Graeme Philipson
November 14, 2016

Where to now for troubled AIIA?

Industry

Where to now for troubled AIIA?

John Paitaridis: The new AIIA chairmain is scoping big changes at the AIIA

The election of a new board at the Australian Information Industry Association – and the release of its financial statements at annual general meeting ten days ago has stirred an uncommon amount of interest.

InnovationAus.com has been contacted by a number of former office bearers and staffers, who in turn suggested other people we should talk to about the direction the organisation is headed.

Many of those people are concerned that the AIIA is not doing its job of representing the industry well. But none of them were prepared to speak on the record, so we noted their concerns and put them to the AIIA as a series of questions.

Like virtually everybody we spoke to, we believe that Australian ICT needs a strong industry body. But there is concern that right now it does not have one.

While everybody wants the AIIA to succeed, it has been struggling for relevance for years.

Now there is a new chairman – John Paitaridis from Optus – and as of earlier this year, a new CEO in Rob Fitzpatrick. They have promised change.

So, what are the problems, perceived or otherwise? Are the concerns justified? And whether they are or not, how does the AIIA propose to address them?

The main problem is that the AIIA is hollowed out. It has a few very large vendor members, who supply the lion’s share of the membership fees, and it has a high proportion of very small members, who do not pay much to belong.

But there is not a lot in between. The vast majority of Australia’s ICT vendors – indigenous players and the subsidiaries of most multinationals – are medium sized companies that are greatly under-represented.

The AIIA’s own numbers, when analysed, tell the story. The 2015-16 financial report shows $2.043 million in membership fees for the year, down significantly from $2.737 million just two years ago. At last week’s AGM the figure of $2.3 million was reported, but this seems to be based on the notion of “membership value” rather than actual receipts.

The breakdown of membership numbers and revenues is revealing:

AIIA

That means the 20 ‘Large’ members, who pay around $50K a year, constitute almost exactly half the membership revenues.

These are the important multinationals, but there are many omissions. Microsoft is there, but not giants like Oracle and SAP. Telstra and Optus are there, but few other telcos. Deloitte is there, but Accenture is not. Google and Facebook and Apple are missing.

But the real problem is in the next rung down. In the ‘Medium’ group, companies with between 20 and 200 employees, there are only 39 members, who pay on average $15,000 a year to be members.

“These mid-range companies are the heart and soul of Australia’s ICT industry, and the AIIA is letting them down,” one former board member told us.

“They see little benefit in joining. There are hundreds of mid-range IT suppliers in Australia, but despite constant membership drives, very few have signed up. This means the AIIA is simply not representative of the industry.”

The bulk of AIIA membership is comprised of ‘Small’ and ‘Micro’ companies with fewer than 20 employees. A significant proportion of these (the AIIA will not say how many) are ‘Affiliates’, who pay nominal fees and who cannot vote.

Yet the AIIA claims to be a “predominantly an organisation that represents SMEs”. The AIIA says that membership numbers are up a little this year, but with declining membership fees, that means significantly less revenue per member.

There are also small startups who are not actually members, but which get many of the benefits of membership. Sydney-based incubator Fishburners, for example, is counted as just one member – but all the startups within it get access to AIIA services.

But even with 281 members, there are very many Australian ICT companies, both indigenous and subsidiaries of foreign companies that are not members.

At best the AIIA represents maybe 20 per cent of the significant ICT vendors in Australia. Just about everybody InnovationAus.com spoke to, including the AIIA itself, sees that attracting these companies is the key.

The AIIA says membership is “below target,” which would seem to be a significant understatement. The key issue seems to be what can be done about it. We put the question directly to CEO Rob Fitzpatrick.

“The ICT sector is best-positioned to fuel Australia’s future social and economic prosperity,” he said. “This is both a tremendous opportunity and a great responsibility for the AIIA and its member companies.”

Mr Fitzpatrick said his key priority has been the development of a multi-year strategic plan, based on feedback from members and the industry.

“The plan involves-focusing on delivering value to our members in two key areas, The first is the ability to participate in and influence national policy for the ICT sector. The second is to generate new business opportunities, collaboration among member companies, and to build the professional standing of members.

“We have made great headway in these areas in 2016 and we will continue to refine and improve our execution through the coming year.

“By delivering on this value proposition, we believe the AIIA will improve its long-term membership and financial positon, provide a strong foundation for AIIA to extend its relevance to other industry sectors, and ultimately expand its business and reputation.”

Mr Fitzpatrick told InnovationAus.com that he expected it would take up to 18 months to see the result of this plan reflected in membership numbers and revenue, because companies will need to allocate funds for membership in their annual operating budgets.

“The AIIA is committed to ensuring the best value and outcome for member companies of all sizes, and the diversity of its membership base will continue to be reflected in the make-up of its national board, state councils and special interest groups.

“While the work the AIIA undertakes ultimately benefits the entire ICT sector, we encourage all companies with a vested interest in the future of the ICT industry to participate and contribute to the health of the ecosystem.”

All fine words and sentiments. But much the same comments were made by Mr Fitzpatrick’s predecessor Suzanne Campbell when she was appointed to rescue the AIIA from a parlous financial position five years ago.

During her time at the helm the organisation returned to profitability (though it is now losing money again) and membership revenue grew (before declining again).

Mr Fitzpatrick has been in the job since January 2016. The numbers for2015-16 have just come out. He says it will take 18 months for the new strategy to take effect.

That means we should expect to see real improvement by the time of next year’s Annual General Meeting in November 2017, when the official numbers will tell the story.

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