KNOWLEDGE FUTURE SUPERCHARGING ILLAWARRA’S PROFESSIONAL SERVICES
InvigoratingThinking business
Call (02)13 26 4229 96 4722 nswbusinessillawarrabusinesschamber.com.au.com.au To propel the Illawarra’s professional service sector and secure our place in the knowledge economy, the Illawarra Business Chamber recommends:
Building the profile and presence of the Illawarra’s professional services sector through marketing, tourism attraction and procurement policy change
Helping Illawarra firms better connect and collaborate through better transport linkages and networking opportunities
Retaining and attracting skilled workers through placement programs and strategies to address identified areas of skills shortage
Developing and promoting the Illawarra’s unique capabilities as a location for government services, back office support, as well as key growth industries such as aged care and tourism
Incentivising investment in the region by supporting professional services businesses to exploit new opportunities, markets and to diversify MESSAGE FROM THE CEO
Technological advances, global competition and changes in the world economy mean the jobs of the future in the Illawarra lie in the knowledge based professions.
While the traditional mining and manufacturing sectors will Together with the NSW Business Chamber, of which we are remain a vital part of our economy, we must urgently a division, the IBC developed the report’s final action plan. diversify the mix of business and labour in our region. This plan draws together the findings of the research into a tangible strategy which, if adopted, will supercharge the There is a compelling case for building our professional Illawarra professional services sector and cement our region services capability here in the Illawarra. Our region has as a major economic centre. The IBC will take a leading role significant natural advantages, cost competitive operating in delivering the strategy, working with our members to conditions and a world class university educating our next implement its recommendations. generation of business leaders. Many of the actions we suggest require the cooperation Outsourcing, new cloud-based technology and the with, or the leadership of Government. As we have emergence of sub sectors such as tourism and aged care highlighted in previous thought leadership, for example, also offer great potential for our professional services linking the Illawarra with Sydney through transport businesses to expand their reach and enter new markets. infrastructure is a critical priority for our regional economy. Despite this, the Illawarra lags by more than 25% behind the The NSW Government should also look to invest in tourism rest of the state in the proportion of its economy involved in attraction facilities such as the refurbishment of the professional services. Only 6.3% of our labour market is Wollongong Entertainment Centre, as well as programs involved in the sector, in contrast with the state-wide designed to bolster entrepreneurship and new business average of 8.6%. opportunities in the knowledge sectors. If the Illawarra’s professional services were simply to reach Taking the steps we suggest will enable Government and parity, this would mean another 300 businesses and an extra business to harness the Illawarra’s outstanding capabilities 3,000 jobs. and supercharge our professional services. The opportunity to bolster our share is too good to miss. Now is the time to translate our region’s strengths into solid opportunities, and secure our place in the knowledge The Knowledge Future: Supercharging Illawarra’s economy. This will create sustainable growth prospects for Professional Services report commissioned by the Illawarra our businesses, attract highly skilled workers and propel the Business Chamber (IBC) sets a clear roadmap for achieving Illawarra toward a bright economic future. this goal. I acknowledge the work of Deloitte in conducting the research, consulting with our members and developing Debra Murphy this report.
While the traditional mining and manufacturing sectors will remain a vital part of our economy, we must urgently diversify the mix of business and labour in our region.
illawarrabusiness.com.au 3 EXECUTIVE SUMMARY
The professional services sector is an important contributor to the Illawarra economy both in terms of Strengths employment and gross regional product. The sector •• Ability to provide services to the holds untapped potential to grow and diversify the region’s specific growth region’s economy, but without focused action from •• Physical assets (UOW, Port Kembla, industry and policy-makers, there is a risk that the Data Centre) sector will not live up to its full potential. •• Cost competitiveness (salaries and office rents) This timely research combines economic and expert stakeholder analysis to uncover where the growth in the sector has occurred and is likely to occur in the next 5-10 years, and outlines key actions for industry and policy- Weaknesses makers to propel the Illawarra’s professional services sector. •• Labour market challenges Importance of Illawarra’s professional services sector •• Perception issues In terms of employment numbers, the sector has grown by •• Narrow market focus an average of 1.4% per year over the last 15 years. While the •• Other weaknesses (lack of professional services sector in the Illawarra remains connectivity, communication nascent, the sector has a potentially important role to play in issues, lower hourly rates) the continuing restructuring of the region’s economy. In 2015, there were significant downsizings by key employers in traditional industries throughout the Illawarra, Opportunities including BlueScope, Pentair and Wollongong Coal. The fragility in the dominant Illawarra industries highlights the •• General (expanding into potential for the professional services sector to achieve regional, national and international strong growth in future periods and to assist in the broader markets) economic restructuring currently underway. •• Sector specific (e.g. civil engineering, on-demand web based engineering, Current state of play out sourcing The provision of professional services in the Illawarra is largely dominated by small firms primarily servicing the local market. Many of these firms are operated by ageing practitioners with few incentives to adapt to changing Threats market conditions or pursue new growth opportunities. •• General (labour market, The SWOT analysis below indicates significant untapped perception/informational, potential of the Illawarra professional services sector, but at connectivity) the same time demonstrates there are considerable barriers to be overcome. •• Sector specific (scale and funding issues, reliance on other sectors, preferred suppliers lists)
4 illawarrabusiness.com.au Untapped opportunities The opportunities identified as holding the greatest potential •• Cost competitiveness; for the Illawarra’s professional services sector include: •• The University of Wollongong and a ready supply of •• On-demand, web based engineering services; skilled graduates; •• Civil/geotechnical engineering and surveying engineering; •• Ongoing transition to an increasingly service- and knowledge-based economy; •• Specialised consultancy and business advisory services; •• A focus on ICT and innovation; and •• Provision of financial advice for retirees; •• Advantageous internet connectivity. •• Website/app design; •• Positioning the Illawarra as an ‘innovation region’ •• Crowdsourcing; Illawarra Professional Services Action Plan •• Tailored marketing strategies; Five strategic objectives have been identified that, if pursued, will exploit the opportunities and overcome the •• Outsourcing; barriers of the Illawarra’s professional services sector •• Establishing strategic partnerships; and broadly and specifically for the high growth sub-sectors. •• Growth in key industries (e.g. tourism, aged care). A range of actions have been developed to pursue these strategic objectives. Implementing this Action Plan will The Illawarra possesses a number of competitive position the Illawarra as a dynamic and competitive provider advantages that have the potential to drive professional of professional services regionally, nationally and globally. services going forward, including:
Strategic objective Actions 1. Building the profile and presence of the region’s professional Facilitate strategic alliances services sector Increase visibility of established professional services firms Establish the Illawarra as NSW’s premier satellite conference venue Develop and implement marketing strategy Establish a ‘Think Illawarra’ Forum Assist Illawarra based engineering firms in tendering for work Review opportunities for crowdsourcing and outsourcing
2. Helping Illawarra firms better connect and collaborate both Illawarra Smart Work Hubs regionally and across NSW Improve road and rail connectivity Establish ‘The Illawarra Group’ Facilitate and support linkages with Sydney-based firms
3. Retaining and attracting skilled workers Establish a ‘Professional Placement Program’ Identify and address skills shortages in the professional services sector
4. Developing and promoting the Illawarra’s unique capabilities Relocate government agencies to the Illawarra Promote the Illawarra as a leading provider of back office support Develop competitive advantage in Asian markets Identify professional services opportunities in the growing aged care sector Identify professional services opportunities in relation to tourism Review opportunities for data driven marketing
5. Incentivising investment in the region Conduct a scoping study for a Professional Services Assistance Scheme Identify diversification opportunities for the Illawarra’s engineering firms Facilitate greater financial support for local professional services firms
illawarrabusiness.com.au 5 INTRODUCTION
BACKGROUND AND CONTEXT and ICT will also play an increasingly important role in the region’s future employment growth. The professional Like many regional economies throughout Australia, the services sector is central to facilitating and guiding Illawarra is currently undergoing considerable change. this transition. Historically a manufacturing and blue collar heartland, the ongoing structural change being felt throughout Fortunately, the region has many of the elements already in Australia is especially relevant in the Illawarra. place to enable this transition. A skilled workforce, a world-class university, an international port, and a number of Diversification of the Illawarra’s economy is central to the industry and government bodies (such as the Illawarra region’s growth and future prosperity. With that in mind, Business Chamber (IBC), Regional Development Australia the professional services sector has the potential to play Illawarra (RDAI), the NSW Government, the New South an important role in broadening the economic base of the Wales Business Chamber (NSWBC) and Illawarra Pilot Joint Illawarra. Professional services – accounting, law, Organisation (IPJO)), will all be important in supporting the engineering, marketing and research, and computer development of the Illawarra economy and the growth of system design and related services – are required not only professional services. today to support and maintain the business sector, but also into the future. SCOPE OF THE PROJECT AND APPROACH Importantly, professional services help to enable economic Deloitte Access Economics was engaged by the IBC to development through the support of other sectors, and conduct a review of professional services in the Illawarra therefore provide linkages throughout the economy. As such, region. The review includes an assessment of the current when considering the growth potential for professional state of professional services, including recent growth, services, it is important also to consider the growth potential along with an overview of the strengths and weaknesses of of the industries that demand professional services. the sector, informed through desktop research and Engineering services, for example, will be an enabling factor consultations with key stakeholders. for advanced manufacturing to be established in the region. An assessment of future growth sectors was also High value accountancy and legal services will be an undertaken using a multi-criteria analysis framework which enabling factor for local businesses expanding their market identified a number of broad criteria (outlined in Appendix C) reach, as well as for discrete industry sectors such as aged and ranked them in order to determine those opportunities care and tourism. Further, strength in information and with the most potential to propel the region’s professional communication technology (ICT) services will be an enabling services sector in future years. factor for the region to continue to position itself as the ‘City of Innovation’. The assessment of future growth sectors was also cognisant of a range of barriers – both general barriers, and, While manufacturing continues to be a vital component of where relevant, sector specific barriers – which might inhibit the Illawarra’s economy, and through advanced the growth in professional services, and the harnessing of manufacturing has a potential to continue to make a these future growth opportunities. substantial contribution to the region’s future growth, other industries such as education, health and aged care, tourism
Diversification of the Illawarra’s economy is central to the region’s growth and future prosperity.
6 illawarrabusiness.com.au Finally, an action plan was developed. This included a rather than capital equipment and machinery. Professional process of identifying overarching economic and policy services predominantly encompass legal and accounting objectives that underpin regional economic growth, and services, market research and statistical services, then developing five strategic objectives consistent with engineering services, and computer system design and these fundamental drivers. The strategic objectives aim to related services. propel the Illawarra’s professional services sector by both Given the close linkages between professional services and harnessing the key opportunities identified and ameliorating other sectors, this report has adopted a relatively broad the barriers hindering the implementation of these definition of professional services, which includes both opportunities. ‘core’ and ‘non-core’ professional services activities. The A range of actions were identified that assisted in pursuing specific definitions of these activities have been drawn from these strategic objectives. The action plan outlines a range ANZSIC industry structure published by the Australian of actions for the IBC, as well as for governments at the Bureau of Statistics (ABS). Specifically: local, State and Federal level, and other agencies such as •• Core professional services is defined to include all the NSWBC and IPJO. These action items focus on sub-sectors within the ABS definition of professional facilitating growth in the Illawarra’s professional services market in general, as well as growing the industries that services; and drive demand for professional services. •• Non-core professional services include some elements of other major ANZSIC categories, as outlined in the DEFINING PROFESSIONAL SERVICES table below. Professional services are defined in the Australian and Opportunities are identified for each of the core professional New Zealand Standard Industry Classification (ANZSIC) as services sub-sectors. Non-core professional service the provision of specialised services based on a high level of sub-sectors were not separately examined, but nonetheless expertise. The delivery of professional services is highly are expected to be closely related to core services, and are dependent on skilled and qualified labour as a key input, factored into the specific opportunities related to the core professional services assessments.
