The geographic size of Australia combined with a population of only 20 million, means that the local ICT distribution channel is very different than what is found in the U.S. The local ICT channel is quite fragmented and characterized by small, specialist resellers. Resellers/distributors look for cutting edge products to sell to the market, and they want to bundle services with new products to increase revenue streams. Additionally, not all resellers and partners provide marketing support. Some distributors/resellers in the local channel are of comparable size (employees and turnover) to companies in the U.S. channel, but most are much smaller;
Market Demand Australians are receptive to high-technology equipment, creating opportunities for U.S. vendors of Information Communications and Technology (ICT) equipment and services. For example, Apple has opened one of its few overseas flagship stores in Sydney, and the demand for its products reflects Australians’ love affair with high-tech products. In particular, demand is very strong for mobile wireless products and mobile applications. In the telecommunications market, 3G access is the quickest growing broadband segment in the local market. Another key driver will be the Federal Governments proposed National Broadband Network (NBN). In May 2008, the Federal Government issued a Request for Proposal (RFP) to build a National Broadband Network (NBN). In April 2009 the government announced its plan to invest up to USD$30 billion over eight years to deliver fiber-to-the-home to domestic and business customers.The new network will: •Connect 90 percent of all Australian homes, schools, and workplaces with broadband services up to 100 megabits per second and 100 times faster than those currently used by many households and businesses •Connect all other premises in Australia with next generation wireless and satellite technologies that will deliver broadband speeds of 12 megabits per second. The Federal Government established the NBN Co, which will build and own the wholesale infrastructure. Telecommunications carriers and ISPs will purchase access from NBN Co.
Market Data The Australian ICT market is valued at approximately US$70 billion, and accounts for eight percent of Gross Domestic Production (GDP). The market is growing overall at a rate of six percent annually. Telecommunications •At the end of July 2010, there were nearly 10 million active Internet subscribers in Australia. •92 percent are non dial-up. •Australians are accessing higher speed plans – with 71 % accessing plans with speeds of 1.5Mbps or greater. •DSL is still the most preferred access technology – accounting for 44 % of all connections. •Mobile wireless (on the 3G network) is growing rapidly with 3.5 million subscribers at June 2010 – representing a 21.7 % increase since December 2009. •There are more than 24 million active cell phones in the local market (100% saturation). In Australia, the information technology (IT) services industry accounts for approximately 35 percent of the total IT market and is valued at nearly US$11 billion. Growth in the IT service market slowed through 2008-2009 but is showing signs of picking up pace.The local IT market is mature and sophisticated. End-users, whether corporate, public, or retail, are early adopters of cutting-edge technology products. U.S. companies dominate the local market. In 2009, U.S. software accounted for 38 percent of software imports.
Best Prospects U.S. companies will always succeed in the local market introducing innovative, cutting-edge products. “Me-too” products struggle for market share in an environment where competitors are already well-entrenched.At the consumer level, good opportunities exist for companies developing mobile applications and solutions, as well as social media applications. At the enterprise level, companies are still trying to aggregate all their data sets, and are demanding solid knowledge management and filtering solutions. Software as a Service (SaaS) is still strong in the local market, and network security and file security solutions are in good demand. Demand for web-based applications will increase as the NBN is rolled out.
Key Suppliers U.S. companies are some of the preeminent suppliers of IT products and services to the local market. It is one of the first countries that North American companies export to and is due in part to the fact that: -English is the main spoken language. As such localization of brochures/literature and advertising materials is not often required. -Australians are early adopters of high-tech equipment and technologies, and are, therefore, sophisticated, experienced and discerning in relation to the quality of the product/service. -Many Australian business practices are similar to that employed in the U.S. As such, many software packages can be more easily sold and implemented in the local market than in other parts of the world. -In terms of population, Australia is small enough to generate market data/sales figures in a timely fashion. Coupled with the fact that the market is IT-savvy, Australia is an ideal location to test new products and distribution strategies. -Americans feel comfortable dealing with the Australian business community, as do Australians in dealing with U.S. companies. -Many U.S. ICT companies have been in the market for years (for example, IBM, EDS, Cisco, etc) and therefore, have deep experience with selling into the local market. The Australian government system is transparent, the legal system is reliable, and intellectual property protection is robust. -A strong Australian dollar makes importing U.S. products attractive.
