things like giving a good work life balance. We don’t have large staff turnover as a result of that. Of course, keeping that intact is always a challenge.”
But being a niche player in a growing industry also presents Norris with another motivator – innovation. Making sure Utilisoft is continuing to invest in software development and research is paramount to ensuring growth.
“We need to keep innovating, and that is how we are going to survive. If we keep thinking up new ways to deliver value, and new products, then that will keep us going as a key player in the market.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
