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Speech during visit to Playford Capital (a BITS incubator), EDS Building, Adelaide.



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MINISTER FOR COMMUNICATIONS, INFORMATION TECHNOLOGY AND THE ARTS

THE HON DARYL WILLIAMS AM QC MP

Visit to Playford Capital (a BITS Incubator)

Ground Floor, EDS Building 108 North Terrace,Adelaide

Monday 3 May 2004 at noon

Thank you Amanda [Acting CEO Playford Capital].

Introduction

In 2000 the Australian Government announced an ambitious scheme that would give emerging Australian ICT companies a kick start. Four years later the BITS incubators have shown what can be achieved when people with good ideas get together with people who are in the business of making things happen.

Playford Capital success stories

In particular, the businesses that have emerged from incubation here in South Australia are truly world-class. In February, Foursticks, a company nurtured here at Playford Capital, picked up an award and received worldwide recognition at the prestigious "DEMO" conference in the United States. DTex Systems, a winner at last year's Secrets of IT Innovation Competition, was recently part of a trade mission to the United Kingdom, promoting its advanced internal security management tools. Maxamine's web management software won the best product award at the Best of Enterprise Vision Awards in California last year. Maxamine's CEO, Dr Stephen Kirkby, was central region winner of Ernst & Young's Entrepreneur of the Year for Technology, Communications, eCommerce and Life Sciences last year.

These companies, along with other Playford Capital success stories, are part of a generation of new ICT companies supported by BITS incubators, a generation that is now starting to take on the world. In recent months two BITS graduates, Biometrics and CogState, have listed on the Australian Stock Exchange - the first, I am sure, of many to come.

Leveraging BITS funding

One of the great strengths of the BITS incubators has been their capacity to take the investment made by the Australian Government and leverage it with financial and in-kind investment from other sources. In the first three years of the program the BITS Incubators attracted almost $84 million in new funding. Seventy-two million of that was private investment.

Like the other incubators, Playford Capital has taken its $10 million in BITS funding and parlayed it into something much more significant. As of February this year Playford Capital incubatees had attracted $20 million in further funding from venture capitalists, corporate investors and private equity investors in the United States, Europe, Japan and South East Asia, as well as Australia. I understand that Adelaide's inaugural Private Equity forum, held here last month, attracted considerable interest. I am sure that the BITS Incubator Program and Playford Capital have contributed to raising awareness in the venture capital community of the opportunities presented here in South Australia.

The importance of ICT to our economic future

The BITS program has shown that good ideas can be nurtured anywhere, and that good products will be sought out by customers around the world, regardless of where they are produced. For instance, one of Playford Capital's incubates, DSpace, has developed a remote signal satellite-based communications technology that is attracting considerable interest from venture capitalists and customers beyond our shores. And the people-counting technology developed by another Playford incubatee, Beonic, is in use at venues including Melbourne's state-of-the-art Federation Square precinct. Such successes are not only good news for Adelaide but also for Australia.

A strong national capability in ICT will be increasingly important if Australia's economy is to continue to grow in coming years. ICT is embedded in an array of manufactured products and is transforming the `back room' operations of traditional industries right across the economy.

Australia's economy has been one of the best performers in the OECD in recent years. It has also been one of the most resilient in the face of internal and external shocks. This has meant that even at a time when the global ICT industry has been undergoing considerable upheaval, Australia has been able to position itself as a significant player, particularly in specialist, high-value niche markets. Areas in which we already have an edge include wireless technologies, e-security, interactive media and games, intelligent transport systems and photonics.

Last financial year our exports of computer and information services grew by 14 per cent, reaching $1 billion for the first time.

Our exports of telecommunications services reached the same benchmark. In fact, OECD research shows that on average ICT was responsible for a quarter of Australia's GDP growth between 1995 and 2001.

The importance of ICT to our national prosperity will only increase in the future.

More recent research by the Ovum Group puts ICT's contribution at closer to half of GDP growth over the next couple of years. Many of the new business opportunities that present themselves to Australian firms in coming years will demand a capacity to exploit the potential of ICT.

Government strategies and initiatives to drive ICT development

That is why the Australian Government is so keen to see sustainable growth in our ICT sector. The success of every other industry sector will depend to a greater or lesser extent on our capacity to exploit the potential of ICT. The Government has laid the foundations for sustainable growth in the ICT sector through its venture-capital reforms, its tax incentives for R&D, the Backing Australia'sAbility initiatives, the ICT Framework for the Future process, the Electronics Industry Action Agenda, the National Broadband Strategy and a host of sector-specific programs.

The restructuring of Invest Australia, the development of an ICT Investment Attraction Strategy and the launch of the Technology Australia brand are also all promoting Australia as a destination for investment and research.

The importance of collaboration

As a small economy, Australia produces only about two per cent of the world's research output. That means we have to be smart about how we use our limited research capacity and infrastructure. Creating critical mass through collaborations and partnerships, within Australia and internationally, is crucial.

The BITS incubators are all about collaboration, the sharing of skills, the combining of resources.

And we are starting to see the same kinds of collaborations happening across the ICT sector, between scholars, researchers and industry. One resource that perhaps has not been sufficiently tapped is the community of ICT multinationals already here in Australia. Multinationals account for about 45 per cent of our ICT market revenues. They are conduits to global markets not only for their own Australian-developed products and services, but for their local partner firms. They also make significant investments in R&D, software development, manufacturing, support and service provision in their own right.

In the academic world too we are seeing greater collaboration. We even have a world-class research organisation called `National ICT Australia' or 'NICTA' which is the ICT centrepiece of the Government's $3 billion innovation action plan built around the notion of collaboration.

NICTA has entered into research partnerships with organisations as diverse as IBM and the Defence Science and Technology Organisation. Its aim is to maximise the return we get for our research muscle and our research dollar.

The BITS incubators have operated on the same principle. There are dozens of companies who would not be where they are today and making a name for themselves in the global marketplace if it had not been for incubators like Playford Capital and their venture partners.

The Allen Consulting Group report

As you know, the Government recently commissioned the Allen Consulting Group to examine the performance of all 11 Government-funded incubators. It reported that the incubators had performed well by international standards, especially considering the difficult ICT business climate of recent years. The scheme had created jobs, increased ICT revenue, boosted exports and fostered the commercialisation of good ideas. Balanced against these positive findings, the review found that the incubators had not yet achieved financial sustainability.

I am conscious that Playford Capital, like the other incubators, is keen to continue its good work beyond 30 June this year. I am not in a position to announce today whether the BITS Incubator Program will receive further Australian Government funding. The decision on further funding will be made known in the context of the Budget to be handed down on May 11. However, I am aware that Playford Capital has some $5million in funds remaining from the current program. The Government has no in-principle objection to these being rolled over to future financial years subject to the negotiation of appropriate arrangements with the Department.

Conclusion

The future of Playford Capital, like the future of any enterprise in this fast-evolving and dynamic industry, will depend on its capacity to respond creatively to challenge and opportunity. I congratulate Playford Capital on all it has done for ICT start-up companies here in South Australia and wish Playford and its incubatees all the best for the future.