Letter to Mr Paul McLeay, Minister for the Illawarra RE: Princes Hwy @ Heathcote
by Geoff McQueen on Jul.26, 2010, under General
The Noisy Minority, who've forgotten the Princes Hwy was there first, and that their shops have an accessible side street parking lot out the back
Recently, the RTA has taken steps to try and implement a Clearway on the Princes Highway at Heathcote. This is the 4th largest road into Australia’s largest city, and should be treated as such – with a Clearway in the peak periods and a reasonable speed limit. Unfortunately, while this is common sense, a very small minority of people in Heathcote are waging a campaign and appealing to the local member – who is also Minister for the Illawarra – and demanding he stop the RTA from making this road a little less miserable.
If you agree with the content of the email below, please feel free to (re)use it and email the Minister to voice your anger and frustration at the way a vocal minority are making life painful for the majority. The road was there first. It is a major road. If isn’t a suburban back street or a little road out the front of the corner store. It should be treated as such, and the Minister needs to be reminded there are a lot more votes in his marginal seat in the northern Illawarra than there are in Heathcote. You can email the Minister at
Dear Minister,
As one of the tens of thousands of motorists who travel along one of the four major roads into Sydney each day, I wanted to join what is surely a chorus of frustration and disgust at how a very small and noisy minority of people in Heathcote are costing ordinary, working people of the Illawarra millions and millions of dollars each year.
Aside from the tremendous waste of time the current Princes Hwy arrangements cost the thousands and thousands of South Coast residents who have to use that road each day, there are also significant costs in both economic and environmental terms as thousands of cars at a time sit idling and burning fuel.
I implore you to make whatever representations you can to the RTA to see Clearways implemented and a more appropriate speed limit reapplied to the Princes Hwy at Heathcote.
This road is the fourth most important road coming into Australia’s largest City after the M5, M4 and F7/M2. It isn’t a sleepy backstreet or hamlet where people should expect the right to park right out the front of the corner store as they duck in and get the morning paper. It isn’t a quiet neighbourhood where pedestrians can jay-walk against the lights and everything will be fine. The Princes Hwy is also not a new road: it was there before all of residents and shopkeepers in Heathcote.
The Princes Hwy is a major road, that connects a great many of your constituents to their work, to their airport, to their state. By my estimation, if someone drives that road each day for work, the current arrangements (a 10 minute delay each way, 5 days a week) are costing them over 80 hours per year – more than 2 weeks of work time! This is a direct cost that the current arrangements are imposing on every one of the Illawarra’s thousands of commuters (and voters).
The other major arterials leading into Sydney have speed limits that reflect the road’s importance: 50kph should be reserved for suburban streets, not major national roads. There are many, many less important and heavily used roads in our state that have clearways. Sure, these clearways can be an inconvenience, but they serve and important purpose on any important and congested road – something that Princes Hwy surely is.
The citizens of the Southern Highlands, the Western Suburbs, the Hunter, the Central Coast and the Blue Mountains are treated much much better than the people of the Illawarra: please represent the reasonable interests and needs of your constituents by helping to push through the Clearway and push up the speed limit on this road, so that your constituents don’t keep feeling like 2nd class citizens.
Yours Sincerely,
Geoff McQueen
eBay and frictionless buying
by Geoff McQueen on Jul.06, 2010, under General
The dock I bought in under a minute, for less than A$20, including shipping.
Came into the office today after being out for a few days and decided the desk needed a clean – you know, clear desk, clear mind, etc.
In the process of tidying up the mess of cables you’ll find on any self respecting geek’s desk, I got to thinking: wouldn’t it be better if I had a dock for my new Nexus One? I’d be able to put it somewhere and tuck that cable away. Like the Big Lebowski, I was thinking this was the bit I needed to hold things together.
I had a look at the different reviews of the official US$45 dock online. It sure looked sweet if I wanted to play music from my Nexus One, like you’d want in your bedroom. But on your desk at work? Not so much.
So, I fired up eBay, logged in, and did a search for “Nexus One Dock”. Dozens of results. Pricing was right – under A$20 including shipping to my office here in Australia (mostly from Hong Kong).