Definition of professional services
Core professional services Non-core professional services Professional, scientific and technical services Information media and telecommunications Key subdivision(s) Key subdivision(s) •• Scientific Research Services •• Internet Publishing and Broadcasting •• Architectural, Engineering and Technical Services •• Telecommunications Services •• Legal and Accounting Services •• Internet Service Providers, Web Search Portals & Data Processing • • Advertising Services Financial and Insurance Services • • Market Research and Statistical Services Key subdivision(s) • Veterinary Services • •• Auxiliary Finance and Investment Services • Management and Related Consulting Services • •• Insurance and Superannuation Funds •• Other Professional, Scientific and Technical Services Administrative and support services •• Computer System Design and Related Services Key subdivision(s) •• Administrative Services •• Other Services
Source: ABS; Deloitte Access Economics
illawarrabusiness.com.au 7 LINKAGES WITH OTHER INDUSTRIES THE ROLE OF ICT The demand for professional services is a derived demand. In the same way that professional services are an enabling It is derived through the demand for other industries which factor for virtually all sectors of the economy, ICT is an require professionals – lawyers, accountants, engineers, enabler for professional services. Without adequate architects, management consultants and the like – in order connectivity, local firms will find it difficult to connect with to pursue their own business operations. colleagues, clients or other stakeholders. Many of the opportunities identified throughout this report are Assessing the potential growth opportunities for intrinsically dependent on ICT. professional services therefore necessarily involves assessing the potential for the industries that demand ICT consulting – defined within the ANZSIC as computer professional services. system design and related services – is a key sub-sector within the professional services sector. Similarly, the While all industries demand professional services in one broader information media and telecommunications sector way or another, in the context of the Illawarra, key industries is classified as non-core professional services for the relevant to professional services demand in coming years purposes of this report. are likely to include: Throughout this report, the role of ICT is considered in two •• Advanced manufacturing, which will require engineering ways: both directly, through the identification of and architectural services; opportunities in the computer system design sub-sector and •• Health and aged care, which will require accounting, through ICT-linked opportunities in other sectors; and management consulting and general business advisory indirectly, through the identification of barriers related to services; connectivity and technological ‘readiness’. •• ICT, which will provide linkages to key professional services sub-sectors; and, •• Tourism, which will support demand for a wide range of professional services. It is noted that the Wollongong City Council has recently conducted an ‘Industry Attractor Program’ which identified five industry clusters – health, knowledge services (broadly equivalent to professional services), entertainment, manufacturing and design and construction – to target industry development looking forward.
8 illawarrabusiness.com.au POLICY ENVIRONMENT AND EXISTING RESEARCH The current project is not being conducted in a vacuum. At a local level: There exists a broader policy environment, including at a •• The Wollongong City Council has recently initiated an Federal, State and Local Government level. Relevant ‘Industry Attractor Program’ aimed at (1) identifying projects include: industry clusters to attract to the Wollongong local government area; and (2) developing a promotional At a Federal level: campaign to attract the identified industries to the region. •• The Federal Government’s recent Innovation Statement •• Wollongong, Kiama, Shellharbour, Shoalhaven and focuses on fostering innovation and entrepreneurship, Wingecarribee councils all have separate economic and incentivising investment and new start-ups. These development plans. However, these strategies are largely objectives are crucial in supporting the national economy developed and implemented independently of each other. in its ongoing transition away from a reliance on mining- The State Government’s current proposal to reduce the led activity towards other drivers of growth, particularly in number of councils in NSW means a merger of Illawarra’s service sectors and ICT. A focus on greater collaboration multiple councils is currently being considered. between universities and industry is particularly relevant. •• The IPJO is a collaborative group involving the At the State level: Wollongong, Kiama, Shellharbour and Shoalhaven •• An industry action plan for professional services was councils, focusing on supporting an Illawarra Regional prepared in 2012 by the NSW Government, aimed at Growth and Infrastructure Plan and a Transport Strategy. growing the professional services sector in NSW as a •• The IBC and NSWBC regularly conduct member events whole. The recommendations in the report are and surveys aimed at establishing a baseline level of necessarily high level and not specifically targeted at the information around key business drivers both at a Illawarra region. However, Deloitte Access Economics regional and at a State level. Where relevant, key findings has been cognisant of this work in reviewing the from such research has been considered in this analysis. Illawarra’s professional services sector. •• RDA Illawarra is currently implementing its ‘Transition •• On 25 September 2015, the NSW Government released Illawarra’ program, which aims to drive the ongoing a list of Premier’s priorities, which provide high level economic transition in the Illawarra region. Deloitte guidance on growth policies for NSW over the coming Access Economics prepared a comprehensive decade. The action plan presented in this report has been preliminary report for the Transition Illawarra project in prepared with reference to a range of fundamental 2013, and has recently completed an update report on economic and policy drivers, which were in turn behalf of RDA Illawarra. developed with reference to the Premier’s priorities.
illawarrabusiness.com.au 9 THE CURRENT STATE
KEY POINTS CURRENT OVERVIEW OF PROFESSIONAL SERVICES
The provision of professional services in the Illawarra is Professional service firms dominated by small firms primarily servicing the local Professional services firms in the Illawarra fall into one of three broad categories: market. Many of these firms are operated by ageing practitioners with few incentives to adapt to changing •• Maintaining the status quo – these firms have a narrow market conditions or pursue growth opportunities. market focus (often confined to the immediate region) and have little desire to seek out or pursue new growth opportunities or adapt to change. The growth potential for The key strengths of the Illawarra’s professional these firms is somewhat limited. services sector include the ability to tap into the region’s •• Improving the status quo – these firms offer the same specific growth sectors, the physical assets in the services to the same customers, but focus on continually region, the region’s cost competitiveness relative to improving the efficiency and the productivity with which Sydney, and the region’s lifestyle advantages. these services are delivered, for example by adopting new technologies. Focusing on productivity improvements is important, however in a rapidly Weaknesses include labour market issues (such as an changing environment such as the Illawarra, it risks ageing labour force and difficulties in recruitment and overlooking key diversification opportunities relative to retention of skilled labour), and, in some instances, the status quo. perception issues, a narrow market focus of many firms, •• Actively changing – these firms concentrate on and a lack of connectivity and communication. expanding both their market base and their service offerings. These firms focus on finding a specialised service for which they hold a comparative advantage, and which aligns with developments in the broader economy (including technological change and evolving consumer demands and preferences). These firms are experiencing the most significant growth in the region.
• Looking at where the future is in the next 10 – 20 years, have a long-term business strategy in place
• Actively pursuing new and specialised service offerings Actively • These firms will be central to the ongoing revitalisation and transformation of professional services in the Illawarra changing
• Offer the same product/service to the same market, but add greater value by adopting new technologies Improving • Don’t always look at new products and/or new markets the status quo • Outsourcing and other new business models present risks to this strategy
• Low value-add services to the same customers or the same type of customers Maintaining • Little differentiation in products or approach the status quo • Older practitioners, not moving forward, relying on local market • Waiting for retirement’ – short-term vision
10 illawarrabusiness.com.au While difficult to quantify, stakeholder consultations revealed On the other hand, competition within the region’s that it is likely that professional services firms in the region professional services sector is healthy. Based on an generally fall into the first two categories, with a relatively assessment of the IBC member database, 116 firms have small number of firms actively pursuing new opportunities. been identified as providing core services of accounting, engineering/architecture, legal services and advertising For regional markets such as the Illawarra, it is not services. The greater the level of competition within a sector, uncommon that a majority of firms would tend to the greater is the need for firms to innovate and to adapt to concentrate on maintaining or improving the status quo. changing market conditions (a monopolist, for example, has Given a lack of large corporations or government little incentive to innovate). headquarters in the region, aspects of professional services have historically been linked to either the manufacturing and Although it remains the case that the type of work offered mining sectors (such as engineering services) or to small by local firms is predominately low value-add services driven businesses and households (such as accounting or legal by population, it is apparent that one key ingredient for services), and as such have had little need to change. innovation – a competitive market – is already in place. Furthermore, even for those firms actively seeking to adapt and continually update their service offerings, the size of the firm affects its ability to cultivate change. In general, the smaller the firm, the harder is the transition away from the status quo. Two-thirds of firms employ fewer than five people, while only 2% of firms have 100 or more employees.
Structure of professional services firms in the Illawarra (IBC members)
500
423 400 66%
300
200 156 Number of Professional Services Firms 24%
100
50 14 8% 2%
0 (0-4) (5-19) (20-99) 100+
Number of Employees in Professional Services Firm Source: IBC Member Data
illawarrabusiness.com.au 11 ILLAWARRA FOCUS
ACCOUNTING PROFESSIONALS Number of professional services firms in IBC member database, by sub-sector and number of employees
This accounting firm with offices in Shellharbour Advertising Services 100+ & Wollongong is actively pursuing new markets, Other Administrative Services 20-99 having recently expanded into Asia, with a new Management and Related Consulting Services 5-19 business division called AP Asia. Given the prohibitive costs of establishing greenfield Auxiliary Insurance Services <5 operations in an unfamiliar market, the firm is Computer System Design and related Services establishing strategic partnerships with Employment Services specialist practitioners including trade Legal Services consultants, migration advisers and import/ Architectural, Engineering and Technical Services export agents. Auxiliary Finance and Investment Services
Accounting Services While still providing its core services in tax and 01020304050 accounting, Accounting Professionals has made Number of firms
a concerted effort to diversify its service Source: Derived from IBC member data. offerings, including forming a team of specialist
entrepreneurial advisers who provide advice to Industry composition of the Illawarra’s workforce, 2014-15 Illawarra traditional businesses seeking to use technology and innovation to transform their current Agriculture business to new innovative business models. ICT Real estate services Arts & recreation In recognising that specialised service offerings Utilities should align with developments in the broader Admin. & support services economy, Accounting Professionals has also Financial & insurance services developed a niche service stream focused on Mining Wholesale Disability Services and the opportunities that Transport innovative business models and social Other services entrepreneurism offer. This is in line with a Professional services Public admin. & safety significant shift in the delivery of disability Manufacturing services following the National Disability Hospitality Insurance Scheme, and the increasing demand Retail Construction for advisory services from disability service Education organisations adjusting to these broader reforms. Health care 0% 3% 6% 9% 12%15% Share of total employment, Illawarra
12 illawarrabusiness.com.au CURRENT EMPLOYMENT BY MAJOR INDUSTRY Share of professional services employment in key locations, 2014-15 At present, professional services does not constitute a large share of the Illawarra’s workforce. However, given the 23.4% IT IT region’s ongoing transition from an industrial heartland to a Admin and support services-based economy, the professional services sector 19.0% Finanace Admin and support has significant potential for future growth. 16.8% Professional 15.5% Finance Relative to Sydney, NSW and the national average, the 14.0% 13.5% comparably smaller share of those employed in professional 11.5% Professional services services in the Illawarra is even starker. The Illawarra also has a slightly lower representation of professional services (both core and non-core) than the case study regions of the Central Coast, Geelong and Brighton (United Kingdom), though they too are under-represented in professional services relative to the NSW and Australian totals. Sydney NSW Australia Brighton, UK Central Coast Geelong Illawarra
Source: ABS Labour Force Survey
Note: Labour Force Survey data relate to the Illawarra Statistical Region (SA4), as defined by the ABS, encompassing Wollongong, Kiama and Shellharbour Local Government Areas (LGAs), as well as sections of Shoalhaven and Wingecarribee LGAs.
Professional services share of total employment, 2005-2015
25%
Sydney
20% NSW
Australia
Central coast 15% Geelong
Illawarra 10% 2005 2015
illawarrabusiness.com.au 13 RECENT GROWTH IN KEY SUB-SECTORS With the exception of specialist design, management consulting and scientific research services, the national The charts on this page show the employment growth of average growth exceeded that in the Illawarra, in some the key sub-sectors in the Illawarra between the 2006 and cases by a considerable margin (engineering, architecture, 2011 Census, separated into ‘core’ and ‘non-core’ surveying and mapping and advertising). professional services respectively. Employment growth was mixed. Employment services In terms of ‘core’ professional services, management and administrative and support services generally consulting, scientific research and engineering consulting recorded strong growth, while activities linked to displayed strong growth between 2006 and 2011 with ongoing technological change and digital disruption (for employment growth well above the broader professional example, data processing and web hosting) also services average. To some extent, this is likely to reflect recorded strong growth. the strength of mining investment in the inter-censal period and the associated demand for engineering services. Growth in financial services has been dominated by superannuation funds, which is likely to be attributable in In contrast, advertising, surveying and mapping, and head part to continuing growth in Pillar Administration’s office management services saw a considerable decline in Wollongong office. Employment contracted in other more employment numbers during the five years to 2011, albeit traditional communications sub-sectors (most notably, the small scale of these sub-sectors means that the data telecommunications services). should be interpreted with caution. The more subdued growth in legal and accounting reflects the largely population driven services of these sub-sectors. Overall, between 2006 and 2011, employment in the professional services sector grew by 2.1%, compared to 1.5% growth in employment in the region as a whole. Employment growth (2006 to 2011)
Employment growth between 2006 and 2011 – Core professional services
Head Office Management Services
Advertising
Surveying and Mapping
Architectural Services
Legal
Total Economy
Accounting
Computer System Design
Market Research and Statistical
Professional Services
Engineering
Photographic Services
Scientific Research Services
Management Consulting
Other Specialised Design
-4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8%
14 illawarrabusiness.com.au ILLAWARRA FOCUS
Since the 2011 Census, employment growth in professional TAYLORED OUTCOMES services has continued to exceed employment growth in the Illawarra economy overall. On average, between 2010-11 and 2014-15, professional services employment Taylored Outcomes is a small management grew at 4.2% per annum, compared with the region’s consultancy operating in Kiama. Taylored average of 2.5%. While ABS labour force data can be Outcomes provides specialised consulting subject to a high margin for error at a regional level, these services in areas such as business trends suggest that the transition of the economy away from blue collar employment towards knowledge- and re-engineering, strategy development and service-based employment is well underway. new product research and development.