Prospective Buyers Retail -There are only a handful of big retail dealers. These firms sell brand name computers, leading brand software and peripherals for PCs and Apple. -The big retailers prefer to buy through a local distributor. They have a large number of suppliers (over 2,000 in some cases), they will expect to return shelf product to the local distributor, and are only interested in selling proven products that they can sell in large volumes. -There are a large number of very small retail outlets and white box sellers. These companies typically assemble PCs and sell peripherals and software for PCs. Internet -According to the Australian Bureau of Statistics (ABS), there were approximately 9.6 million active internet subscribers at the end of June 2010. Nearly 92 percent of these connections are non dial-up, with 71 percent of all access connections offering a download speed of 1.5 Mbps or greater -By far the fastest growing technology is mobile wireless, with 3.5 million subscribers in June 2010, an increase of 21.7 percent from December 2009. Multi-National Companies/Corporate Sales -In some cases, corporate headquarters can influence their local subsidiaries’ IT purchasing decisions. If a U.S. vendor already sells its products to the head office, it is worth asking the contact at the company for the name of the IT purchasing officer in the local market. If the local contact evaluates and likes the product, he may be able to recommend your products to one of the distributors who sell to them. -The local subsidiary will not buy the U.S. vendor’s products if there is no local backup support. Government Market -According to Gartner Group, the Australian federal government spends over US$6 billion on ICT products and services making it the biggest individual buyer in the local market. -Sales cycles are typically very long -The tender process can be very expensive -Partner with a distributor who is certified to sell to the government and who has a wealth of experience with the tender process Educational Sales Schools -The local academic market is very competitive and the process for having products evaluated for school syllabi is very rigorous and time consuming. -Australia is divided into six States and two territories (Queensland, New South Wales, Victoria, South Australia, Tasmania, and Western Australia), and (Northern Territory, and the Australian Capital Territory). -Syllabi for each age group of pupils are drafted at the State level. At the start of each year, each State will release information on what level of proficiency its students must reach by the end of any given subject. -Distributors conduct a road show of all the schools in each State at the start of the year and present their range of products. Schools then choose reference materials that reflect their syllabi. -In the education market, partner with a local distributor with proven experience in selling educational titles. -There are only a small number of distributors of educational titles in the local market. -Educational titles will need to be localized to include Australian English spelling. University Market -The federal government funds the majority of Australian universities. Only a handful of universities in Australia are privately run and funded. Buying decisions are made by each individual university, and in most cases, the end-user will be the buyer and he/she will be the person who needs to be influenced by the sales pitch. -Multinational vendors such as HP, IBM and Cisco fund much of the research that is carried out in local universities. Existing partnerships that a U.S. vendor has with these companies in other markets are worth leveraging in the local market.
Market Entry Strategies There are number of ways that U.S. vendors can locate local partners: -Sift through requests for product information that come from Australian distributors directly onto the U.S. vendors’ website. -Search the Internet for Australian ICT companies with the appropriate distribution/resellers skill sets. -Meet Australian companies at trade shows either in the U.S. or abroad. -Speak to local ICT associations and user groups. These groups usually always pass information of companies looking to find partners to their members. The Australian associations will have either a website or a newsletter that they distribute to their members with such information. -Speak to a technology partner that is already distributing in the local market. Sometimes their local partners (through their channel manager) will help the U.S. company identify potential partners. -U.S. ICT companies can approach their distribution partners in the U.S. It may be that they have a subsidiary in the local market and are interested in representing the technology in the market. For example, Ingram Micro has a subsidiary in Australia, and they may want to add to their range of products they represent in the local market. -Ascertain if competitors’ products are sold in the local market and generate a list of all of their local representatives. In certain cases, through one reason or another (a competitor goes out of business or wants to sell direct), some of these may be looking to locate similar products from another vendor. They have the channel, end-user market and support process already in place. Additionally, it is beneficial to analyze competitors’ “go-to-market” strategy in foreign markets, as it can serve as a model for international expansion. -Engage the support of a local consultant. Most consultants have a background of working in the industry for many years with large ICT companies as product and channel managers. They have an excellent knowledge of the local market and key players. Consultants offer a range of services; generating market intelligence, locating local partners, advising on marketing strategies, acting as a master distributor and ensuring that local partners are making quotas and following up on trade leads. Some consultants will, for a pre-agreed period, manage the local subsidiary and subsequently, hand over the company to the U.S. parent to manage. Some have the facilities to provide back-end call center support in the region and bill according to the volume and duration of support calls taken.