The time from start of the search on eBay, to paying for the dock, was well under 60 seconds.
Then it hit me. This is truly frictionless shopping. No friction at all: I was able to sit at my desk, realise I had a need, and then purchase a product to satisfy that need in a matter of seconds.
Pretty impressive. If this kind of frictionless shopping comes to other areas of the retail experience, our retailers are in a lot of trouble.
Going to America – online business from down under
by Geoff McQueen on Jul.02, 2010, under BusinessWeb, Entrepreneurship, General, Industry.AU
Unfortunately, though, running an Australian business in a global market sucks. A lot.
This post tries to outline an approach to setting up your Australian internet business so that you can trade on close to a global market scale, competitively. And that means being able to price your product in US Dollars, and get paid in US Dollars, without getting completely screwed by transaction, currency exchange and lots of other fees.
This post is a work in progress, and will be updated as better advice and the pain of real world experience corrects assumptions/guesses. If you’ve got something to ask or contribute, please do so in the comments.
Getting Paid in USD
When it comes to the global marketplace – particularly online – the only game in town is US Dollars. A big chunk of the market is in the United States, people who aren’t are largely aware of how to convert from USD into their own currency, and most importantly of all, when prospective customers are comparing offerings and prices, they’ll be benchmarking your offering against your competitors, who’ll be pricing in USD.
If prospective have to think and convert your currency of choice into USD for comparisons and then their own currency for the cost to them, they’re probably going to have to reject you.
So, you need to get paid in USD if you’re selling online to a global market.
There are roughly four ways I’ve found to get paid online in USD as an Australian.
- Use a US Gateway and set up a US entity
This method means getting a business, a bank account and a tax identification number set up in the US. It involves cost, paperwork and dealing with the IRS. However, it also means you can access very competitive pricing from gateways – the people who link your website to the credit card payment networks and thus get money into your account. A couple I’ve found – Cocard and Authorize.net in combination – are going to cost me US$18/month and their fee is only 0.15% above the credit card company interchange rate. Pretty compelling, but now your business has two bank accounts, two legal entities and two currencies to do accounting for, not to mention the risk of double taxation and other inter-government scams. - Use a European Gateway and set up an EU entity
The next option I’ve come across still involves creating an entity, but in this case it is more of a piece of paper entity. No bank account, no legal structure, no double accounting. As far as I can tell, you pay a small fee to someone like simpleformations.com, and then you find a company who’ll give you a merchant account such as www.nochex.com who can take credit cards, and they’ll deposit the funds as a wire transfer into your Australian account.
Unfortunately, all the options I have prices for at the moment have a minimum monthly transaction of A$3000 or so. - Use an Australian Gateway who supports multiple currencies
As far as I’m aware, the only option open to Australian businesses who want a merchant account that supports multiple currencies is the National Australia Bank. I’ve made an enquiry to find out what the current state of affairs is on this, everyone I’ve talked to who’s tried this has had a terrible experience. A search for “nab merchant account rant” on Google turns up gems like this and this. I’ll update this post if this option surprises me and becomes even remotely competitive, but I’m not holding out much hope. - Use a US ‘Reseller’ style company to collect credit card payments on your behalf
This option is lowest setup effort, but it also provides less control, is least professional for users and costs the most in transaction fees. Companies like Plimus or Fastspring are effectively becoming our retail or reseller front end, reselling our product, and so all client interactions and payments go through these companies. They also charge up to 10% for their effort (and risk taking) getting between you and your customer, which while compared to traditional retailing and channel’s isn’t crazy, but they’re not actually finding you customers and handling client support the way a regular retailer or reseller would; 10% for payment processing is very high. If you’re only doing small amounts of revenue, this might work, but if you’re trying to build a business that is more than a hobby, this is a stretch.
Having reviewed a bunch of the crappy options, the direction I’m leaning towards is setting up a US entity, opening a bank account, and getting a tax identification number.