Taylored Outcomes is one of the local professional services firms that are actively changing and pursuing new markets and products. In particular, the business is harnessing the opportunities presented by the growing and transforming health and aged care sectors.
For instance, Taylored Outcomes is currently heavily involved in providing consulting services for the new Shell Cove Warrigal Care Centre. The aged care sector is undergoing unprecedented change given Australia’s ageing population (which leads to increased demand for services) as well as changing preferences (a shift in the type of demand for the provision of aged Employment growth between 2006 and 2011 Non-core professional services care services, such as more personalised, consumer directed care). As such, aged care facilities require consultancy services to create Telecommunications Services
Information Media and Telecommunications and adapt to new service delivery models.
Auxiliary Insurance Services
Life Insurance
Other Administrative Services
Auxiliary Finance and Investment
Civic, Prof and Other Interest Group
Other Services
Total Illawarra
Financial and Insurance Services
Health and General Insurance
ISP and web search
Travel Agency and Tour Arrangement
Administrative and Support Services
Employment Services
Data Processing, Web Hosting
Superannuation Funds
Internet Publishing and Broadcasting
-6 -3 0 36912 15
illawarrabusiness.com.au 15 STRENGTHS OF PROFESSIONAL SERVICES Industry Focus Growth in the Illawarra’s professional services sector should not be considered in isolation. In the same way that ICT •• Advanced manufacturing both enables and is enabled by professional services, •• Health and aged care growth in professional services both enables and is enabled by growth in other sectors. •• Computing and innovation As such, a key strength for the Illawarra is that there already exists a number of discrete industries which are likely to drive professional services going forward. The importance of identifying specific industries for regional areas to target is highlighted in the Lille Case Study. For the Illawarra, this is particularly important as it provides an avenue of Cost Competitiveness specialisation and differentiation relative to Sydney and other •• Lower wages regional areas. •• Lower staff turnover For example, the Illawarra is increasingly positioning itself as an innovative region, promoting its focus on technological •• Lower office rent and digital advancements. This enables growth in •• Value for money professional services both on the supply side, through the provision of improved service offerings, and on the demand side, by driving increased demand for professional services. A number of industry bodies that support the region’s IT focus already exist, including the Illawarra innovative Physical Assets Industry Network (i3net) and ICT Illawarra (ICTI). These groups are important in establishing the Illawarra’s ICT •• University of Wollongong presence and driving change looking forward. •• National Broadband Network Other industries in the region (such as the growth in health •• Innovation Campus care) also supports local professional services. •• Unanderra Data Centre Cost competitiveness •• Port Kembla A recent Deloitte analysis of Wollongong’s office market found that salaries in Wollongong are approximately 10% lower than those paid in Sydney, while office rent in the Lifestyle Wollongong CBD is approximately half that in the Sydney CBD. Further, staff retention rates in Wollongong are 95% •• Natural amenities compared to 75% in Sydney. Lower staff turnover translates directly into lower costs associated with recruitment and •• Proximity to Sydney training. While these estimates are specific to Wollongong, •• Live by the beach discussions with stakeholders have indicated that the same • Reduced traffic costs can also be said for the broader Illawarra region. • •• Lower cost of living Furthermore, owing to the smaller scale of local professional services firms, clients that engage a local firm often receive an increasingly personalised service, greater interaction, and, potentially, greater value for money.
16 illawarrabusiness.com.au CENTRAL COAST, NSW
Given the Central Coast’s proximity to Sydney, Learnings for the Illawarra coupled with its lifestyle and natural amenities that While competition from the Central Coast is a major attract tourists, skilled labour and retirees, the barrier to professional service in the region, the Illawarra Central Coast is a clear competitor to the Illawarra. possesses a number of key strengths relative to the The Central Coast is similar to the Illawarra in several Central Coast, including: ways. It is approximately the same distance to Sydney Lesser dependence on Sydney: The Central Coast is as the Illawarra is. Residents from both regions more dependent on Sydney than the Illawarra – a greater commute to Sydney, via the highway, or through the City share of its residents work in Sydney (18% compared to Rail network. Both the Illawarra and the Central Coast 14% of the Illawarra’s residents), while a smaller share are have similar advantages, including a beachside lifestyle. employed within the region (65% compared to 73% in the However, the Central Coast is currently more reliant on Illawarra). Developing its own industry specialisations will tertiary industries and less reliant on primary industries help the Illawarra establish a base for professional services than the Illawarra economy. A greater share of the in its own right. Central Coast’s workforce is employed in professional A more condensed office market: The Central Coast’s services, including in both core and non-core sectors office market is around the same size as Wollongong’s at (14% compared to 13% in the Illawarra). A slightly approximately 150,000sqm of office stock, but is spread smaller share is employed in manufacturing (9% over Gosford, West Gosford, Erina, Tuggerah and Wyong. compared to 10%) and education (7% compared to 11%). Specialised industries: The case studies of Lille and The attractiveness of the Central Coast as a place to live Brighton below demonstrate that, while proximity to a major and work is also amplified by the fact that, by road, city undoubtedly drives large growth potential, it is Gosford is slightly closer to Sydney than Wollongong important for regional areas to diversify and develop (76km compared to 85km, or around 20 minutes faster), strengths in certain industries. Arguably the Central Coast although approximately the same by train. does not have specialised industry clusters to the same extent as the Illawarra. Physical assets: Illawarra has two crucial assets that the Central Coast does not – the UOW and Port Kembla. Although the University of Newcastle has a small campus on the Central Coast, its scale and study opportunities are significantly smaller than the UOW.
illawarrabusiness.com.au 17 Major physical assets Lifestyle The Illawarra region is well endowed with key infrastructure, The Illawarra’s natural amenities attract families, skilled and to a large extent already capitalises on these assets. The workers, and retirees. This increases demand for University of Wollongong (UOW), for example, provides the professional services while also providing a supply of labour. region with a steady stream of highly qualified graduates. The Illawarra’s proximity to Sydney means that residents in Port Kembla generates work for a number of professional the northern parts of the region can travel to Sydney for services firms in the region, predominantly in the work. While the region loses skilled labour when its engineering sub-sector, but also for marketing, accounting residents commute, people generally spend more money and legal services. where they live, not where they work, meaning the net The Illawarra is one of Australia’s most connected locations, effect on the Illawarra economy is positive. with the National Broadband Network (NBN) now During stakeholder consultations, it was commented that accessible to over 25,000 premises after being enabled in the phrase ‘proximity to Sydney’ is sometimes used as an April 2015. An additional 42,400 premises are under excuse rather than an outcome – that is, it is used as an construction. NBN connectivity has already led to local excuse for lack of action rather than an opportunity to firms expanding their presence into alternative markets and prosper. However, the region’s proximity to Sydney is as presents a key comparative advantage in the short term much, if not more, of an opportunity as it is a threat. The relative to other regions. case study of Lille in Northern France provides a The Innovation Campus assists in fostering the region’s demonstration of how proximity to major centres can propel image as the ‘City of Innovation’, with the solid base of IT a region’s professional services sector. firms enhancing the positioning of the Illawarra as a leading In general, with the connectivity to Sydney (both physical provider of technological services. The impending move by and technological) only expected to become greater, there is NEC to the Innovation Campus is expected to provide a a need to harness the opportunities that it delivers, such as large boost for the region’s technological reputation. the potential for strategic alliances with Sydney-based firms. The Illawarra’s proximity to both Sydney and Canberra Another key benefit of the Illawarra is the relatively lower prompted the establishment of a data centre at Unanderra. cost of living for families – while it is recognised that wages This investment has helped support the region’s reputation in the region are below those paid in Sydney, the lower cost as an ICT hub, and complements the Illawarra’s growing of living is larger than the wage differential, providing local technological capabilities. residents with a huge advantage. The median house price in Given the Illawarra’s advantageous connectivity, Sydney is now $1,000,616, compared to around $530,000 in technological capabilities and its focus on innovation, the Illawarra. professional services in the region are well positioned to While the Illawarra’s professional services sector possesses harness the opportunities and respond to the challenges a number of key strengths, it is nonetheless subject to generated by digital disruption. considerable competition from surrounding areas, for instance the Central Coast, which possesses many of the same advantages as the Illawarra (see Case Study on the previous page).
18 illawarrabusiness.com.au WEAKNESSES OF PROFESSIONAL SERVICES Labour Market
Labour Market •• Attraction and retention of skilled staff Given its proximity to Sydney, the Illawarra faces •• Ageing workforce stiff competition for skilled labour, both in retaining graduates and attracting experienced workers. •• May be reluctant to embrace change Many UOW graduates seek employment opportunities in Sydney. Indeed, many UOW students come from Sydney and have no intention of remaining in the region following the completion of their studies. Scale As a result, the Illawarra struggles to both attract and retain the workers that it needs in order to propel its professional •• Insular market view services sector. This is one reason why professional •• Type of work (can be low value-add) services firms in the Illawarra are largely geared toward the status quo. •• Dominance of small firms means lack of scale to expand There is strong anecdotal evidence that skill shortages exist in the region, specifically the ability to attract and retain appropriately qualified staff. Increased cooperation between the UOW and local businesses could assist in addressing Perception potential skills shortages in the region, in line with a national • Image of blue collar region objective to foster greater collaboration between industry • and educational institutions. That said, recent surveys •• Preceived lack of quality conducted by the IBC seem to suggest the issue is •• Preceived lack of demand becoming less pressing. This highlights the importance of conducting a comprehensive skills audit of various sub- sectors within professional services, as recommended in the Action Plan. Other Scale Compared to more mature professional service markets, •• Lower hourly rates for servies firms in the Illawarra generally tend to undertake a greater •• Connectivity proportion of relatively low value-add activities, such as individual or small business tax returns, or small scale •• Communication conveyancing. It was commented through stakeholder consultations that one of the biggest issues facing the sector at present is an insular view of the market. The issues that this creates are somewhat circular. Low value professional services are becoming increasingly commoditised, outsourced or digitised, meaning firms must look to broaden their offerings to more specialised services. However, this in turn requires skilled staff and scale. Many of the most qualified workers (and those with entrepreneurial talents) are often not inclined to remain in the region, and many firms simply do not have the financial resources to actively pursue alternative markets.