Essential Information on the Australian Channel Success in the Australian ICT market depends, to a large degree, on how well U.S. vendors work with the local sales distribution channel. If local distributors don’t receive prompt attention to their customers’ inquiries, or if the U.S. vendors do not devote enough resources to assist in the promotion of the product, sales will never reach their full potential.Listening to the needs of the local partner will ensure that a U.S. vendor’s local business will be a success. If the partnership does not flourish, success in the local market may be short-lived and the damage to the relationship with local end-users may be irreparable. Australian companies evaluate technologies and products to distribute in the local market based on certain set criteria. Technology Local companies look for the latest cutting-edge technologies to distribute and integrate. They are constantly monitoring U.S. technology trends in an effort to gain an advantage on their local competitors. Margins on new, in demand technologies are much higher than on more mature products. Timing does also play a part. If the technology is too new, or unproven, it will make take time to sell in the local market. Margins For commodity based products, most distributors will ask for discounts of 40 points. Any less, and it becomes uneconomical to provide adequate marketing, sales, and support to promote the technology in the local market. With a population of 20 million, Australia is a relatively small market. Unlike in the U.S., where companies can generate significant revenue streams on the back of high volume/low margin selling, Australian distributors need to factor in higher margins as they will never sell the same volume as U.S. distributors. Accordingly, U.S. vendors need to adjust their expectations of what is considered a big order. Australian service companies will accept lower margins on selling software or hardware as long as they can trade it off with increased provision of services or support. Exclusives At the outset, most of the smaller local companies will ask for exclusivity on a product, but will not refuse to enter into a relationship if not given that right. In most cases for the local market, a vendor may have two or three principal distributors for the country and a range of resellers and integrators who supply the product. However, distribution agreements will depend on the product and the number of vertical channels in which it can be sold. Conversely, large local systems integrators support multiple vendors, and will be reluctant to support one product exclusively.As a rule of thumb, it is preferable to opt at first for one or two non-exclusive distributors in the channel and monitor how sales progress. Sign On Fees and Training Many Australian companies report that U.S. vendors place unrealistic demands on them, by asking for sign on fees or fees for marketing, sales and technical support training. U.S. vendors are showing more creativity and flexibility nowadays by providing online training or carrying out a portion of the training in Australia. From an Australian company’s perspective, the costs of gaining the required skills to sell and support the U.S. product need to be balanced against the potential revenue streams. Experienced International Managers Many local companies are run by directors with hundreds of years of experience in the ICT industry. U.S. companies need to fill their international business development divisions with experienced professionals who can listen, show flexibility and have the ability to make decisions on behalf of the company that reflect nature of the local business environment.
