Launch: The ‘App Economy’

July 31, 2014

Good afternoon. It is a pleasure to be here today to launch the Jobs In Australia’s App Economy paper. I’d like to welcome Will Marshall, President of the US Progressive Policy Institute and Michael Mandel. My thanks also to Global Access Partners for organising this event. 

In the 1880s natural ice harvesting was big business - at its peak the US ice market was worth about $660 million in today’s dollars. It was a clever and labour intensive business. Workers would measure the thickness of lake ice with a hand turned drill and, if thick enough, a horse drawn plough-like device would crisscross the lake into a chess board of squares, which was then cut into cubes.

Demand was strong and firms were innovative. In Norway, a network of artificial lakes provided a ready supply, and increasingly sophisticated transport networks allowed ice to be shipped around the world. Businesses knew they needed to innovate to stay competitive. American Fredric Tudor became the ‘Ice King’, pioneering techniques such as packing the ice with sawdust instead of straw to better insulate ice being transported across the tropics.

But despite the ingenuity, the fall of the ice trade was abrupt. In 1882, the first commercially viable refrigerated ship, the Dunedin, sailed from Auckland to London and in 1911 General Electric released its first household fridge. By 1910 the US was only exporting 15,000 tons of ice, a far cry from the boom days in the 1880s where more than four million tons was stored on the Hudson River.

Shortly after, the ice harvesting industry came to an abrupt end. I’m sure some of you are thinking, “what’s this go to do with apps?” It’s all about disruption and innovation. For businesses to survive today, they need to be more than just technically efficient. They also need to experiment outside their traditional markets. They need to be aware that with the internet almost all sectors, all industries, are trade exposed, driving global competition. The app economy epitomises that demand. Check your smartphone - how many alerts do you receive to update you about a new feature, a new product? The app economy is adaptive and innovative, and all businesses have a lot of learn from its agility.

The Australian App Economy

For the first time in history, a business has access to every consumer with a mobile phone - that’s about 1.5 billion people. If your business operates an app, consumers across the globe can access your services. But more than that, consumers can also access the services of your competitors.

The days of the local competition being just down the road are long gone. Australia’s economy is strong and growing, but within that is the threat and opportunity of digital disruption. Two-thirds of Australian businesses face imminent disruption. According to the ABS, 460,800 workers were employed in the 18 primary ICT occupations in August 2012,[1] with ICT workers accounting for 4.1 per cent of our total workforce. In the next five years employment in the ICT sector is projected to grow by 33,200 workers, or 7.1 per cent.[2] The importance of the ICT sector to Australia’s economy is clear.

Research by the Centre for Innovative Industries Economic Research estimates that ICT contributed 6.9% to GDP. The same research found that the annual contribution of the digital economy to the broader Australian economy was $100 billion in 2011.[3] Dr Mandel’s paper makes a useful contribution - identifying apps as a major and growing part of the ICT sector and of the economy more generally. It tells a very positive story - that many Australians understand the importance of apps for their business, whether they are small businesses connecting directly with consumers or providing services to multinationals.

App development is becoming one of Australia’s strengths and one where we can compete with the best in the world. Dr Mandel’s report finds that there are 139,000 jobs in the Australian app economy. In Sydney, 10.7% of ICT jobs relate directly to app development, more than in New York, Chicago or London - albeit a long way from Silicon Valley’s 17.6%.

Demand for apps continues to grow, suggesting there’s a limited role for government here and the best thing we can do is to get out of the way to let private sector innovation continue to flourish.

Cloud Computing and Open Data

I would like to finish by touching on a few of the important things government is doing to improve the way it uses ICT and to encourage innovation. The first is cloud computing. The Government will soon release a revised cloud computing policy - to significantly increase the take up of cloud services by federal government agencies, consistent with our policy for e-Government and the Digital Economy. And as important as vision statements are, of most importance are the actions we’re taking to remove barriers that currently restrict, and in many cases actually prevent, agencies from procuring cloud services.

We cannot shy away from the fact that we need to improve the way ICT has traditionally been delivered by government. Consider the fact that the federal government alone spends about $6 billion a year on ICT and yet has spent less than $5 million on cloud services since July 2010. Changes, which I look forward to announcing in the coming weeks, will present a range of opportunities for cloud service providers as government agencies increasingly move to deliver ICT as a service. The second is open data - an area where we are making good progress. Open data is a key government lever which, if used correctly, can help to spur innovation.

The Government recognises the immense enabling role that open dta can play - particularly when it comes to app creation. The Coalition has a clear agenda to release government data in anonymised and machine readable form as standard practice. As a result, 86% of the data available through has been added since the Abbott Government came to power, with a number of new valuable datasets to be added over the coming months.

Let me return to where I started. Fredric ‘the Ice King’ Tudor ended up in a debtor’s prison twice before he was able to crack the ice market. Failure is the hallmark of many successful innovators. As this paper shows, Australia is well placed to rise to the challenge of digital disruption and embrace the app economy. Cloud computing, open data and apps are completely changing the way business, and increasingly government, engage with their customers.

Governments and businesses that fail to embrace these technologies risk being left behind by new ideas and new innovations, or even melting away like those early ice traders. I thank the authors for this report. [ends]

[1] Australian Workforce and Productivity Agency, ICT Workforce Study, July 2013, p30

[2] Department of Education, Employment and Workplace Relations, Meeting Australia’s future ICT skills needs July 2013.

[3] Australian Computer Society, Australian ICT Statistical Compendium 2013



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