illawarrabusiness.com.au 19 Perception Other weaknesses One of the most pressing weaknesses facing the Illawarra’s While professional services firms in the Illawarra generally professional services sector is perception. While the region have a cost advantage compared to Sydney firms, they also is actively attempting to transform its image (through have lower hourly rates for their services. This difference is initiatives such as Transition Illawarra and Advantage typically more significant than the wage differential. As a Wollongong), the reality is that many still perceive the region result, the profitability of firms in the region can be weaker as an industrial town. than those in Sydney. Perception affects the professional services sector on both Connectivity has long been an issue for the Illawarra, with the supply side and the demand side. On the supply side, over 80% of respondents in the IBC’s most recent member prospective workers bypass the region due to a perception survey agreeing that faster links with Sydney and improved of small scale, monotonous work limiting the type of internal connectivity would greatly boost the economy. The services local firms are able to offer. On the demand side, IBC’s previous thought leadership in the Linking the Illawarra local firms are often overlooked due to a perceived lack of report brought into relief the urgent need to invest in and resources or capability. deliver the transport linkages that will achieve this. For example, preferred supplier lists tend to be biased Poor communication and collaboration was commonly towards large engineering firms based in Sydney or mentioned during stakeholder consultations as a major Melbourne. As a result, smaller Illawarra-based engineering weakness in the region’s professional services sector. While firms find it difficult to compete and win contracts, even for it is broadly agreed that the Illawarra possesses ample local work. In addition, the Illawarra’s engineering firms are potential, it was often commented that inconsistency over predominately known for their manufacturing and mining key aspects of the region’s future positioning, an linkages. As such, there is a perception they do not have inconsistent definition of the Illawarra, and a fragmented civil and structural engineering capabilities. voice, considerably hinder the region’s ability to successfully transition towards a knowledge- and service-based Further, it was commented during consultations that many economy. Many stakeholders also believed there was a lack local firms have two perceptions that significantly hinder the of an overarching and long-run vision for the sector due to growth of local professional services. These perceptions are minimal collaboration between industry groups and – a) firms do not consider themselves to require professional government bodies. services and b) firms do not believe they can afford professional services. The IPJO, a strategic and collaborative effort between four of the Illawarra’s local councils, was formed in July 2015. There exists significant potential for the IPJO to assist A STIGMA AGAINST ENGAGING LOCAL in enhancing collaboration and communication and a promoting a ‘single voice’ in Illawarra in the coming PROFESSIONAL SERVICES? years and the region diversifies away from industrial Stakeholder consultations revealed that negative perceptions activity and position’s itself as a services- and knowledge- or stigmas regularly prevent local businesses to ‘buy local’. based economy. This affects all aspects of professional services: local A consistent and coordinating marketing strategy in Lille, businesses often engage external marketing consultants France, has assisted the region in positioning itself in a way when considering their strategic vision or market position; that attracts foreign investment and stimulates regional local organisations engage large, city-based legal and economic growth. As such, a coordinated internal and accounting firms despite comparable services being offered external marketing strategy for the Illawarra is locally (and typically at a lower price); and large-scale recommended in the Action Plan. engineering firms are often preferred to local engineers to conduct civil and geotechnical services.
20 illawarrabusiness.com.au LILLE, FRANCE
The city of Lille, one hour north of Paris, has positioned Undoubtedly the massive connectivity benefits that Lille itself as a major services hub to complement Paris and enjoys (there are some 80 million potential workers, surrounding areas. Growth has been underpinned by residents and customers within an hour of the city) are the substantial foreign direct investment (FDI). This is main driving force behind its success. While enhanced driven by the region’s ability to leverage its competitive connectivity with Sydney would certainly be a positive for advantages, including its attractive lifestyle, cost the Illawarra, the benefits will never be on the scale as Lille. competitiveness and accessibility. Learnings for the Illawarra Traditionally dependent on primary industries (mining, steel and textiles), Lille’s economy began to decline in the 1960s •• Lille has explicitly identified eight discrete sectors in and 1970s owing to the demise of its primary industries. which it focuses on (rail, automotive, logistics, eco- A policy of ‘metropolisation’ was undertaken in the late 1960s business, health/nutrition, CRM, e-business, and IT and to increase regional connectivity and form a comprehensive multimedia), and has successfully attracted investment in and connected urban area. each of these key industries. Analysis of Lille provides evidence that such an approach, if implemented In the early 1980s, a development programme was established by regional authorities aimed at enhancing successfully, can result in beneficial outcomes. economic and political integration within the region, and •• Positioning the region and promoting specific industry facilitating the economy’s transition to a focus on tertiary specialisation requires a clear and consistent industry industries (such as service-based sectors), that is, the voice and marketing strategy. In the case of Lille, Nord transition from a blue-collar based economy to an France has overarching responsibility for this. increasingly white-collar workforce. •• Regional locations can differentiate themselves from Finally, in 1993, Lille’s mayor successfully lobbied the French major cities (such as through specialisation in discrete Government to ensure that Lille became the connection industries) while still reaping the benefits afforded by point on the London-Paris-Brussels fast train route. their proximity to the major hubs.
illawarrabusiness.com.au 21 THE FUTURE OUTLOOK
KEY POINTS OPPORTUNITIES Through desktop research and consultation with A considerable degree of untapped local demand has stakeholders, opportunities have been identified both at a been found to exist which could improve some firms’ general level and sector-specific level. General opportunities growth prospects in the near to medium term. Over the relate to all professional services sub-sectors. longer term, future growth can be driven by expansion General opportunities of market reach outside of the Illawarra, both nationally General opportunities refer to the potential for Illawarra and internationally. firms to expand their market reach, including locally, nationally and internationally. To extend market reach to the A range of targeted opportunities have been identified rest of Australia and overseas, Illawarra based firms can which could, to varying degrees, help propel the establish partnerships with external firms. In an increasingly globalised economy, establishing strategic alliances, professional services sector. Some opportunities are both nationally and internationally, is crucial in successfully relevant to all sub-sectors within professional services, propelling the Illawarra’s professional services sector, while some are relevant only to specific sub-sectors. and is consequently an important recommendation in the Action Plan. A number of barriers have also been identified which, if left unaddressed, have the potential to hinder or prevent the harnessing of opportunities. Barriers have been identified both for professional services as a whole and, where relevant, for individual sub-sectors within professional services.
INTERNATIONAL
The ongoing growth in Asia NATIONAL and other international markets will continue to Considerable opportunities provide significant overseas LOCAL exist outside the Illawarra, opportunities for professional through greater connection services firms across Market reach can be with the rest of Australia. Australia. For this to be expanded by harnessing This connection comes successful in the Illawarra, the ‘untapped’ Illawarra demand, through two avenues: (a) region requires clear and which is thought to exist due selling local services to consistent market positioning. to the perceptions and external firms, and (b) stigmas that anecdotally establishing strategic discourage local firms from alliances with external firms. ‘buying local’.
22 illawarrabusiness.com.au General and sector specific opportunities
General opportunities
•• Expanding market reach (internally, nationally and internationally) •• Alliances/partnerships with Sydney-based and international firms •• Proximity to Sydney – relocation of staff in the long term •• Focus on growing industries (e.g. aged care/disability services, technology/innovation, tourism) Sector specific opportunities A number of barriers have also been identified which, if left unaddressed, have the potential to hinder or prevent the harnessing of opportunities. Barriers have been identified both for professional services as a whole and, where relevant, for individual sub-sectors within professional services.
Engineering Accounting & financial advice •• Civil/geotechnical engineering and surveying engineering •• Provision of specialised consultancy and business advisory services •• On-demand web based engineering services (e.g. restructuring services) •• Port Kembla expansion/redevelopment •• Provision of financial advice for retirees (e.g. self-managed superannuation funds) •• Advanced manufacturing •• Cloud accounting •• Medical products manufacturing •• Defence (e.g. naval base at Port Kembla)
Marketing Legal •• Market research – tapping into new markets, understanding new •• Conveyancing and contract development (spurred by greater business environments construction activity) •• Tailored marketing strategies – industry (e.g. tourism) and business specific •• Legal and commercial advice related to expansion into Asian markets •• Social media strategies •• M&A – restructuring agreements through links with other firms •• Crowdsourcing
IT & computing Shared services & outsourcing •• Positioning the Illawarra as an ‘innovation region’ – e.g. through ongoing •• Outsourcing of shared services (such as HR, IT, internal legal services growth in the Innovation Campus and NBN connectivity and payroll functions) to take advance of cost differentials •• Development of websites/apps for clients •• Outsourcing of back end work (e.g. bookkeeping and contract drafting) •• Crowdfunding from big firms
The Illawarra’s proximity to Sydney is something of a double just as a professional services hub, but as a vibrant and edged sword – although the region sees a large share of its diverse regional location. As Sydney-based professionals workforce commute each day to Sydney, it also attracts reside in the region in greater numbers, Sydney-based firms people to live in the region who would otherwise have lived will be increasingly inclined to establish satellite offices. in Sydney. Further, over the longer term, professional There are significant opportunities for professional services services firms may become increasingly willing to open to expand by capitalising on the demands of the Illawarra’s satellite offices (or relocate their headquarters) in the region growing and transforming industries. These include health (see Case Study). and aged care, tourism and ICT – the former two will drive The potential relocation of Sydney-based staff presents a demand for increased professional services, and the latter considerable opportunity for the region to establish itself not will enable improved provision of professional services.
illawarrabusiness.com.au 23 ILLAWARRA FOCUS
PILLAR ADMINISTRATION •• Health / aged care / disability services: the changing structure of these sectors (an increase in both the quantity and quality of health services) provides Pillar Administration, a superannuation opportunities for many professional services sub-sectors administration provider, has its national service – management consultants to assist with the design of centre in the Illawarra. In an effort to accept new business models; accountants to provide business changing business practises and comply with advisory services for the adoption of new service government reforms around updating systems models; financial services to assist with financial systems and billing; marketers to undertake research; and reporting procedures, Pillar Administration and advertising agencies to promote the new delivery of has increasingly recruited ICT staff to be involved health services. with one of its major initiatives, the ICT •• Tourism is one of the Illawarra’s largest growth sectors, Integration Program. This is an example of cross especially given the potential for cruise ships to come collaboration between the region’s growing ICT through the port. As such, there is growing potential for capabilities and the professional services sector. local professional services firms to assist with increased business advisory services, management consultancy The opportunity for increased integration services, HR and marketing services. Also, there is a between these sectors is not limited to growing trend towards adventure tourism in the Illawarra (such as skydiving, Jamberoo, paragliding, Illawarra Fly). superannuation administration. ICT integration Successfully promoting the Illawarra as an adventure programmes are rapidly transforming the tourism destination requires significant marketing and education sector, and through this, there are consulting efforts. Finally, there is potential for an opportunities for increased ICT collaboration in increased focus on business tourism in the Illawarra, the training and development for various including establishing the region as a satellite conference professional service sub-sectors, such as venue. According to Tourism Research Australia, business tourism accounted for around 8% of all domestic total accounting. ICT integration programmes in tax visitor nights in the Illawarra. As such, there is potential software, for example, could help address skills for business tourism to grow, especially given the cost gaps in these areas. advantages of the region. •• ICT: the Illawarra is increasingly becoming known for its specialisation in technology and innovation. There has been an increased shift to greater interaction between ICT and the provision of professional services. To expand professional services in the region, and to attract foreign investment and skilled labour, the Illawarra needs a targeted and coordinated marketing strategy. This strategy should position the Illawarra in a way such that both internal individuals and businesses, and external organisations (both nationally and internationally), can understand and recognise the Illawarra as a knowledge- and service-based economy. This strategy should encompass the views of the multitude of government, industry and other organisations that exist throughout the region. This has successfully worked for Lille, Brighton and Geelong, and is recommended in the Action Plan in this report.