Types of Distributors Master Distributorship Tier One - The tier one group includes a number of very large “time and place” distributors with revenues in excess of US$300 per annum. Companies include: Ingram Micro, and Tech Pacific. -Branches in all the key Australian States -Multi vendor distributors -Distribute high volume products -Are not strong at providing marketing assistance -Only distribute companies’ products who have a marketing presence in Australia Tier Two - The top two dozen distribution companies in this category generate revenues in the vicinity of US$70million. -There are approximately 20 tier two distributors -More focused on core product areas such as networking equipment, multimedia applications or desktop solutions -Some have introduced a service solution component to their skill sets Value-Added Resellers -The bulk of the local ICT channel is made up of a very large number of VARs -Small number of employees, but have the ability to take on contractors as projects require -Most concentrate on providing value-added services -Most operate in niche markets are very specialized -High degree of expertise
Market Access Issues and Obstacles In 2005, Australia and the United States enacted a Free Trade Agreement (FTA). The FTA eliminated duties on more than 99 percent of tariff lines including IT software and hardware.The Australian government imposes a Goods and Services Tax (GST) on both imported and locally manufactured equipment. The GST is a broad-based tax of ten percent on the supply of most goods and services consumed in Australia. It is akin to the value-added tax systems in Canada and Europe.Foreign companies that provide consulting and other services within the market are required to register for an Australian Business Number (ABN). By registering for an ABN, the Australian Tax Office is able to ensure that the Australian customer pays GST on the service it receives. U.S. firms who are exporting products to Australia, as opposed to providing in-country services, do not need an ABN number. The Australian Communications and Media Authority (ACMA) is empowered via the Telecommunications and Radiocommunications Acts to mandate technical standards relating to items of customer equipment, customer cabling and specified devices. The aim is to protect personal health and safety, facilitate access to emergency services, protect the integrity of public networks, enable interoperability of voice telephony services, and contain interference to and from a range of radiocommunications and non-radio communications devices. These standards include: Electronic Compatibility Arrangements (EMC),Electromagnetic Radiation Arrangements (EMR), Radiocommunications Regulatory Arrangements, Telecommunications Regulatory Arrangements, and Network Standards and Codes.In the majority of instances, international Standards are recognized in Australia. This eliminates the necessityof re-testing. For EMC compliance, international standards EN 55022 or CISPR 22 are recognized locally.Software, such as switchless, software-based solutions for call and contact centers that indirectly connect to the local telecommunications network require compliance with the local Telecommunications and Radiocommunications Act.Responsibility for establishing and attesting to compliance typically lies with the importer, manufacturer, their authorized agent, or in some cases the licensed operator of a device.
The US$30 billion Australian telecommunications market is steadily growing at 4 percent per annum. The American market share is 40 percent, making Australia a top priority market for U.S. companies. Companies have invested heavily in telecommunication infrastructures such as VoIP, broadband, and 3G networks. These companies are now offering differentiated services such as Naked DSL – a mix of DSL and VoIP telephony services through one broadband line.
Promising opportunities exist for American vendors of Voice over Internet Protocol (VoIP) equipment and solutions. While large Australian companies have implemented VoIP solutions, the Small-to-Medium Enterprise (SME) market is rapidly increasing services and solutions.
Between 1998 and 2008-09, access to computers increased from 44 percent to 78 percent, while household Internet access more than quadrupled from 16 percent to 72 percent. The majority of Australia’s 8.4 million active Internet subscribers preferred digital subscriber lines (DSL or xDSL) over non dial-up connections. Reflecting the impact of the global financial crisis on the telecommunications market, DSL decreased from a 63 percent market share in December 2008 to 57 percent (4.2 million subscribers) of these connections.
Following DSL, mobile wireless subscribers ranked next highest in market share. Subscriptions increased from 20 percent (1.3 million subscribers) of all non dial-up connections in December 2008 to 27 percent (two million subscribers) in June 2009 (Note: information is inclusive of mobile wireless subscriptions to the Internet via datacard or USB modem, but excludes data on Internet connections via mobile telephones).
As more Australians have gained access to the internet, the use of high speed internet has also been increasing recently. Between June 2006 and June 2009, household usage of low speed internet (speed connection of 256 Kbps to less than 512 Kbps) increased consistently until June 2008 when it subsequently declined in June 2009. The number of households with Internet speeds 512 Kbps to less than 1500 Kbps, declined from March 2007 to June 2008 and then increased slightly for the rest of the period. High-speed Internet significantly increased in popularity from 2006-2009. In June 2009, the number of subscribers on speeds of 1500 Kbps or greater was 3.9 million, a significant increase over the 0.8 million subscribers in June 2006. In June 2009, both the 1.5 Mbps to less than 8 Mbps and the 8 Mbps to less than 24 Mbps segments had large subscriber bases of 1.8 million and 1.7 million, respectively.
