Little for CIOs to Get Excited About in Federal Budget

The federal government’s budget has drawn a mixed response from industry analysts and organisations.

Kwanghui Lim from the Melbourne Business School said the budget may hold growth opportunities for CIOs in sectors that are tied towards specific investment initiatives such as providing IT solutions relevant to infrastructure, transportation, medicine, defence, R&D and education.

“These are tough times, and the government's anticipated $22bn in cost cuts will probably lead to the same kinds of concerns among CIOs about pressure to put projects on hold, delay IT hiring, and spend less on hardware and software upgrades,” he said.

“The main thing is that these cuts in operational costs are going to happen alongside similar cuts in the private sector, rather than counter-cyclically. So I think many CIOs are going to be worried.”

Australian Computer Society CEO Kim Denham said while it was important that ICT was playing a prominent role in the budget via the focus on the National Broadband Network, said there was little for CIOs to get excited about.

“The tax incentives may be good for some, but the operational budget cuts CIOs are already facing mean that they are unlikely to be celebrating,” she said

Michael Warrilow, managing director at analyst firm Hydrasight, said the tax breaks -- 30 percent on eligible assets contracted for prior to 30 June 2009, and 10 percent for eligible assets committed to investing in between 1 July 2009 and 31 December 2009 -- could be viewed as positive by CIOs.

“The government’s intention is to stimulate businesses to spend in this period when they are retreating from it,” he said. “Smart accountants and CIOs will look at that to help with their tax bills and make capital acquisitions a little easier in this time of scarce capital. Anything that will have effect of helping a CIO get his budget approved -- in the sense that it will be more tax effective -- will have some attraction.”

Ian Bertram managing vice president and business intelligence research team manager at Gartner, said the tax incentives would be viewed by CIOs as a way to cut costs, rather than spur new project spending.

“CIOs are already cutting costs, so they will view the tax incentives as an additional cost saving,” he said. “They’re already upgrading their servers or storage or putting in new network infrastructure, and they will see this as a way to save 30 percent. They won’t be saying they’ll now go out and spend.”

Jean-Marc Annonier, program manager IT spending at IDC was positive about the budget’s $2.4 billion flagged for innovation.

“[It] is going to have a more substantial impact as Australia is already a strong innovation hub and this will comfort us in this position, whereas we cannot really compete with low cost countries for commoditised IT administration and software development.”

Agreeing, MBS’s Lim said the government’s investment was a good first step in reversing the decline in Australian R&D investment in recent years.

However, it was important to focus on how that money was to be spent, building a system of innovation around those investments, and, nurturing a community of inventors and commercialisation partners such as venture capitalists to translate those investments into economic returns.

“Innovation isn't' something you can promote simply by throwing money at it, but it surely helps to invest in it rather than not to,” he said. “If invested wisely, the amount spent on education and R&D should lead in the medium term to better-educated professionals (including IT graduates and in other areas) entering the workforce. This should improve the quality of human capital in Australia, and so is an important investment.”

Gartner’s Bertram was sceptical, arguing that the budget focused more on laying a solid foundation future innovation and R&D.

“There are some breakages in the system, things that the government can be more efficient and effective on, so [the tone is] let’s get those things right before we start to look at innovation,” he said.

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