Having a US entity, bank account and tax identification number
The idea of this post is to save future Aussie entrepreneurs some of the hassle/drama/uncertainty associated with doing business globally. If you’ve got any knowledge of any of this stuff and could affirm or correct any of these assessments, I’d really love to hear from you in the comments or by emailing geoff.mcqueen – at – hiivesystems DOT com!
While I recognise that spending hours on this while we’re trying to get AffinityLive ready for launch is a bit stupid – this is what you pay accounts for, right? - I’ve found in business that understanding the fundamentals of these sorts of things yourself is priceless – after all, as a Director, it is me, not an adviser, who’s on the hook. Additionally, whether it is in IP law or other areas, understanding the basics means I’m in a better position to assess whether one adviser or another is more expert, and thus make the best decision about who to go with.
US Entity
Business registration in the US is handled on a state by state basis. One of the most appealing states for registering your business is Delaware – their fees are low, they have no sales tax (whereas in California it is close to 20% and the state is still almost bankrupt), they don’t take to kindly to people suing company officers and they are “friendly” like the Swiss when it comes to confidentiality. Handy.
There are a bunch of different entity types you can register in Delaware. The most common types as far as I can tell are a C-Corp and an LLC.
C-Corp
A C-Corp is like an Australian Limited company. Note that it isn’t equivalent to a Proprietary Limited (Pty Ltd) company, as a C-Corp has to have officers, needs to file returns to the state, and a bunch of other stuff. Nothing too scary, but more formal than you’d be used to if you’re running your own Pty Ltd company.
The company can file its own tax returns with the IRS (Federal, not state).
A C-Corp can keep hold of its own money from a tax perspective, paying dividends only when it wants to. It also doesn’t have limits on the number of shareholders like some of the other structures, so it is a good type to use if you’re looking to raise a round of capital by selling equity to investors. This entity is pretty much what you’re used to with running an Australian company, but having a C-Corp makes the repatriation of funds to Australia a bit more interesting, and makes transfer pricing a potential issue, as the C-Corp is a full company, and your Australian parent operation may well be a shareholder – or the only shareholder – but the IRS will treat the C-Corp as its own entity.
A Limited Liability Company (LLC)
An LLC is a particularly curious beast. It is like a company in that the business shields the owners and officers from personal liability should the business fail and have debts. It can have a bank account and trade just like a regular business. However, it can’t submit its own tax return like a company and pay tax – instead, the profit that the business makes flows through to its “members” (like shareholders), and they pay tax on it just like it was any other form of income.
In this sense, an LLC is much like an Australian Trust structure. And the way the Australian Taxation Office treats these LLCs – also known as “hybrid vehicles” because they tend to be more like a partnership where the “members” or shareholders can be natural persons and companies – is pretty good from what I’ve read so far. More on that later.
Registration
Regardless of the structure you follow, registering the company in Delaware is fairly inexpensive; there are a ton of agents out there who’s job it is to do just this sort of thing.
Just one example is IncNow.com, and the cost of registering an LLC and being up and running within a week is under US$300.
Annual fees are in the range of US$120 – also fairly reasonable at $10/month.
You also get the forms you need to submit an application for an Tax Identification Number (TIN), which your merchant account people will need you to have to set up your account with them.
Franchise & State Taxes
In Delaware, they make their money by charging a small “Franchise tax”. From my reading, this would be around $90/annum. Bugger all really.
IRS and Federal Taxes
While business setup in the US is a matter for the state jurisdictions, it is the Federal Government you really need to worry about. Like in Australia with the ATO, the IRS are very bureaucratic and hungry for your money.
Every year, they require all taxpayers in the US to pay income tax and file a tax return – this includes not just individuals, but also companies, members of LLCs, etc.
If you’ve got an entity and a bank account, odds are that means you too. I’ll outline a bit more of what I understand the alternatives and situation to be in the Tax Returns section below.
Australian Taxes, Dividends and Double Taxation
Of course, if you’re running your company/business from Australia, you’ll have your regular dealings with the ATO to worry about too. This in and of itself isn’t a problem, but bringing together multiple tax jurisdictions around your taxable profits is asking for trouble – if someone’s going to get f*cked, it is going to be you.