Australian Internet Service Providers (ISPs) offer plans with broadband download limits, and DSL remains the most popular broadband connection choice. Cable networks offer the most affordable high-speed Internet access but very few Australian households have access to cable networks. Note: Exchange rate: US$1.00 = AU$1.15 (June 30, 2010)
Market Demand Australians are receptive to high-technology equipment, creating opportunities for U.S. vendors of telecommunications equipment and services. This receptivity is reflected in the 2009 OECD survey of 30 developed countries which ranked Australia, with 5,356,000 subscribers, 13th in broadband penetration. Sydney also ranked 13th of the top 30 hub cities in Internet bandwidth amount. At a cost of US$62.83, Australia’s average monthly subscription price ranked 9th among the top 30 developed countries.
Within Australia, the penetration of broadband varies. The Capital Territory registers the highest proportion of households with broadband Internet connections (74 percent of all households), while Tasmania and South Australia record the lowest proportion of households with broadband connections (49 percent and 54 percent, respectively).
The expansion of mobile technology plays an important role in the continued growth of broadband penetration in Australia. The predominant mobile technology in the local cellular telephone market is 3G. Services of 3G increasingly offer new options for voice calls, SMS, and content data. As the cost of 3G data plans are decreasing, consumers are using more mobile on-line services. Plans offering 3G services are viable for households seeking wireless broadband access. At the fixed broadband level, the only real 2G- 2.5G-3G price competition exists in offering ADSL+2 services. Companies offering xDSL speeds up to 8Mbps have all kept their prices fairly constant. These carriers’ best packages are bundled with phone line rental and phone services. As prices for these services continue to fall, more consumers will come on-line and use available telecommunications technologies. For example, some of the ISPs now offer Naked DSL plans including free VoIP calls.
In addition to the expanding 3G market, at the enterprise level, small, medium, and now large Australian corporations use VolP technology, a change that has been driven by consumers shifting to high-speed Internet plans for home and business use. The more traditional carriers offer VolP calls for the small and medium business sector. Over the last five years, companies aiming to reduce operating costs have promoted internal VoIP solutions. Many use VoIP technologies externally as well as in their contact centers. The large enterprise VoIP market is mature while the best opportunities exist in supplying these solutions to the small and medium enterprise (SME) market. As broadband costs fall, many SMEs can purchase more software-based switching solutions and attendant hardware to drive these solutions.
Fixed Wireless Access (FWA) wireless technologies (excluding 3G data broadband) are also recently popular. With these services, customers no longer need landlines. Connecting FWA is also a simple process. Some Internet suppliers offer fixed wireless broadband options for businesses.
In addition to 3G, VoIP technology, and FWA, the Federal Government is also contributing to the growing broadband demand through its encouragement for businesses and education providers to take on more broadband technologies. It plans for Australia to be a leader in broadband infrastructure and penetration. A major move towards such leadership occurred in May 2008 when the Federal Government issued a Request for Proposal (RFP) to build a National Broadband Network (NBN). In April 2009, the Government announced its plan to invest up to US$40 billion over eight years to deliver this faster broadband system to homes and workplaces. The new network will: • Connect 90 percent of all Australian homes, schools, and workplaces, with broadband services up to 100 megabits per second, and is 100 times faster than those currently used by many households and businesses; • Connect all other premises in Australia with next generation wireless and satellite technologies that will deliver broadband speeds of 12 megabits per second • Directly support up to 25,000 local jobs every year over the 8-year life of the project.
Children The 2009 Children's Participation in Cultural and Leisure Activities survey found that of Australia’s 2.7 million children aged 5 to 14 years, 79 percent use the Internet. Home was the most common site of Internet use (73 percent), followed by school (69 percent). Of the two million children using the Internet at home, educational activities (85 percent) and playing online games (69 percent) were the most common activities. Less than half of the children surveyed (42 percent) who used the Internet at home spent two hours or less on-line per week and four percent were online for 20 hours or more.
In 2009, an estimated 841,000 children (31 percent) aged 5 to 14 years had access to their own cellular phones, although this has not translated to increased Internet use. Of these children, the majority (60 percent) used their cellular phones mostly to contact family. Only four percent used their cellular phones to access the Internet.
