The digital dividend from SaaS

If economic modelling developed in Australia, around digital transformation, holds true for this country too we’re looking at a $35 billion a year opportunity for Aotearoa, writes John Mazenier.

Recently, technology analysts Gartner said New Zealand government IT spending will grow by 7.9 percent next year, outpacing the global growth rate average of 6.5 percent.
It also predicted 50 percent of government agencies will have modernised their critical core legacy applications by 2025. That’s not only welcome news for those of us in the IT industry but it also bodes well for economic growth.
Of course, it’s probably no surprise Aotearoa leads the world in the adoption of cloud computing. Quite apart from the obvious pun, punching above our weight is a national trait. As a relatively small country a long way from many others we’ve had to be innovative.
So, if a little cloud computing is a good thing – helping us get on with business during Covid for example–what could more do?
That’s the question my colleagues across the Tasman recently put to some economists. They asked, is there any benefit to accelerating the digital transformation that’s already under way in most private and public sector organisations?
Quite a lot; as it turns out.

Economic analysis
Last month, a landmark economic analysis by researchers at IBRS and Insight Economics revealed there is a massive NZ$234 billion ‘digital dividend’ to be gained over 10 years if the Aussies ditch their old data centres and move to the cloud in the next three years.
If you assume our economy is roughly 15 percent of Australia’s that is a $35 billion opportunity for us too.
To put it in context, it would be enough to balance the Government’s budget deficit* for this year ($23.1 billion) and almost the next ($15.1 billion).
The Aussie economists also predicted bringing forward the move to SaaS could create efficiencies which increased that country’s Gross Domestic Product (GDP) by 1.3 percent over a decade. Which doesn’t sound like a lot until you recall New Zealand’s GDP is $204.9 billon.
Hang on, where did those numbers come from?
Kiwi business people have not become successful around the world by being easily led. We know if something sounds too good to be true it often is.
So it’s worth mentioning the work was validated using the Monash Multiregional Forecasting Model (MMFM), a framework frequently used by Australia’s State and Federal Governments to evaluate new public sector policy proposals and investments.
Through face-to-face interviews with business leaders in multiple sectors, together with data from a wide variety of sources, IBRS and Insight Economics developed, for the first time, a Computable General Equilibrium (CGE) model of the economic benefit of SaaS.
The technological and operational case for moving to SaaS has been clear for some Recently, technology analysts Gartner said New Zealand government IT spending will grow by 7.9 percent next year, outpacing the global growth rate average of 6.5 percent.
It also predicted 50 percent of government agencies will have modernised their critical core legacy applications by 2025. That’s not only welcome news for those of us in the IT industry but it also bodes well for economic growth.
Of course, it’s probably no surprise Aotearoa leads the world in the adoption of cloud computing. Quite apart from the obvious pun, punching above our weight is a national trait. As a relatively small country a long way from many others we’ve had to be innovative.
So, if a little cloud computing is a good thing – helping us get on with business during Covid for example–what could more do?
That’s the question my colleagues across the Tasman recently put to some economists. They asked, is there any benefit to accelerating the digital transformation that’s already under way in most private and public sector organisations?
Quite a lot; as it turns out.

Economic analysis
Last month, a landmark economic analysis by researchers at IBRS and Insight Economics revealed there is a massive NZ$234 billion ‘digital dividend’ to be gained over 10 years if the Aussies ditch their old data centres and move to the cloud in the next three years.
If you assume our economy is roughly 15 percent of Australia’s that is a $35 billion opportunity for us too.
To put it in context, it would be enough to balance the Government’s budget deficit* for this year ($23.1 billion) and almost the next ($15.1 billion).
The Aussie economists also predicted bringing forward the move to SaaS could create efficiencies which increased that country’s Gross Domestic Product (GDP) by 1.3 percent over a decade. Which doesn’t sound like a lot until you recall New Zealand’s GDP is $204.9 billon.
Hang on, where did those numbers come from?
Kiwi business people have not become successful around the world by being easily led. We know if something sounds too good to be true it often is.
So it’s worth mentioning the work was validated using the Monash Multiregional Forecasting Model (MMFM), a framework frequently used by Australia’s State and Federal Governments to evaluate new public sector policy proposals and investments.
Through face-to-face interviews with business leaders in multiple sectors, together with data from a wide variety of sources, IBRS and Insight Economics developed, for the first time, a Computable General Equilibrium (CGE) model of the economic benefit of SaaS.
The technological and operational case for moving to SaaS has been clear for some time. In general, the technology is more secure, flexible, allows organisations to operate more efficiently and, importantly these days, lets work be done anywhere and anytime.
But in sector after sector – government, higher education, health and aged care, property and infrastructure, financial and corporate services – the economists found the cost of moving to SaaS was far outweighed by the hard financial benefits.
The biggest savings came from the reduced cost of buying and maintaining IT infrastructure, reduced compliance costs, increased labour productivity and employee retention.
But they also found indirect benefits, like reduced energy costs and lower carbon emissions.
In Australia’s health and aged care sector for example, an area very much in focus in this country, the researchers found a benefit of $25 billion from SaaS.
Translated to our own New Zealand Government system, that’s a potential digital dividend of $3.75 billion we really can’t afford to leave on the table.

Could SaaS accelerate our Covid recovery?
You’ve probably noticed the organisations which have adapted best to the disruptions of Covid are those who’ve invested in technology. Unfortunately, it is often difficult to find the money for those investments because the outcomes are difficult to predict ahead of time.
Not anymore.
Thanks to our friends across the ditch, we’re finally able to put a dollar figure on the likely benefits of moving to SaaS, across a range of industries, beforehand.
That knowledge should spur every leader in New Zealand to double down on digital transformation.
If the modelling developed by IBRS and Insight Economics holds true for this country too – we’re looking at a $3.5 billion a year opportunity for Aotearoa. And that’s too big to ignore.
 
* Budget Economic and Fiscal Update 2021, Treasury.

John Mazenier is the New Zealand Country Manager for TechnologyOne Corporation.  He is a seasoned executive with more than 25 years of experience in the IT industry.  

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