The New Frontier for Kiwi Tech Firms Is Colombia. Yes, Colombia
When New Zealand games developer PikPok decided to expand, it headed to South America. The company, known for tongue-in-cheek mobile apps like Super Monsters Ate My Condo and zombie shooter Into the Dead, purchased a studio in Medellin, Colombia, because it couldn't find the necessary talent at home.
“The staff that PikPok needs just doesn't exist in the country,” said Chief Executive and co-founder Mario Wynands. “If we want to stay cutting edge, that means not only training up our people internally, but it also means tapping into cutting edge talent internationally.”
New Zealand has never lacked pioneering spirit, from ocean navigation by the first Pacific Island settlers to the satellite launching exploits of Rocket Lab, but a failure to invest in technology education has created a skills gap that's driving its digital entrepreneurs offshore. That won't help the South Pacific nation to diversify its economy away from a reliance on agriculture and tourism.
Recent reports have identified that the education system doesn't deliver enough talent to grow emerging sectors like digital technology.
“The sector's moving at the speed of a Ferrari, the education system's moving at the speed of a Massey Ferguson tractor,” said Bruce Jarvis, Head of Software-as-a-Service at Callaghan Innovation, a government agency charged with supporting budding tech companies. “We're not short of entrepreneurs. The biggest constraint here is the talent to take those ideas through the growth stage, through the international stage.”
It's a view shared by the OECD, which says New Zealand's digital sector is lagging behind its peers.
Australian Tax Breaks
Despite being “relatively advanced in some aspects of digitization,” the country's domestic pipeline of advanced information technology skills is “weak,” the Paris-based group said in a January report. It identified an over-reliance on skilled migrants, growing competition from other countries for staff, and school students' poor math and science skills.
A recent survey by the New Zealand Game Developers Association found that more than half of the 12 largest studios were considering relocating some of their operations to Australia to take advantage of a proposed government incentive program there.
From July 1, Australia will offer a 30% tax credit for digital game developers. An additional 10% rebate is available in some Australian states.
“Why wouldn't you go to Australia to make 40% more, like you'd be foolish not to,” said NZGDA chair Chelsea Rapp. New Zealand was unusual among its peers in not offering “any kind of games incentive at the central government level,” she said.
The government has responded with a draft Industry Transformation Plan that recognizes the need to improve the country's skills pipeline, but it has yet to come up with concrete proposals.
Suggestions include more funding and resources to increase the participation of Maori, Pacific peoples and women in the tech sector.
The government is monitoring developments in Australia, Minister for the Digital Economy David Clark told Bloomberg. The final version of the industry plan will include details for supporting future growth, he said.
In the meantime, competition for the nation's brightest tech talent is only getting tighter.
From 2024, Amazon Web Services has pledged to spend NZ$7.5 billion ($4.9 billion) over 15 years to set up a network of cloud data centers in New Zealand, creating an estimated 1,000 jobs. Microsoft Corp has also announced plans to build data centers in the country.
“These global companies are going to be hiring heads from an already constrained labor pool,” said Greg Cross, co-founder and Chief Executive at Soul Machines, a New Zealand artificial intelligence company with operations in San Francisco.
Furthermore, the pandemic has underscored the ability to work remotely and increased the chances that locals will be picked up by offshore companies, he said.
“We now live in a work-from-anywhere world,” said Cross. “The brain drain happens without Kiwis even leaving the country.”
PikPok's Wynands said he's lost staff to bigger companies in the U.S., Europe and Australia.
For him, acquiring talent in a nation like Colombia made perfect sense.
“Young workers there see the gaming industry as a vehicle to help them actually change the economy and the narrative around the country,” he said.
It's a big step from the company's early beginnings in a dingy flat in the late 1990s, when he and two other founders tore up the carpet to run cables through the lounge and worked on the project in the weekends. Now PikPok employs over 200 people, has hit 500 million downloads, and is tired of waiting for government support.
“The games industry here is going to be successful whether the government helps or not, because we're doing what we need to do to get it done,” Wynands said. “But if the government got behind the games industry in a more serious way, there would be even more success to celebrate.”