An estimated three percent of the children who accessed the Internet (approximately 72,000 children) had some kind of personal safety or security issue on the Internet. The same percentage of children who have cellular phones (28,000 children) have experienced a personal safety or security problem while using a cellular phone.
Market Data The number of non dial-up Internet subscribers is increasing in both the business/government and household sectors. Most Internet subscribers use broadband and DSL connections. Business and household settings have increased demand for Internet subscriptions since 2006, and download speeds between 1.5 Mbps and 8 Mbps have become most popular.
Best Prospects Opportunities exist for U.S. vendors of expanding telecommunication network equipment. Such as switches, routers, security solutions, power supplies, and network monitoring. Although the VoIP market is maturing, the SME market still has good opportunities for U.S. vendors of hardware and software solutions. U.S. IT security vendors also have an opportunity to expand into the Australian market because of the government Request for Proposal for a National Broadband Network.
Telecommunications products offering portability, and convenience, will be most popular in the Australian market. As customers across greater age ranges use these products, simple and convenient products will appeal more to children and senior users. Simpler purchasing processes will also be more popular.
Key Suppliers The United States accounts for a large proportion of Australian-imported telecommunications products and services. U.S. companies have Australian subsidiaries and large service divisions. Multinationals also have Australian offices.
Prospective Buyers Telecommunications carriers are tier one targets in Australia. There are approximately 700 ISPs in the local market. The top 200 Australian companies are ideal targets for U.S. telecommunications vendors. Clients in the private sector come from the following: • Finance and Insurance • Retail • Mining • Manufacturing The Federal Government purchases about 50 percent of Australia’s telecommunications products and services. Welfare agencies and the Department of Veterans’ Affairs, are key clients. The defense market is also crucial within government account strategy.
The process of tendering for Australian government projects is transparent. The Australian Government and its federal agencies will require assurance from the U.S. company that it will provide support and service in Australia. The U.S. company will need to partner with a local company, or install its own support team in the country, in order to guarantee support and service in Australia. While sales cycles on most telecommunications projects can be reasonably long, U.S. vendors should expect longer waiting periods for government tenders.
Service providers will also be important for driving sales. U.S. vendors will need to engage large integrators and local providers to reach corporate end-users.
Market Entry Strategies There are a number of options for IT companies to sell products into the local market which include: • Opening a subsidiary – there is considerable up-front costs associated with this model, such as costs associated with hiring staff, complying with local HR laws, leasing office space, and marketing. • Identifying a sales partner(s) who can carry out lead generation, pre-sales, implementation, and support services. • Generating leads directly from the U.S and implementing remotely, or engaging a local firm to carry out the implementation. Australian firms stress the importance of local support and service when trading partners are distant. The third market entry plan is probably the least viable to implement. Government agencies will always show a preference in awarding contracts to companies that can provide local support. American companies should visit Australia, both to meet prospective partners and to demonstrate ongoing support, as this is the common practice of their European competitors.
Market Access Issues and Obstacles In 2005, Australia and the United States enacted a Free Trade Agreement (FTA). The FTA eliminated duties on more than 99 percent of tariff lines including IT software and hardware. Despite the FTA, there are still market differences and obstacles American companies should be aware of when entering the Australian market. These include: a Goods and Services Tax, the necessity of an Australian Business Number, and technical standards as determined by the Australian Communications and Media Authority.
Unlike the United States, the Australian government imposes a Goods and Services Tax (GST) on both imported and locally manufactured equipment. The GST is a broad-based tax of 10 percent on the supply of most goods and services consumed in Australia. It is akin to the value-added tax systems in Canada and Europe.
Foreign companies that provide consulting, and other services, within the market are required to register for an Australian Business Number (ABN). By registering for an ABN, the Australian Taxation Office is able to ensure that the Australian customer pays GST on the service they receive. U.S. firms who are exporting products to Australia, as opposed to providing in-country services, do not need an ABN number.