24 illawarrabusiness.com.au GEELONG, VICTORIA
Some 75kms south-west of Melbourne, Geelong is Learnings for the Illawarra Victoria’s second largest city, with a population of over Geelong and the Illawarra region share many similarities. 225,000. The G21 Geelong Region Alliance (the G21) is Both are traditionally ‘blue collar’ hubs aided by proximity to responsible for the development and implementation a major port, and both are now feeling the full effects of of the region’s strategic growth plan, prioritising sustained structural adjustment. Both are within an hour of projects and promoting the region’s image. the state capital, and provide a less busy, coastal, and often Geelong is comparable to the Illawarra in population and cheaper lifestyle compared to Sydney or Melbourne. Finally, proximity to a major city – a sizeable share of Geelong’s both have a reputable University which drives a solid inflow workers commute to Melbourne each day for work (13% of local and international students. from Geelong to Melbourne compared to 14% from Illawarra Given these similarities, it is interesting to note some of to Sydney). Regional growth in Geelong to date has been the great successes that Geelong has seen in its transition aided by substantial inner city redevelopment and planning. to the services sectors. Partly this success can be Increasingly, government and businesses are relocating their attributed to government attempts to counteract the headquarters to Geelong, which has stimulated employment closure of the Ford facility in Geelong. Indeed, the growth in the area. For instance, in 2014, the Federal relocation of NDIS headquarters to Geelong was government opened the National Disability Insurance announced less than a fortnight after Ford announced it Agency (NDIA) headquarters in Geelong, expected to would close its Geelong facilities. contribute $34 million to the regional economy when the Equally though, as was also demonstrated in the previous NDIS is fully rolled out. case study of Lille in France, a consistent voice is crucial to In 2016, WorkCover will begin the relocation of its regional economic development. The G21, for example, Melbourne headquarters to Geelong. This is on the back of consisting of over 300 community members, directors the State Government’s commitment to establish an injury from each of the five local councils, and business insurance centre of excellence, as the region becomes representatives, provides a clear and collaborative strategy recognised as a skills-based and knowledge economy, and in which the region’s potential projects can be identified, known for its expanding health care and professional assessed and prioritised. services sectors. In late 2014, Energy Australia opened a customer operations contact centre in Geelong, with a commitment to creating 300 new positions.
illawarrabusiness.com.au 25 ILLAWARRA FOCUS
ESTABLISHING PARTNERSHIPS SECTOR SPECIFIC OPPORTUNITIES
There are considerable opportunities for the Illawarra’s Engineering professional services firms (including in the accounting, legal, Engineering in the Illawarra has historically been tied, in engineering and IT sub-sectors) to form partnerships with large part, to steel manufacturing and mining. As such, it is interstate (or potentially international) firms. Importantly, the not surprising that the outlook for engineering is challenging Illawarra can leverage the advantage of its proximity to Sydney in the short term – as traditional manufacturing declines, so to establish alliances with large, Sydney-based firms. too will the demand for engineering services. Strategic partnerships allow regional firms to export their That said, the sector is also faced with considerable services (both nationally and internationally) without incurring opportunities: the large upfront costs associated with physically establishing an office in another location. •• Continuing urban renewal in the region is likely to spur demand for civil and geotechnical engineering and This idea has proven successful for Illawarra based firm surveying engineering. Internetrix. The local ICT firm has established alliances with two large IT organisations, Google and IBM, which results in a •• The provision of on-demand engineering through a web substantial work being available to Internetrix from external based platform presents considerable opportunities. This markets. These strategic partnerships also provide Internetrix would involve real-time, online servicing and electronic with training opportunities and enhances skills development enquiries. This is driven by the digital disruption that is and acquisition for local staff. transforming the engineering sector, and is enabled by This could equally apply to firms in other sub-sectors – the connectedness of the region through the ongoing partnerships with cloud based accounting providers, such as rollout of the NBN. Xero or MYOB, could present considerable opportunities for •• The ongoing expansion of Port Kembla and defence accounting firms, and alliances with large engineering related engineering services present significant companies could help small local engineering firms counter opportunities for engineering services, especially some of the barriers presented by the preferred suppliers list considering the potential to establish a naval base at the (see barriers section below). Port and the ongoing growth in Shoalhaven’s defence Further, increased national linkages could potentially involve industry. The Shoalhaven Defence Industry Group is employee secondment arrangements, allowing local firms to charged with encouraging business investment in the access the Sydney labour market while at the same time region’s defence industry and promoting the region’s providing local graduates the opportunity to gain experience in provision of innovative defence technology and services, Sydney in the short term before returning to the region. which may increasingly generate employment Enhanced collaboration and communication between local opportunities for the Illawarra’s engineers. firms and larger organisations in Sydney could also •• With many of the key requirements in place (the UOW, encourage shared services and outsourcing opportunities the port, skilled engineers), advanced manufacturing has (discussed below). the potential for a strong future in the region. Through Increased linkages with growing overseas markets (such as this, there would be an associated boost in the demand the partnerships formed by Accounting Professionals) are also for engineering services. central to growth and expansion. •• One specific opportunity within advanced manufacturing Establishing strategic partnerships can also apply to other is the manufacture of medical products and technologies, bodies. One practical way for the Illawarra to seek to establish which some stakeholders noted has already generated itself as a provider of professional services in developing Asia engineering demand in the region. would be to enhance the collaboration between IBC and similar organisations in key growth markets in Asia. During stakeholder consultations it was commented that regular exchanges or ‘study tours’ can encourage interested professionals to establish networks and linkages within Asia, and can provide an opportunity to market the benefits of doing business with Illawarra based firms.
26 illawarrabusiness.com.au Accounting and financial advice Legal services Ongoing technological change and digital disruption has Opportunities for the region’s legal services sector exist meant the provision of accounting services is undergoing both in the provision of ‘traditional’ services, as well as in considerable change. Individuals and small businesses are the provision of specialised corporate services related to an increasingly using e-tax, for example, reducing the demand expanding and diversified economy. for tax agents. •• Construction related services: increased construction This provides accounting firms in the region with the activity throughout the region, spurred by ongoing urban opportunity to diversify their services away from ‘traditional’ renewal efforts, presents an opportunity for increased accounting services and general tax accounting, and traditional legal services, such as contract development towards higher value-add consultancy and business advisory and conveyancing. services. Corporate restructuring and advisory services •• Supporting expansion to Asia: as local businesses and (strategic and business oriented), for example, provides firms seek to expand into Asian (and other) markets, opportunities for local businesses to pursue alternative opportunities are presented for specialised corporate and revenue streams. Diversification of service offerings in accounting is also important given the often seasonal nature commercial legal services. For example, a local business of ‘traditional’ accounting work. looking to establish a commercial relationship with a business in Asia would benefit from engaging a local law Further, financial advice for retirees, especially given the firm to draw up contracts and review terms. region’s ageing population, presents significant opportunities, • M&A agreements: the development of alliances or other for example through self-managed superannuation funds • agreements with firms in Sydney and elsewhere will (both establishment and management). generate demand for legal services related to those In addition, the widespread shift to online provision of alliances and partnerships. accounting services means the region’s accounting firms •• Outsourcing: the commoditisation of legal processes could establish a specialisation in cloud accounting. This present opportunities for regional law firms. Large, would be enabled by: city-based firms can outsource discrete components of •• The Illawarra’s technological/digital focus; larger projects to Illawarra-based firms owing to the cost •• The Illawarra’s status as one of the most connected competitiveness of regional firms. regions in the country; and •• The presence of a data centre at Unanderra. Partnerships with interstate firms could be established, whereby regional Illawarra firms provide cloud based accountancy services for the external firm.
illawarrabusiness.com.au 27 ILLAWARRA FOCUS
UNISON OUTSOURCING Marketing and other services Marketing and other services consists chiefly of market Wollongong based Unison Outsourcing research, advertising and management consultancy represents a new approach to commoditising services. Considerable marketing opportunities exist for and outsourcing niche areas of work from local marketing firms to service the local area. For instance, 65.3% of Illawarra based respondents in the June 2015 larger firms in Sydney, Melbourne and other NSW Business Chamber Business Conditions Survey major centres. For example, if a firm from indicated that increasing sales through better marketing was Sydney requires specific contract clauses to a ‘major priority’. Indeed, better marketing was the highest be amended or reviewed, rather than doing it ranked major priority, above lowering costs by increasing in-house, it can outsource the services to efficiency and increasing sales through better products. Unison at a fraction of the cost. One benefit of Several specific marketing opportunities have been identified: this model is that it provides local graduates •• As local businesses and firms seek to tap into other with practical experience without having to Australian and overseas markets, they will increasingly leave the region. A key barrier to the expansion require market research – an understanding of the market of local professional services firms is the ability they propose to enter, including, for example, the characteristics of the customers and their preferences for to attract and retain qualified staff – a recently difference services and products. The market research graduated lawyer or accountant from the UOW opportunities presented to the regions marketers, will find their local opportunities limited both in researchers and advertisers are even more prominent wage and complexity. By linking intrinsically to given the ongoing popularity of big data, which brings the work conducted by large city based firms, with it considerable insights about consumer preferences the back-end outsourcing model provides a and behavioural trends as well as insights about the financial performance of organisations, which can potential way to, at least partially, ameliorate underpin strategic business decisions and actions. that barrier. •• Opportunities exist for local marketing firms from increased general business activity in the region, which generates demand for tailored marketing strategies, both industry and business specific. The expansion of other CRITICAL ARC industries provides opportunities to marketing firms to assist businesses to sell and market their products to Critical Arc is a technology company focused new customers, both locally and externally. For example, on designing safety and security systems. tourism is one of the Illawarra’s growth sectors, and will continue to present opportunities for marketing firms to Critical Arc, based at the Innovation Campus, is assist in the advertisement, promotion and positioning of a start-up company from the iAccelerate the region, especially given the planned arrival of cruise program, and has successfully expanded into ships from 2016. the UK and the Middle East following the •• A key opportunity for local marketing and advertising launch of its SafeZone app and the creation agencies is through the development of social media and implementation of the London Olympics advertising strategies. This includes both website design security software. and advertisements, and also the underlying strategy and purpose of the campaign. Social media is increasingly the main avenue in which potential customers receive their Critical Arc is currently raising $3 million in information or recommendations. funds, financed through an equity crowdfunding platform, VentureCrowd.
28 illawarrabusiness.com.au ILLAWARRA FOCUS
As such, a key opportunity, especially in anticipation of SHARED SERVICES greater tourism numbers, is for local firms to enhance their social media presence, assisted by local advertising and marketing specialists. Currently there are around 32 shared service operations in the region that employ around •• Crowdsourcing provides ample opportunities for the region’s marketing and design firms. Similar to the 1,600 staff, spanning the ICT, wealth management, concept of outsourcing discussed above, crowdsourcing insurance, public administration, accounting, involves outsourcing specific components of a task HR and finance sectors. to the ‘crowd’ via a web based platform. This concept harnesses the opportunities presented by digital Shared Services centres in the Illawarra include disruption, and has been a successful strategy for NEC, Pactera, Peoplecare, QBE Insurance, Pillar Brighton-based marketing agency Propellernet (see Case Study overleaf). Administration, NRMA and the ATO. These companies capitalise on the Illawarra’s key Information and communication technology strengths, including its lower business costs, Computer system design is intricately linked to the broader workforce/skilled graduates, lower staff turnover, technological change and digital disruption being felt and advantageous infrastructure and connectivity. throughout the Illawarra’s professional services sector and wider economy. As local businesses and firms attempt to enhance their connectivity and online presence, the demand In particular, Shared Services in ICT presents for computing services locally will be bolstered. As such, the considerable opportunities. In 2014, 559 ICT provision of IT support will be stimulated through general students graduated from the UOW, making the economic and business development and growth. university the second largest source of IT and The sector’s expansion will also be driven by the ongoing computer science graduates in the country. The positioning of the Illawarra as an innovation region, NBN connectivity, coupled with the presence of especially given continued growth in the Innovation Campus the Data Centre at Unanderra, also offers huge and the NBN rollout. advantages for ICT shared services in the region. Expansions in teleworking opportunities – particularly with the potential for a teleworking hub to be developed in the Advantage Wollongong, a collaborative initiative region – are also likely to generate opportunities for local firms. Given the Illawarra’s connectedness through the NBN between NSW Department of Industry, the UOW (despite some blackspots), considerable growth and Wollongong City Council, promotes the opportunities exist for local computing firms to increase and region’s shared services culture and attracts diversify their service provision both within and outside of investors, including NEC. the region, including in website and application design. Crowdfunding, similar to the concept of crowdsourcing, is a new and alternate way of obtaining finance through a large online network. The concepts of crowdsourcing and crowdfunding support the Illawarra’s growing reputation as an innovative and digital city. The Brighton case study below demonstrates ways in which regional areas can promote their digital and technological sectors.
illawarrabusiness.com.au 29 BRIGHTON, UK
Brighton is just under an hour south of London via train, Brighton’s core and non-core professional services sectors with a population of over 270,000. While tourism is a make up a bigger share of overall employment than the pivotal part of the economy, Brighton is also known as a Illawarra (16% compared to 14%), with a large contingent commercial centre, hosting many major company employed, unsurprisingly, in ICT. headquarters. Importantly, there has been a growing Brighton has one major group, Wired Sussex, focused on trend in digital, creative and new media companies. bringing together businesses in the region’s digital, media Brighton is comparable to the Illawarra in its population and technology sector, and is responsible for the sustainable base, proximity to a major city, coastal amenities and digital growth of Brighton’s digital cluster. and innovative focus. Like the Illawarra, many of Brighton’s Employment growth in the digital sector between 2010 and resident’s work outside of the region (each day, 37,310 2013 was 38.1%, almost five times the region average for all people leave the city for work). But unlike the Illawarra, an sectors (8.1%). almost commensurate number of people (31,915) enter the city each day for work. Learnings for the Illawarra A report by the global investment bank HSBC in 2009 •• Identified one major sector – Creative, Digital and IT identified Brighton as an ‘alternative economy’ and one of (CDIT) – and made that the overarching priority area for the UK’s five future ‘super-cities’ owing to its entrepreneurial economic development. As with Lille, this demonstrates talent and innovation focus. One example is Propellernet, an the importance of targeted government policy focused online marketing agency that has tapped into new markets on discrete areas of industry specialisation. and embraced the collaborative and creative culture in Brighton through crowdsourcing. •• Identified one major body – Wired Sussex – to drive CDIT. This highlights the importance of consistency of Recent employment in the region has been driven by message and approach in developing industry sectors. growth in the services industries, especially the Knowledge Intensive Business Services (KIBS) sector, which includes •• Tasked that group with the responsibility of bringing professional services, finance, IT, business administration together businesses, highlighting the importance of a and support services. Between 2010 and 2013, 9,464 new single focal point for communication and collaboration. jobs were created in the region, of which over 65% were in the KIBS sector.