Tax returns and not getting double-screwed
While there are undoubtedly a bunch of issues to address with running an international business and dealing with governments, the one that I’m trying to get to the bottom of with this post is tax.
Basically, I don’t want to be paying tax on the same income twice, and where possible, I want to be paying the lowest rate of tax I can on hard-earned profits.
Situation
Everything from here on in is assuming we’re running the US operation through a Delaware LLC, with a bank account in the US, and credit card based income coming into this US bank account.
There will be a few thousand dollars a month - initially - of expenses in US Dollars, mostly things like hosting fees with our US hosting provider, and a few odds and ends like local US phone numbers and such. All other expenses – our rent, our staff costs for product development and client support – will all be in Australia and paid in Australian dollars.
All income for our AffinityLive.com product sold to clients outside Australia will come through this LLC, with clients paying recurring monthly, quarterly or annual subscriptions in the hundreds of dollars via credit cards per client.
As a result, it is expected that the US entity will be quite profitable compared to the Aussie HQ given its lower fixed costs.
Complying with the IRS
As far as I can tell, running an LLC means that you’ve got two choices – the LLC can submit its own tax return acting as a corporation – a 1120 form – or its “members” can submit tax returns for their own share of the income that is distributed from the LLC.
To simplify things, we’re currently planning on completing our US tax return using a an 1120-F form, which is what a foreign company completes to declare income earned through their business activities in the US.
The IRS agent I spoke to today told me that we’re effectively declaring the income as Australian company income, earned through US business activities, and the LLC in this case is a financially transparent entity that doesn’t complete its own tax return.
If you submit a corporate tax return as the LLC, you’ll be taxed on your profits the normal way; I think it is around 33% or so. Then, you can repatriate your after-tax income to Australia, and the IRS is pretty much done with you.
The standard tax year in the US is a calendar year; again, to simplify things, we’re going to complete an 1128 form to move our tax year to be July to June and thus in-sync with our Australian financial year.
Witholdings
In some situations – and I don’t quite understand thesem but they seem mostly related to property transactions? – the IRS will also withhold a percentage of your dividend on top of the tax they’ve already collected.
One of the reasons to go with an LLC over a C-Corp and to use the 1120-F form, completed as the Australian parent, is to avoid dealing with dividends and transfer pricing issues at all, so hopefully withholding won’t be an issue for us.
Foreign Tax Credit
Australia has a tax treaty with the United States, which means income earned in the US is taxed by the US, and once it is repatriated to Australia, you get a credit from the ATO for the tax you’ve paid.
In a way it isn’t quite this easy, as the ATO will actually “gross up” your dividend to put the amount the IRS took away from you back on, at which point the ATO will calculate the amount of tax payable as if it was all Australian money, and then it will credit you for the amount you paid to the IRS on the US income, and you’ll then owe the ATO whatever extra tax they say you owe them. I think this is there so that ATO gets to charge you Australia’s tax rate and get more money out of you for income earned in places with lower company tax. What I don’t know is whether the reverse applies, and the ATO will allow us to “deduct” all of US tax from our total tax payable (since the US rate is a bit higher), or whether the ATO will have it both ways – charging you more tax when the other country has a lower rate, and saying bad luck and quarantining foreign income and tax when there is a higher international rate.
No Franking Credits on US post-tax earnings
When a company declares a dividend and pays its shareholders, the shareholders need to account for that income as part of their normal tax return process, and pay tax on that income at their marginal tax rate. In Australia, a concept known as Franking Credits means that Australian taxpayers don’t have to pay tax on the whole amount of the dividend, since the dividend has already had company tax come out of it. It is a fair and great system, but unfortunately, the dividends that come as a result of internationally taxed income don’t get franking credits.
The following example, courtesy of a great newsletter from the team at Johnston Rorke, shows how you could lose almost two thirds of your hard earned profits to taxes due to this lack of franking credits. In the example, a foreign company makes a $1000 profit, the company tax rate in the foreign market is 35%, and the personal tax rate for shareholders in the Australian parent company is assume to be 40%. They’ve also included a dividend withholding tax rate.