The Australian Communications and Media Authority is empowered via the Telecommunications Act 1997 and the Radiocommunications Act 1992 to mandate technical standards relating to items of customer equipment, customer cabling, and specified devices. Software, such as switchless software-based solutions for call and contact centers that indirectly connect to the local telecommunications network, requires compliance with the local Telecommunications Act and Radiocommunications Act. The aim is to protect personal health and safety, facilitate access to emergency services, protect the integrity of public networks, enable interoperability of voice telephony services, and contain interference to and from a range of radiocommunications and non-radio communications devices. These standards include: Electronic Compatibility Arrangements (EMC), Electromagnetic Radiation Arrangements (EMR), Radiocommunications Regulatory Arrangements, Telecommunications Regulatory Arrangements, and Network Standards and Codes.
In the majority of instances, international Standards are recognized in Australia. This eliminates the necessity of re-testing. For EMC compliance, international standards – EN 55022 or CISPR 22 – are recognized locally. Responsibility for establishing and attesting to compliance typically rests with the importer, manufacturer, and their authorized agent; or in some cases, the licensed operator of a device.
The local software market was worth US$6 billion in 2006 and
should reach US$6.5 billion by 2008. Overall it is growing at approximately eight percent. Some sub-sectors such as security solutions and Voice Over Internet Protocol (VOIP), however, have enjoyed double digit growth for many years.
The Australian software market offers some of the best opportunities for U.S. technology developers. The Australian IT market is mature and sophisticated. End-users, whether in corporate, public, or retail sectors, were early adopters of cutting-edge, technology products. U.S. companies and their products are widely-accepted in the local market, making it easier for new-to-market companies to enter the market. In 2005, U.S. software accounted for 42 percent of Australia’s software imports.
Third-country and cutting-edge, software technologies are also well-established in the local market. Companies such as SAP, Fujitsu, and Alcatel have a strong client base in the local market. Israel, Japan, Germany, and the United Kingdom are the most common source of imports of third-country software into Australia.
Local market partners are very experienced in working with U.S. high-tech companies and have an excellent understanding of how best to market and generate sales leads in Australia. This and the commonality of English as the main spoken language, mean that Australia has become one of the first, non-U.S. destinations that U.S. software companies should consider. It is easier to find a local partner for cutting-edge applications than a mature, me-too product. Since it can be expensive to market a new product, local partners will want to ensure that they can maximize their return on investment, which a cutting-edge technology will ensure. The challenge for U.S. software developers when identifying a local partner is to fully understand the local market opportunities. Australia is a relatively-small market with a population of 20 million. Many potential partners will be small companies with four to eight, full-time employees. Australia can provide excellent opportunities for small-to-medium (SME), U.S. software companies.
Unless the software has application to a specific, vertical market, the best opportunities lie in selling solutions to Australia’s largest technology consumers. These include the government, finance/insurance, telecommunications, and retail markets. Solutions these markets demand include: voice messaging solutions (including VoIP applications); security solutions for networks/email environments/anti spam and “phishing;” workflow/document and asset management; corporate governance compliance solutions; and data cleansing and quality tools.
Software as a Service (SaaS) as a delivery mechanism is gaining traction with local end-users, SME companies.
The provision of goods and services to Federal and State Government agencies offers excellent opportunities for U.S. IT companies. Some of the multi-million dollar contracts on offer are for the provision of a suite of very complex services calling for an experienced prime contractor. It is possible, however, for a smaller local integrator to win part of the contract if it has participated in the tender bid, due to the nature of the specific technology and product skills. Thus, if the U.S. company partners with a well-connected local firm, the opportunities present in this market segment are very promising.
Good opportunities exist in the private sector in the finance/insurance, telecommunications, retail, and manufacturing markets.
Australia has only just begun to see local ISPs offering viable, robust VoIP solutions to consumers. With over 4.3 million subscribers and the number expected to grow strongly again in the next year, U.S. developers of VoIP solutions should find substantial opportunities in the local market.
Security solutions are also in demand. Given the ever-changing nature of security threats to networks, email systems, and websites, governments and companies are prepared to devote a good proportion of their IT budgets to ensuring that their assets are secure. This is particularly true for the government agencies like defense and Centrelink (welfare agency), as well as all private financial institutions.