People and businesses are increasingly reliant on information technology, and consequently, people who design computer systems are in hot demand. The computer systems design (CSD) industry has become very important in creating jobs and generating export earnings for our economy.
This article digs further into the activities and performance of the CSD industry. Our statistics show:
We sourced data from a range of Statistics NZ surveys, including:
Jobs in the industry increased by 78 percent between 2000 and 2010
Since 2000, the CSD industry has experienced strong employment growth. While the CSD industry is high-tech, it is still very reliant on labour. Therefore, economic growth needs to be driven by an increase in the number of people working in the industry.
From 2000–10, the industry’s workforce grew by 78 percent, to reach 28,200 workers at the end of the decade. Growth in the total workforce was 22 percent over the same period. By 2009, the CSD industry contributed 1.3 percent to New Zealand's gross domestic product (GDP).
The number of self-employed workers in the CSD industry accounts for almost all of the increase in self-employed workers in New Zealand from 2000–10. During this time, the number of self-employed people in the workforce grew by 3,700. Self-employed workers in the CSD industry alone grew by 3,100. Figure 1 indexes the number of self-employed workers in the CSD industry against the total economy, showing how both have grown from 2000–10.
The industry had the equal-highest rate of product innovation in New Zealand in 2011
Last year, the CSD industry had the equal-highest rate of innovation within New Zealand. The high-tech nature of the computer systems designed allows the industry to innovate at a high rate. Innovation includes developing or introducing any new or significantly improved activity for a business. This includes products, processes, and methods that a business was the first to develop, or those adopted from other companies.
More than half the businesses in the New Zealand CSD industry introduced new or significantly improved goods or services into the market in the two years to August 2011. This compared with one in five across the whole economy. The difference was particularly evident in goods or service innovations new to the world. Twenty-one percent of CSD businesses introduced goods or service innovations to the world, compared with 3 percent of businesses across the economy. The only other industry in New Zealand with such a high rate of developing new goods and services is machinery and equipment manufacturing.
Most CSD companies exported their goods and services in 2011
The CSD industry earns income by tapping into the export market for knowledge-intensive services. In 2011, more than half the businesses designing computer systems and related products exported their goods and services, compared with 18 percent of all businesses in New Zealand.
Figure 3 shows that 2011 was not a one-off – in each year since 2007, the percentage of exporting businesses in the CSD industry has been significantly higher than across the whole economy.
Further, half of CSD businesses currently generating overseas income anticipate an increase in the level of that income over the next 12 months. This compares with one in three businesses across the economy, and indicates that the international picture is rosy for the CSD industry.
Those businesses who want to expand their overseas income further often target specific regions. In 2011, businesses in the CSD industry were similar to the overall economy – 46 percent of those interested in future expansion looked across the Tasman, compared with 42 percent of businesses across the economy. However, the next biggest target for CSD businesses was the USA, with 28 percent of businesses wanting to expand to there – double the rate of those in the total NZ economy. Similarly, CSD businesses indicated a much greater desire to expand into Europe than the average business. The flipside of this was expansion into Asia – just 6 percent of CSD businesses were interested in this area, compared with 22 percent of businesses in the total economy.
Businesses indicated which barriers hindered them from generating overseas income. The CSD industry differs from the total economy over this. In 2011, the three key barriers for New Zealand businesses generating overseas income were:
- the level of the exchange rate
- the volatility in that rate
- low demand, or increased competition.
However, within the CSD industry, the top two barriers were businesses’ limited access to finance, and their physical distance from overseas markets. Exchange rate volatility was a factor, but CSD businesses also reported limited experience in expanding beyond New Zealand, and related to this, limited knowledge about specific markets.
At the lower end, very few CSD businesses stated that overseas government regulations or tariffs were a barrier in them generating overseas income. Only 4 percent of businesses reported this, compared with 13 percent across the economy. Similarly, only 3 percent of businesses found their inability to rapidly increase supply was a barrier.
The industry is focused on providing high-tech information technology products, which creates opportunities to tap into niche markets abroad. This differs from traditional New Zealand exporting, which has been based on agricultural products.
Workforce is concentrated in major cities, and is well educated and young, with above-average pay
Workers in the CSD industry are young, well paid, more likely to be their own boss, and mostly work in Auckland and Wellington.
Around three quarters (76 percent) of the industry’s workforce is based in the Auckland and Wellington regions. By comparison, 45 percent of New Zealand’s total workforce is based in the Auckland and Wellington regions.
CSD workers in Wellington and Auckland are paid more than CSD workers in other parts of New Zealand. In 2010, workers in the CSD industry earned more than the average worker. In Wellington, a CSD industry worker earned an average of $80,400 – 63 percent more than the average Wellington worker. CSD industry workers in Auckland are also well-paid, earning $70,500 on average in 2010.
The CSD industry is highly qualified. From 2009 to 2012, almost 80 percent of the CSD workforce had a post-secondary qualification. This compares with 60 percent of the entire New Zealand workforce, and 50 percent of all New Zealanders aged 15 to 64.
The CSD workforce is younger than that of New Zealand’s overall workforce, and is concentrated around the 25 to 44 age brackets. The need for technology-related qualifications seems to limit both the youngest and the older brackets of the workforce. The time needed to complete tertiary study explains why very few CSD workers are aged 15 to 19. The technological nature of software design also explains the low number of workers in the over-50 age brackets.
The majority of workers in the CSD industry are professionals, averaging almost 72 percent from 2009 to 2012. This compares with just 23 percent of the entire New Zealand workforce. Professionals are workers who perform analytical, conceptual, and creative tasks by applying their knowledge and experience.
CSD businesses invest heavily in their future growth
Businesses in the CSD industry set a strong platform for future economic growth. This industry has higher-than-average rates of investment into expansion and research and development (R&D). These activities could lead to increases in CSD businesses’ profitability and productivity.
Currently, CSD businesses view themselves in a favourable light in relation to their competitors. In 2011, 23 percent of businesses thought their profitability was higher than that of their competitors, while only 18 percent of all businesses had the same opinion. One in three CSD businesses rated themselves as more productive than their competitors, compared with one in four businesses across the economy.
Almost 40 percent of CSD businesses invested in R&D during 2011, compared with less than 10 percent across the economy. The CSD industry is dynamic and fast moving, and the high rates of innovation require high levels of R&D. This does point to strong growth prospects in the future – several studies link investment in R&D with future economic growth, and the CSD industry is positioning itself well in this regard. One such study is Business R&D, Innovation and Economic Growth: An Evidence-Based Synthesis of the Policy Issues. R&D is important as these activities could flow on to new knowledge, materials, products, or processes that could help the business and the economy grow in the future. For example, new processes developed in the industry to improve efficiency could be generalised to the whole economy.
In 2011, around a third of CSD businesses invested in expansion, compared with a quarter of businesses across the economy. Expansion could include purchasing businesses or assets, entering new markets, or developing significantly improved goods, services, or processes. These investments could lead to the CSD industry growing in the future.
The CSD industry has been a standout performer in the New Zealand economy during the 2000s. The industry has experienced very strong employment growth, amongst both employees and the self-employed. Its rate of innovation and exporting are up with the best in the country. Further, the workforce is young, highly educated and well paid, and they are concentrated in Wellington and Auckland. The CSD industry is well-positioned to benefit from the increasing use of technology in the economy.
Economic News: August 2012