As you can see, even allowing for the Foreign Tax Credit (note the “Nil” as the tax payable in the Australian company), the fact the shareholders have to pay tax at their full marginal tax rate (no dividend franking) means the effective tax rate on the end shareholders is a horrible 64.9%.
Things Still to Work Out
There’s still a lot of questions in the above.
I currently don’t have a good handle on exactly how the ATO will treat the income that comes via the LLC, as it is what the ATO calls a Hybrid Vehicle. While it would appear that the ATO will recognise the tax credit, I want to know for sure that this is the case, and unfortunately for me, researching this information on the web is pretty tricky, as the ATO has been making changes in the last couple of months – see http://law.ato.gov.au/atolaw/view.htm?docid=”AID/AID201077/00001″ for information that at the time of writing this post, was less than 3 months old.
I also want to understand the C-Corp scenario a bit better – particularly the dividend withholding issues – in case we find for legal or investor reasons we need to step up from an LLC to a C-Corp.
Another thing to look into is the option of setting up a structure in a tax friendly third country. Capital Gains tax in Australia is particularly horrible for entrepreneurs; not only do we have profits and incomes taxed, but if we manage to sell a company we’ve spent tens of thousands of hours and much personal risk building over many years, the tax man then wants to tax the money you get from selling the company at the top marginal tax rate in the year you sell it, in effect taking half of your pay off for success as tax. Other countries like Hong Kong and Singapore don’t have similar capital gains tax situations, however, since all the IP is currently owned by an Australian based company, and changes would need to be very well thought through as moving the holding company to another country would be expensive because it would trigger a capital gains tax event at the time of moving (since a company you set up in, say, Singapore, would be buying the Australian company, and the ATO would tax the shareholders – you – on that transaction even though no real money changed hands).
If you have any knowledge of how this is treated through first hand experience, or can point to an online article that explains it a bit more clearly than the ATO website tax rulings, I’d really appreciate you leaving a note in the comments.
Heathcote Farce
by Geoff McQueen on Jun.24, 2010, under General
Shame on you, RTA and Paul McLeay. The fourth biggest road into our biggest city deserves better. Make it 70 and give us a clearway or lose your seat.
Nexus One dropping back to 2G on Optus
by Geoff McQueen on Jun.13, 2010, under General, Technology
I’m looking at moving my company’s mobile phone services over to Telstra, and I wanted to do some checking of whether my new Nexus One (gift from GoogleIO 2010) was going to work on the NextG network. While some of the frequencies (2100MHz) overlap, my Nexus One uses the 900MHz frequency, whereas Telstra NextG uses the 850MHz frequency.
In the process of sniffing around my phone’s settings, I accidentally screwed something up so that my phone only had 2G access. This blog post is to share the optimal settings for the Nexus One on Optus.
After referring to the really helpful Nexus One Help Forum post I went into the testing menu, and basically screwed something up.
- In the phone dial pad… *#*#4636#*#* (This is the testing menu)
- Select Phone information (first) option
There are two settings you need to have to work well with Optus:
- Towards the bottom under “Set preferred network type:” to “WCDMA Preferred“.
- Hit the Menu key > Select radio band > Select AUS as the network > Select OK.
I think I must have selected AUS2 out of curiousity, and in the process screwed up the 3G access on Optus.
Changing back to AUS and fixing WCDMA Preferred, and I got back my 3G.
Changing Subversion Revision Authors – simple script
by Geoff McQueen on Jun.08, 2010, under Technology
After making the decision to move our JIRA and Confluence development stack back in-house (after a year or so of using JIRA Studio), I also took the opportunity to pick up a few of Atlassian’s other products thanks to their disruptive $10 Start Deals.
One of these products, Fisheye, looks pretty impressive, however, I ran into a road-block when starting to use it on our existing Subversion repository: we had too many committers.