30 illawarrabusiness.com.au Shared services and outsourcing PRIORITISING THE OPPORTUNITIES Shared services present significant opportunities for the Opportunities were considered using a multi-criteria analysis Illawarra to capitalise on its existing strengths and to framework that takes into account the ease of enhance its collaboration with larger firms in other regions. implementation as well as the potential benefits (including In this context, shared services refer to the ‘back office’ the current state of the market for each opportunity, the functions that are integral to most businesses (particularly scale of the potential opportunity, and the competitiveness large firms), such as human resources, legal support, ICT, of the market environment). Specific criteria used to assess and billing and finance support. each opportunity are described in Appendix C. With cheaper wages and office rents, coupled with its The resulting analysis yields three categories for the supply of qualified graduates and its proximity to Sydney, opportunities: the Illawarra has established a growing shared services culture. Going forward, there may be potential for the •• High potential benefits / relatively easy to implement ongoing establishment of shared services centres in (green ball); regional areas as office rents in Sydney and other major •• High potential benefits / relatively difficult to implement cities continue to rise. The greater connectivity through the (orange ball); and NBN rollout will be a key enabler. •• Low potential benefits / relatively easy to implement Similar to the shared services model, outsourcing of back (red ball). end tasks presents considerable opportunities for the This provides a simple and effective way of determining those region’s professional services sector. Outsourcing has opportunities which could be pursued in the short term already been recognised as an opportunity for law firms (green balls) and those opportunities which could be pursued in the region. This concept need not be confined to law over a longer timeframe (orange balls). It also reveals those firms and could be extended to other sub-sectors. Indeed, opportunities which may not provide a significant boost to the the ‘back end’ accounting work of large city-based firms, Illawarra professional services sector, but are easy to such as bookkeeping services, could be outsourced to implement and may therefore be worth pursuing (red balls). regional firms. The opportunities with green balls should be prioritised in the near term, as they are both relatively easy to implement, and are expected to yield relatively high benefits. As such, the analysis reveals that the key short term, sector specific opportunities for the region’s professional services sector are:
•• On-demand, web based engineering services; •• Civil/geotechnical engineering and surveying engineering; •• Specialised consultancy and business advisory services; •• Provision of financial advice for retirees; •• Website/app design; •• Positioning the Illawarra as an ‘innovation region’; •• Crowdsourcing; and •• Tailored marketing strategies; Additionally, the key general opportunities for the Illawarra’s professional services sector are:
•• Outsourcing; •• Establishing strategic partnerships; and •• Growth in key industries (e.g. tourism, aged care).
illawarrabusiness.com.au 31 Prioritisation of sector specific opportunities
Opportunity Ease of Potential benefits Ranking implementation
On-demand, web based engineering services
Medicinal product manufacturing
Advanced manufacturing
Engineering Civil/geotechnical engineering and surveying engineering
Port Kembla expansion/redevelopment
Cloud accounting
Specialised consultancy and business advisory services
Accounting Provision of financial advice for retirees
Conveyancing and contract development
Legal and commercial advice relating to expansion into Asian markets
Accounting M&A advice
Website/app design
IT Positioning the Illawarra as an ‘innovation region’
Crowdfunding
Market research
Tailored marketing strategies
Social media strategies Marketing Crowdsourcing
Shared services
Outsourcing
General Establishing strategic partnerships
Growth in key industries (e.g. tourism, aged care)
Key
Hard to implement / low potential benefits
Medium-Hard to implement / low-medium potential benefits
Easy-Medium to implement / medium-high potential benefits
Easy to implement / high potential benefits
32 illawarrabusiness.com.au BARRIERS A number of barriers have been identified as hindering the growth potential of the Illawarra’s professional services sector. These barriers have been separated into four broad categories.
Barriers to growth Labour market Perception and informational •• Small firms / firms dominated by an ageing workforce with limited •• Perception that local suppliers are not as capable as external suppliers incentives to change the status quo or adopt new business practices •• Perception that the Illawarra is a manufacturing town rather than a •• Difficulties attracting and retaining skilled staff – the top graduates leave services-based economy the region and often do not return •• Owing to multiple peak bodies, there is a risk of inconsistency in •• Limited collaboration between UOW and the community reduces the programs and messages ability/incentive for local graduates to find jobs in the region •• Lack of information for local businesses on who to contact for professional services
Scale Connectivity •• Relatively small scale of demand for professional services stemming from •• Poor state of road and rail infrastructure inside the region •• Poor connectivity within and outside the region •• Difficultly securing large ICT contracts from both the Illawarra and •• Internet blackspots where some households cannot get ADSL internet externally connection •• Expansion requires large, upfront capital investment
Labour market The attraction and retention of skilled labour is one of the Furthermore, despite certain discrete courses which involve major barriers hindering growth in the region’s professional some amount of ‘practical’ work experience, limited services sector. There may exist a shortage of the collaboration between the UOW and businesses reduces the entrepreneurial and business nous required to diversify ability and/or incentive for local graduates to find jobs in the market offerings. region. A concerted effort to increase cooperation between the UOW and industry (such as through compulsory work- An outflow of graduates results in the Illawarra having a experience or by facilitating greater internship opportunities) relatively older workforce. Workers who are close to could assist in encouraging local graduates to remain in the retirement or ‘set in their ways’ are less inclined to actively Illawarra upon completion of their studies. pursue new and niche markets or diversification opportunities. In general, therefore, the professional Similar labour market barriers were identified in the UK city services sector in the Illawarra tends to maintain the status of Brighton, and substantial efforts have been made to quo. It was commented in consultations that many of these rectify these. While this specifically relates to Brighton’s businesses are owned by older practitioners who do not digital sector, these initiatives are transferable to all other have a succession plan in place, and as a result, numerous professional service sub-sectors in the Illawarra. small professional services firms in the region have exited the market.
illawarrabusiness.com.au 33 •• Local businesses perceive a lack of leadership in the BRIGHTON, UK – FACILITATION OF region. There are multiple government and bodies in the JOB RECRUITMENT Illawarra, including five local councils, the State and Federal Government, the IBC, RDAI, i3net, ICTI, The The Intern Placement Programme (IPP), recently launched Illawarra Connection (TIC) and the Illawarra Forum). by Wired Sussex, assists SME’s in Brighton’s technological However, a perception remains that these bodies work and digital in recruiting young and qualified graduates for independently not collaboratively. As such, the region is six week, grant-funded placements. perceived to have a fragmented ‘voice’ when dealing The Wired Sussex Jobs Board helps bring together talented with internal and external stakeholders. The recent workers (both interns and those seeking full-time formation of the IPJO could help in addressing this employment) and companies searching for skilled labour. considerable barrier. However, there is scope for further Wired Sussex also facilitates employment creation through collaboration and communication. its annual Jobs and Skills Fair, where prospective •• Local businesses, especially smaller ones, do not have candidates can network with both digital companies wishing enough information relating to who to contact for to recruit, and digital media course providers. professional services, nor what type of services are In recognising that a skills and talent gap exists in the available within the region. In addition, there is limited region’s digital sector, Wired Sussex hosted a Digital Skills information on potential grants or subsidies available at a Summit in 2015, where universities and businesses State/Federal Government level. collectively identified what skills shortages exist in the •• An inconsistent definition of the Illawarra presents industry, and discussed how they might be overcome. challenges when establishing a consistent and coordinated Successfully addressing skills shortages requires marketing and positioning strategy for the region. Building collaboration between the suppliers of skilled labour (such brand recognition is a crucial element of any marketing as universities) and those demanding skilled labour (such as strategy, and ambiguity over what precisely is covered by local businesses). the Illawarra region limit the extent to which sufficient brand recognition can be achieved. Perception and informational The large body of existing research outlined in this report The perception barriers that face the professional services lends itself to the establishment of a forum or similar event sector are considerable. In soaboveme cases: attended by key representatives of each of the major government, industry and regional organisations within the •• Local customers do not perceive local suppliers of being Illawarra. Such a forum could be used to consolidate capable of producing the work they require. While in learnings and priorities from previous research and some cases it will be necessary (and desirable) to look determine a co-ordinated approach to addressing barriers outside the region, anecdotally it appears that many local and harnessing opportunities. businesses engage external suppliers for professional services they could have acquired locally. •• A potential perception from local and external firms that the Illawarra’s professional services sector is not capable of producing more sophisticated services. •• Prospective employees perceive the Illawarra as providing insufficient opportunities to begin a career in the region, and consequently seek employment elsewhere. •• Internal and external individuals and businesses perceive the Illawarra as a manufacturing town, which inhibits the potential for professional services to thrive.
34 illawarrabusiness.com.au Connectivity Scale Connectivity barriers refer to both physical and technological Issues relating to scale primarily refer to: connectivity, including: •• The relatively small scale of demand for professional •• Poor connectivity within and outside the region including services stemming from inside the region. problems with roads (such as bottleneck issues) and rail •• Difficultly securing large contracts from both the Illawarra infrastructure (the train line is very old and slow); and and externally (from government departments and large •• Internet blackspots – some households in the region private sector clients), due, in part, to perception issues. PERCEPTIONcannot get a sufficient AND INFORMATIONAL internet connection. ISSUESWhile the •• A lack of physical and financial resources which reduces REDUCINGongoing NBN STIGMArollout should rectify this issue in the coming the extent to which local professional services firms can years, in the short term this is a considerable barrier to compete in an increasingly globalised and connected While a reduction in stigma and perception issues may encouraging Sydney-based workers to reside in the region, market environment. naturallyand prohibits occur ‘working in the long from run, home’ there are for ways local inresidents. which local professional services firms could address these challenges Access to the financial capital required to expand service in the short run. offerings and pursue new marketplaces is a considerable issue facing relatively small professional services firms in For instance, Internetrix has successfully promoted its the Illawarra. The ability for local firms to harness many of capabilities by receiving government accreditations and the opportunities identified above is hindered by financial winning business awards. To do this, Internetrix has actively participated in interstate trade and procurement shows and constraints. As such, there is scope for increased events, thereby establishing networks and becoming government support. recognised by prospective interstate clients. In time, this external publicity filters through to the region’s other businesses, who can see the success of the local professional services, and as such contributes to reducing perception issues. Several other stakeholders commented that perception barriers could be reduced by celebrating and promoting local success stories, which builds confidence and trust in local professional service providers. The IBC Business Awards presents one such way in which this can be achieved internally. It is also important to promote the region’s transformed image to external parties. It was commented during consultations that people need to physically visit the Illawarra to see the considerable urban renewal occurring. Bringing past residents back to the Illawarra may assist in reducing some of the external stigma and perceptions, and potentially lead to an increased level of positive publicity for the region.
illawarrabusiness.com.au 35 THE IMPORTANCE OF SCALE – HONG KONG’S PROFESSIONAL SERVICES THE WESTERN SYDNEY EXAMPLE DEVELOPMENT ASSISTANCE SCHEME Western Sydney is one of Australia’s fastest growing Hong Kong’s Professional Services Development Assistance regions. In many regards, Western Sydney is a clear Scheme (PSDAS), a Government initiative aimed at competitor to the Illawarra region in terms of attracting improving the competitiveness and standard of Hong Kong’s government departments through the NSW Government’s professional services sector, provides financial aid to Decade of Decentralisation policy, attracting Sydney-based eligible projects. The scheme (worth HK$100 million) awards workers and firms to relocate to the region, and attracting grants to projects (including forums, conferences, niche investment. exhibitions, surveys and educational courses) that are most likely to enable growth in the professional services sector. Western Sydney has several similarities to the Illawarra region, and one key difference – scale. Western Sydney has More than 100 projects have already been completed or approximately 2 million residents compared to approved in the areas of accounting, business consultancy, approximately 300,000 in the Illawarra. Parramatta’s office engineering, IT consultancy and legal services, and market is almost five times larger than Wollongong’s, and professional services employment and activity has grown as that is not including other major office precincts within a result of the scheme. The contribution of professional Western Sydney such as Olympic Park. services to Hong Kong’s GDP increased from 10.7% in 2002 (the year the PSDAS was set up) to 12.8% in 2012, driven Importantly, Western Sydney has flourished even in the chiefly by architecture and engineering activities, absence of adequate transport links. Scale is a key reason information technology and advertising. why the region has flourished. While the Illawarra will arguably never have the scale of Western Sydney, it The scheme is especially targeted at increasing the highlights the importance of the Illawarra region continually competitiveness of the professional sector in the external looking for ways to attract Sydney-based workers and firms marketplace. The Illawarra region could benefit from a to relocate. Over time, as the Illawarra reaches a critical similar scheme, especially given the untapped professional mass in terms of population and business size, it too has the services opportunities in Sydney, elsewhere in Australia and potential to flourish. internationally.
