Published on the 25/10/2016 | Written by Donovan Jackson
Going large easily said, but just not that easily done…
While a recent press release put out by new NZTech board member Robett Hollis entreated local technology companies to ‘go large’, the reality is that doing so is no simple prospect and even with an excellent product, cracking the big time is never assured.
That much has been driven home by the failure of the Wynyard Group which has, for some time, shown signs of faltering. Comments in a story run in the NBR in August attracted a barrage of negative commentary including one from ‘the doctor’ which among other things, accurately anticipated ‘Legal suits pending.’
And so it has come to pass, with the company going into voluntary administration and estimates that investor losses could run to above $170-million. While the precise reasons for the company’s failure are yet to play out, likely issues might include scaling too rapidly, dramatic overvaluation, failure to achieve growth, perhaps due to immature product and potentially market, and competition in the areas where it plied its trade, being crime analytics, cyber threat analytics and investigations case management. NBR’s Lance Wiggs provides some insight into the problems and indeed, who is to blame.
Wynyard enjoyed a high profile as an innovator in crime fighting software, attracting clients domestically and internationally. As part of a clutch of technology companies which listed shortly after Xero, it has the ignominy of being the first among them to fail.
In his press release (which described him in all earnest as ‘a Zuckerberg-type new NZTech board member’) Hollis said that ‘just because New Zealand is a tiny country [but] there is no reason why the Kiwi tech impact on the world has to be small’.
“We need to stop thinking small with technology. As soon as you say tech or digital you are literally playing on a global level. New Zealand is not our market – the world is our market,” he added.
That may be so, but the reality for any company out of this country or any other for that matter, is that the big, juicy international markets of the United Kingdom, the European Union and the United States are not untraded paradises populated by gormless natives eager to buy New Zealand’s beads, trinkets and software. Those markets are tough nuts to crack, as Xero itself has found, because there are highly competent incumbents already operational.
Moreover, business isn’t just about a great product (although that undoubtedly helps). It is also about marketing and advertising, building sales and partner networks and establishing on the ground infrastructure and support. The bigger the market, the bigger the cash-hungry beast (pictured) that needs to be created and fed. Just this week, Flight Centre’s New Zealand technology leader Angus Armstrong told iStart that, in purchasing new data centre hardware rather than opting for a cloud platform, local support was among the most crucial criteria.
That points to a further complication for potential global expansion plans. Quite aside from the product, when enterprises buy any technology, they need assurance that the company offering it isn’t a flash in the pan. Gartner calls it Vendor Risk Management; if a vendor fails, it can cause serious issues. That’s factored into any buying decision (with the bottom line that even with the best product, your company might not make the sale – particularly in a market where your name recognition is low or non-existent).
So, while we like Hollis’ enthusiasm, it remains a fact that breaking into international markets, no matter how ripe for the taking they might appear from a distance, is no trivial matter. Attempting to do so without rock-solid foundations and a hefty balance sheet is arguably more a recipe for failure rather than it is for success.