The above analysis reveals that barriers relating to the labour market, perception and informational, connectivity and scale are hindering the pursuit of the general and sector specific opportunities. As a result, action items linked to a series of high level strategic objectives aimed at addressing these broad barriers are likely to have the most significant impact on the professional services sector’s growth path. This is discussed further on the following pages.
36 illawarrabusiness.com.au ACTION PLAN
KEY POINTS DEVELOPING THE ACTION PLAN A sequential approach was adopted in developing the action Combining the opportunities and barriers yields five high plan, including four broad steps. level strategic objectives which, if pursued, should place the professional services sector on a footing Summary of action plan approach commensurate with its opportunities. Overarching economic and policy drivers Actions for the IBC, NSWBC and all levels of Fundamental policy objectives Government to deliver have been linked each of the five objectives. The actions are designed to the bolster professional services market, as well as fundamental Opportunities and barriers enabling factors designed to facilitate future growth. General and sub-sector specific
Strategic objectives Five core objectives linked to opportunities and barriers
Action items Developed for each strategic objective
Source: Deloitte Access Economics
Overarching economic and policy drivers First, six fundamental economic and policy drivers were identified. These drivers underpin not only this research but also the broader transition of the Illawarra economy. A detailed explanation of how these drivers relate to the action items can be found in Appendix D. The six fundamental economic drivers include: jobs growth; regional economic growth; skills broadening/deepening; facilitating/driving investment; trade/export readiness; and objective alignment.
Opportunities and barriers Second, opportunities were prioritised, and those which are most likely to propel the Illawarra‘s professional services sector forward were the focus of the Action Plan. Prioritisation of the opportunities was detailed above.
illawarrabusiness.com.au 37 Strategic objectives THE ACTION PLAN Third, five high level strategic objectives were identified, The Action Plan outlines the action items ascribed to each of based on the opportunities and barriers. These objectives, the five strategic objectives. The responsibility and indicative seen below, are intricately linked and would, if pursued, timeline for implementation is also stated. underpin significant growth in the Illawarra’s professional services sector. These objectives were developed to both Detailed action items harness the opportunities and ameliorate the barriers. Further information regarding the rationale for each strategic This section provides detailed actions for each of the five objective can be found in Appendix D. strategic objectives identified above. Along with a brief description of what exactly the action item would entail, the Action items tables provide detail on specific sub-sectors (if applicable) Finally, a number of specific action items were developed the action item is expected to primarily benefit, as well as for each of the five strategic objectives. These are discussed indicative information regarding responsibility and timing. in detail in below.
Strategic objectives
1. Building the profile and presence of the region’s professional services sector
2. Helping Illawarra 5. Incentivising firms better connect investment in and collaborate the region PROPELLING THE both regionally and ILLAWARRA across NSW PROFESSIONAL SERVICES SECTOR
4. Developing and 3. Retaining and promoting the attracting skilled Illawarra’s unique workers capabilities
Source: Deloitte Access Economics
38 illawarrabusiness.com.au Strategic Objective 1: Building the profile and presence of the region’s professional services sector
Action Description Specific Responsibility Timeframe sub-sector/s)
Facilitate strategic alliances •• Establish strategic external partnerships between IBC and General IBC, NSWBC 1-2 years similar organisations in key growth markets in Asia, including general through a forum or sponsored visits of representatives in Asian counterparts to share relevant business experiences and expertise •• Establish stronger links with emerging markets through international university and regional partnerships, such as supporting exchanges or study tours to key Asian markets
Increase the visibility of •• Support more businesses getting online though initiatives such General IBC, NSWBC, 6-12 months established professional as the Australian Chamber local councils, services firms IPJO General
Establish the Illawarra as •• Refurbish the Wollongong Entertainment Centre (WEC) so that it General NSW 1-2 years NSW’s premier satellite is established as a high quality, multipurpose facility Government Local Councils conference venue •• Target conferences and events that specifically align with the Illawarra’s business environment and comparative advantages, such as technology and innovation, and industrial activities
Develop and implement a •• A consistent and coordinated local and external marketing General Local councils, 12-18 months marketing strategy strategy Marketing IPJO •• Emphasises the various advantages and strengths of the General Illawarra for both employers and employees •• Create and promote marketing materials that highlight the cost competitiveness of doing business in the Illawarra •• Create and promote marketing materials that highlight the benefits of a lower cost of living for individuals and families •• Promote the Illawarra as ‘A new place to live, a new place to work’, targeted at potential new workers •• Promote the proximity of the Illawarra to South West Sydney, especially given the NSW Government’s commitment to growing the number of homes in South West Sydney
Establish a ‘Think Illawarra’ •• A series of meetings to bring together representatives from General IBC, local 1-2 years Forum different industry bodies and local councils to share ideas, councils, IPJO collaborate and decide upon priorities and actions •• Facilitate inter-group linkages, including for example collaboration between representatives from the IBC, IPJO, RDAI, NSW Government, i3net, ICTI, TIC, UOW and the Innovation Campus, to promote knowledge-sharing and synergy
Assist Illawarra based •• Develop a gateway process for tendering for work Engineering IBC, NSWBC, 1-2 years IPJO engineering firms in •• Encourage tenderers to place greater focus on regional firms in tendering approaches to market, potentially through government initiatives for work to consider the local content aspects of proposals •• Support local firms in the writing process when tendering for work, including assisting firms in promoting their value for money proposition and conveying the cost competitiveness of conducting business in the Illawarra
Review opportunities for •• Run an ‘Outsourcing Workshop’ and a ‘Crowdsourcing Marketing IBC, NSWBC, 6-12 months crowdsourcing and Workshop’, including guest speakers, provision of information Business IPJO outsourcing and networking opportunities advisory
illawarrabusiness.com.au 39 Strategic Objective 2: Helping Illawarra firms better connect and collaborate both regionally and across NSW
Action Description Specific Responsibility Timeframe Heading sub-sector/s) Illawarra Smart Work Hubs •• Open a teleworking hub in the Illawarra, funded through the General State 2-3 years NSW Smart Work Hub Pilot Program government, NSWBC
Improve road and rail •• Prioritise transport infrastructure projects from the Restart NSW General Local councils, 1-2 years connectivity Illawarra Infrastructure Fund IPJO, State •• Prioritise Illawarra infrastructure projects from the Rebuilding government NSW fund •• Support Infrastructure New South Wales’ Mainline Acceleration Program, and its recommendation for a one-hour express train service between Wollongong and Sydney
Establish ‘The Illawarra •• Establish one large body that would be responsible for the General IBC, local 2-3 years Group’ overarching long term vision and strategic positioning of the region councils, IPJO, Business State •• The ‘Think Illawarra’ Forum could be a precursor for the advisory establishment of ‘The Illawarra Group’ government Engineering •• Establish sub teams, including: •• A ‘Wired Illawarra’ team, focused on propelling the region’s IT digital sector (including developing a name for the digital sector that can become nationally and internationally recognised, e.g. CDIT in Brighton, and collaborate with UOW to maximise IT opportunities available at the Innovation Campus) •• An ‘Export Cluster’, focused on harnessing export opportunities, both nationally and internationally •• An ‘Outsourcing’ team, focused on harnessing outsourcing opportunities •• An Advanced Manufacturing group, that identifies new and accentuates existing advanced manufacturing opportunities
Facilitate and support •• Establish partnerships or strategic alliances between General IBC, NSWBC 6-12 months linkages with Sydney-based Illawarra-based professional services firms and large firms Sydney-based professional services firms, including by: •• Establishing staff swap agreements •• Holding an outsourcing event with local firms interested in exploring outsourcing opportunities and prospective Sydney- based outsourcers (coordinated and run by the Outsourcing team recommended as part of ‘The Illawarra Group’)
Strategic objective 3: Retaining and attracting skilled workers
Action Description Specific Responsibility Timeframe sub-sector/s)
Establish a ‘Professional •• Collaborate with the UOW to facilitate greater internship and General IBC, local 1-2 years Placement Program’ graduate opportunities for all sub-sectors (including accounting, councils, IPJO marketing, law, commerce, ICT), such as through seeking government funding for subsidised intern placements •• Connect graduates/interns/UOW staff with industry/business through a professional services specific career fair
Identify and address skills •• Conduct a comprehensive skills audit to identify skills gaps and General IBC, local 12-18 months shortages in the professional confirm the needs and areas of opportunity within professional councils, IPJO services sector services in the Illawarra •• Host an ‘Illawarra Professional Services Skills Summit’ to connect the UOW/TAFE with industry/businesses •• Identify ways to address skills gaps •• Implement actions to reduce skills gaps
40 illawarrabusiness.com.au Strategic Objective 4: Developing and promoting the Illawarra’s unique capabilities
Action Description Specific Responsibility Timeframe sub-sector/s)
Relocate government •• Prepare case for strategic relocation of relevant government Business IPJO, Federal 2-3 years agencies to the Illawarra headquarters to the Illawarra through the government’s Decade advisory government of Decentralisation •• Identify government departments that align with the Illawarra’s business environment and comparative economic advantages
Position the Illawarra as a •• Audit current local government services to identify current Business Local councils, 12-18 months leading provider of back capabilities in local government to be a leading provider of back advisory IT IPJO, State office support office support for NSW councils government •• Identify potential opportunities for increased government resource sharing and collaboration, similar to Hunter Councils
Develop competitive •• Unlock engineering opportunities in the market for sustainability Engineering IBC, local 1-2 years advantage in Asian markets and energy services (which is growing due to Asia’s rapid urban councils, IPJO development) including by leveraging off the UOW’s Sustainability Buildings Research Centre
Identify professional •• Partnership with government to become a pilot region for new Business Local councils, 2-3 years services opportunities in the geriatric aged care models advisory IPJO, State growing aged care sector •• Identify professional services opportunities, including specialised government, consulting services, in the aged care facility planned for Kiama Federal government •• Support the transformation of Bulli Hospital into an Aged Care Centre of Excellence •• Collaborate with the Aged Care Illawarra Workforce Action Group (ACIWAG) to identify professional services employment opportunities in the aged care sector
Identify professional •• Identify opportunities for the Illawarra to develop a niche in Business Local councils, 1-2 years services opportunities in business tourism advisory IPJO, State relation to tourism •• Identify marketing opportunities in promoting the Illawarra as a government, premier satellite conference venue (see earlier recommendation) Federal government
Review opportunities for •• Hold a workshop or course in conjunction with the Association Marketing IBC 1-2 years data driven marketing for Data Driven marketing and Advertising (ADMA), focusing on ways in which local firms could pursue data driven marketing opportunities
Strategic Objective 5: Incentivising investment in the region
Action Description Specific Responsibility Timeframe sub-sector/s)
Conduct a scoping study for •• Conduct a scoping study for a scheme similar to Hong Kong’s General IBC, Local 12-18 months a Professional Services Professional Services Development Assistance Scheme councils, IPJO Assistance Scheme •• A scoping study should be conducted to consider the feasibility of such a scheme in regional Australia, including how it would be structured
Identify diversification •• Conduct a development strategy for Advanced Manufacturing, Engineering Local councils, 12-18 months opportunities for the including identifying opportunities and barriers, conducting gap IPJO, State Illawarra’s engineering firms analysis and identifying land, labour and capital requirements government •• Review the potential for the Illawarra medical research facility to conduct research aimed specifically at establishing a medical products manufacturing capability in the region
Facilitate greater financial •• Loosen eligibility requirements for the Australian Government’s General State 6-12 months support for local Entrepreneurs Program government, professional services firms •• Expand grant opportunities for Illawarra professional services Federal firms to partially offset the impact of closure of some of government Bluescope operations
illawarrabusiness.com.au 41 4.2.2 Summary of sector specific action items As discussed earlier, most of the barriers affecting professional services are generic in nature, and as such most of the critical action items noted above are equally general in nature. That said, and notwithstanding the generalness of the barriers, a range of targeted action items have been identified in order to help ‘propel’ the individual sub sectors forward. While these action items do not necessarily correspond with specific barriers as such, they are essentially intended to ‘kick start’ the sector specific opportunities. The table below provides a summary of these action items.
Action Description Specific sub-sector/s)
Business Advisory •• Identifying tourism/aged care services One of the biggest growth opportunities in professionals services opportunities relates to the provision of high value business advisory services – •• Back office support essentially this involves firms moving from the ‘status quo’ to the ‘actively changing’ categories. •• Outsourcing •• Relocating government agencies
Engineering •• Assistance with tendering Traditionally, the Illawarra’s engineering sector has been •• Advanced manufacturing development tied to mining and manufacturing. However opportunities for strategy diversification are considerable, ranging from advanced manufacturing to medical research. •• Market research into medical research •• Outsourcing •• Relocating government agencies
Marketing •• Regional marketing strategy Similar to business advisory, the biggest growth opportunities in relation •• Crowdsourcing/crowdfunding workshop to marketing stem from more high value services. Crowdsourcing and data driven workshops have been suggested as a way to kick start the • Data driven marketing workshop/course • region’s marketing sector.
IT •• ‘Wired Illawarra’ focus as part of The Despite the UOW being the State’s largest provider of IT graduates, Illawarra Group IT accounted for only 1% of the region’s workforce at the 2011 Census. •• Provision of back office support With a changing face of professional services and the economy more broadly, considerable opportunities exist for the region to better leverage its existing IT capabilities.
42 illawarrabusiness.com.au CONCLUSION
The Illawarra economy is undergoing significant Moving forward, a number of key, untapped opportunities transformation away from reliance on traditional have been identified in this report, which, if pursued, should manufacturing and mining, towards a knowledge- and assist in supercharging the Illawarra’s professional services services-based economy. As such, professional services sector. These opportunities, along with consideration of the present significant growth potential going forward. general barriers impeding growth, have underpinned five key strategic objectives. While not currently constituting a large share of the region’s employment, the Illawarra’s professional services sector has Action items were ascribed to each of the five strategic a number of strengths, including cost competitiveness, objectives, and are expected to provide the sector with proximity to Sydney, advantageous connectivity, the significant growth potential. If pursued, these actions should technological and innovation-focused reputation of the assist in successfully harnessing the opportunities Illawarra, key infrastructure and supporting industries. That presented to the professional services sector, and reducing is, growth in the Illawarra’s professional services sector is or removing the barriers hindering such growth. largely driven by growth in the region’s other significant industries, such as health and aged care, ICT, manufacturing, and tourism. There are, however, several key weaknesses, including difficulty attracting and retaining skilled labour, perception issues, scale and physical connectivity. Furthermore, the sector is dominated by a large number of small firms focusing on maintaining or improving the status quo, rather than actively pursuing new markets and diversifying service offerings. This has the effect of limiting the sector’s current growth potential.
illawarrabusiness.com.au 43 GLOSSARY
ABS Australian Bureau of Statistics
ANZSIC Australian and New Zealand Standard Industry Classification
CBD Central Business District
IBC Illawarra Business Chamber
ICT Information and communications technology
IPJO Illawarra Pilot Joint Organisation
I3NET Illawarra Innovative Industry Network
ICTI ICT Illawarra
IT Information Technology
LGA Local Government Area
NBN National Broadband Network
NSW New South Wales
NSWBC New South Wales Business Chamber
RDAI Regional Development Australia Illawarra
TIC The Illawarra Connection
UOW University of Wollongong
44 illawarrabusiness.com.au APPENDIX A: SUB-SECTOR EMPLOYMENT
Core professional services Employment Share of core professional services Professional, Scientific and Technical Services Professional, Scientific and Technical Services (except Computer System Design and Related Services) Scientific Research Services 402 4% Architectural, Engineering and Technical Services 2517 28% Legal and Accounting Services 2570 29% Advertising Services 224 2% Market Research and Statistical Services 385 4% Veterinary Services 324 4% Management and Related Consulting Services 848 9% Other Professional, Scientific and Technical Services 213 2% Computer System Design and Related Services Computer System Design and Related Services 1453 16% Total core professional services 8996
Non-Core professional services Employment Share of non-core professional services Information Media and Telecommunications Internet Publishing and Broadcasting 15 0% Telecommunications Services Telecommunications Services 617 9% Internet Service Providers, Web Search Portals and Data Processing Services Internet Service Providers and Web Search Portals 76 1% Data Processing, Web Hosting and Electronic Information Storage Services 28 0% Financial and Insurance Services Auxiliary Finance and Insurance Services Auxiliary Finance and Investment Services 913 14% Auxiliary Insurance Services 166 3% Insurance and Superannuation Funds Life Insurance 36 1% Health and General Insurance 1026 16% Superannuation Funds 783 12% Administrative and Support Services Administrative Services Employment Services 1237 19% Travel Agency and Tour Arrangement Services 423 6% Other Administrative Services 850 13% Other Services Personal and Other Services Civic, Professional and Other Interest Group Services 448 7% Total non-core professional services 6618
illawarrabusiness.com.au 45 APPENDIX B: PROJECTED EMPLOYMENT
Deloitte Access Economics’ employment forecasts for core and non-core professional services at a 1-digit ANZSIC level, as well as total employment growth in the Illawarra, are provided in the following charts. Growth in both core and non-core professional services, with the exception of admin and support services, is expected to comfortably outpace overall employment growth in the Illawarra throughout the projection period. This reflects both the ongoing structural change being seen at a national and State level, and regional specific factors. Importantly, however, the forecasts provided here do not explicitly consider the opportunities and barriers discussed in this report. Overall, professional services are projected to show a slightly stronger growth path relative to the regional total in the coming years
A NOTE ON THE ACCURACY OF REGIONAL LABOUR FORCE DATA Regional labour force data published by the ABS are subject to a high margin for error due to small sample size. The most recent observations have been noted as particularly volatile at a regional level. For instance, the ABS data show that employment in the Illawarra’s ICT sector fell by nearly 1,000 workers over the course of 2014-15. Given this volatility in the historical data, the generation of forecasts necessarily involves an initial reversion to an expected level of employment in a sector. As a result, growth rates may appear abnormally high or low. In order to adjust for this, the growth rates below are provided from 2015-16 to 2024-25.
Chart B.1: Projected employment growth in core and non-core professional services
Admin. & support services
Total employment
IT & Telecommunications
Professional Services
Financial & insurance services
-0.5% 0.0% 0.5% 1.0% 1.5% 2.0%
46 illawarrabusiness.com.au Chart B.2: Projected employment in professional services in the Illawarra
Number of people employedForecast 10,000 160,000 Professional, scientific & technical 140,000 8,000 Total employment 120,000
100,000 6,000
80,000 Finance & insurance 4,000 60,000
Admin. & support services 40,000 2,000 Information media & telecommunications 20,000
0 0
illawarrabusiness.com.au 47 APPENDIX C: RANKING OF OPPORTUNITIES
Existing presence Description Rating scale
Current Scale The extent to which the identified opportunity has an established presence within the region 1 = no presence Existing skill base The extent to which the requisite skillsets to harness the opportunity are present within the region 5 = strong presence
Existing market/client base The extent to which there is an existing market or client base for the opportunity
Scale of opportunities Description Rating scale
Illawarra The potential scale of the opportunity within the region 1 = low potential Rest of Australia The potential scale of the opportunity outside of the region but within Australia 5 = high potential Overseas The potential scale for the opportunity overseas
Market environment Description Rating scale
Degree of competition The extent to which a vibrant and competitive market is foreseeable with respect to a particular opportunity
Economic linkages The extent to which pursuing a particular opportunity might generate broader economic 1 = low extent multiplier effects 5 = high extent
Uniqueness The extent to which the Illawarra region might be able to present a niche or specialised service offering
Ease of implementation Description Rating scale
Simplicity (lack of barriers) The extent to which an opportunity can be pursued with little or no barriers 1=very easy hindering its progress (no barriers or investment, little time involved) Land/labour/capital The extent to which pursuing an opportunity would require investment in discrete requirements factors of production (land, labour and capital) 5=very hard Time to implement The amount of time (indicatively) it might take for the full extent of the opportunity (significant barriers and to be realised. investment, lots of time involved)
48 illawarrabusiness.com.au APPENDIX D: ACTION PLAN RATIONALE
Table D.1: Rationale for strategic objectives
Strategic objective Rationale
Building the profile and •• Collaborative efforts to develop a clear and consistent strategy for the region presence of the region’s •• Specific focus on harnessing opportunities presented to the region’s professional services firms, such as outsourcing professional services sector and crowdsourcing •• Enhances collaboration and ensures the region speaks with “one voice” •• Encourages export opportunities and networking opportunities •• Reduces stigma / negative perceptions of Illawarra based firms both locally and externally •• Encourages awareness of Illawarra professional services firms and coordinated positioning of the Illawarra
Helping Illawarra firms better •• Reduces the need for workers to commute to Sydney connect and collaborate both •• Incentivises skilled labour to either remain in the Illawarra or relocate to the Illawarra regionally and across NSW •• Encourages increased collaboration (sharing staff, outsourcing opportunities)
Retaining and attracting •• Encourages local graduates to remain in the region upon completion of their tertiary studies skilled workers •• Encourages local skilled workers to remain in the region or to relocate to the Illawarra •• Allows businesses to attract the skilled labour required to expand and diversify their service offering and markets
Developing and promoting •• Harnesses the opportunities presented by specific sub sectors the Illawarra’s unique •• Allows the Illawarra to capitalise on its strength and competitive and comparative advantages capabilities
Incentivising investment in •• Facilitates general economic growth and expansion the region •• Encourages economic diversification of the region away from a reliance on traditionally manufacturing towards other sectors
Table D.2: Key economic and policy drivers and relevance to action items
Key driver Relevance to action items
Jobs growth •• How will the proposed objectives/action items facilitate jobs growth in the region? •• What sort of jobs will be created? •• How will these jobs benefit the ongoing structural changes being seen throughout the region?
Regional economic growth •• How will regional economic growth be affected? •• How will implementation of the action affect supporting/enabling industries, not just professional services?
Skills broadening/deepening •• Does the region have the requisite skills for the proposed objective/action item to be successful? •• What will be the impact of insufficient skills being available? •• How will the proposal generate an improvement in the underlying labour market within the Illawarra?
Facilitating/driving •• How will the proposal attract external investment into the region? investment •• How will the proposal work alongside other initiatives at the NSW Government level (e.g. Advantage Wollongong)?
Trade/export readiness •• How will the proposal work with existing programs such as Export Growth China? •• How will the proposal assist local firms in gearing their products and services for export?
Objective alignment •• How does the proposal align with broader strategic and policy objectives both at a regional and State level?
illawarrabusiness.com.au 49 REFERENCE LIST
The City Factory (2014), What economic activities and siting strategies for cities?, Lille, September 2014.
Cultural Inspirations (2013), Commuting A Thing of the Past? Research report assessing Illawarra Commuters experiences and perceptions with commuting and teleworking.
Deloitte (2015), Wollongong Location Analysis: A Case for Shared Services.
Department of Planning & Environment (2014), Review of Illawarra retail centres, SGS Economics & Planning, June 2014.
HSBC (2011), The Future of Business, HSBC Business.
IBISWorld (2015), Industry Report M6931: Legal Services in Australia, June 2015.
IBISWorld 2015, Industry Report M6932: Accounting Services in Australia, June 2015.
Illawarra Business Chamber and Australian industry Group (2015), Illawarra Structural Adjustment: Helping the Illawarra region to adjust to the BlueScope downsizing.
Illawarra Business Chamber (2015), Member Survey: Membership, Events and Policy.
LJ Hooker (2014), Office Market Update: Central Coast Office Market, LJ Hooker Commercial.
NSW Department of Industry (2015), Knowledge Hubs Initiative Guidelines.
Property Council of Australia (2015), Greater Illawarra: The Smart Growth Agenda, Strategic Summary Report, 2 March 2015.
Ray White (2015), Wollongong CBD Office Update, Commercial Research February 2015.
50 illawarrabusiness.com.au
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