While the current Hiive Systems team consists of only 5 code committers – well under the 10 committer limit in the Starter version of Fisheye – the subversion branch has quite a lot of history. Our revision log is well over 100,000 commits, and includes a bunch of people who’d played a role in development in the past – interns, staff from our sister company, Internetrix, and some staff no longer with the company. This, combined with some laziness around usernames – I’ve been known by two usernames over time – and we were going well beyond our 10 unique committers. Unfortunately, and understandably, Fisheye doesn’t prompt to say “which users do you want to count/care about” – it just stops indexing once it gets to the 11th committer.
So, we needed a way to go back and group together committers. In some cases, it meant having my commits work off a standard username (how novel!). In others, it meant taking commits from interns and language translation staff and converting them over to a common “archive” user.
While the process was fairly easy on a revision by revision basis, with over 100K revisions, I needed a better approach. So I wrote this little Perl script. Hopefully it is useful for you too.
More Facebook App Spam – Who Always Views My Profile sfapp
by Geoff McQueen on Mar.15, 2010, under General
Update: I think Facebook are onto this; luckystar_profile is just one app that is doing this (I’ve now seen many more), and all have been removed by Facebook. Unfortunately, the spam photo albums are still everywhere.
Yesterday afternoon, I received a Facebook notification from a friend I haven’t seen for about 6 months. It said she’s tagged me in a photo album, called “Who is checking my profile? – Mar 14 2010 07:54″. This struck me as pretty weird – since I hadn’t seen this friend for a while, I didn’t think there was much chance I could have been tagged in a photo recently. I checked the email was really from Facebook – it was – and the message also appeared in my new notifications within the Facebook system, so it wasn’t a case of sneaky phishing.
The original tag notification email, showing a very weird album name
The weird thing is, the very same minute that I got this bogus notification about being tagged in a picture, I got a notification that this same friend had commented on a picture of mine, with a really suss looking lin.
The spam link that accompanied being tagged by the sfapp
I sent a message to my friend telling her I thought her Facebook account had been hacked; she got back to me to tell me she’d changed her password as a precaution, and I thought nothing more of it – the internet is full of nasties that try and steal your identity and access.
Then, over 24 hours later, I logged into Facebook and saw something much more widespread and concerning.
Tonight I went look for a photo I’d uploaded a week or so ago, and I clicked on the “Photos” icon on the left hand navigation. What I saw stunned me – many of my friends all had a very similar most recent album. 11 out of the 20 photo albums displayed – 55% – were showing this spam/phishing application’s calling card as their default picture/most recent album.
All of the red squares shows a friend who's been hit with this facebook spam app, of sfapp
Looking more closely, all of these albums were from a sfapp (Spam Facebook App) called “luckystar_profile” (http://apps.facebook.com/luckystar_profile).
I’m not sure yet how it works – and don’t dare install the application in case it then screws with all of my photos and tries to get my friends to install something malicious – but in any case, it is clearly another example of Facebook’s Apps support ruining the user’s experience.
Facebook, the answer is very straight forward.
Remove all apps from your platform.
If you’re not to prepared to do this, then at least stop apps from sending messages, putting in notifications, or messing with user’s data like photo albums.
If people want to have a farm or raise virtual fish, knock yourselves out – just don’t let any application write to anything in a user’s Facebook account.
Clearly app developers can’t be trusted, and this sort of crap is going to drive users away to the next big thing – the same way auto-loaded crap music drove people from MySpace to your service.
Google’s OAuth Pain: Token invalid – AuthSub token has wrong scope
by Geoff McQueen on Mar.14, 2010, under General
While I’d been meaning to play with Google’s applications – and integrating them with our own Affinity - for some time, the launch of the Marketplace pushed this experimentation up the priority list.
After spending a fair bit of time hacking on a Sunday, I’d managed to re-purpose our OAuth platform to play nicely with Google, including their need to have the scope variable passed as a part of the token request process.
Regardless, I’d gotten really really really frustrated with a persistent error. While it is now really obvious, I missed it and it cost me a few hours and a lot of frustration, so hopefully this blog will help someone else trying to solve this into the future.
After correctly getting my token and secret for a specific user – and asking for quite a few scope options – I was still getting the error Token invalid – AuthSub token has wrong scope when I was trying to access a document list via OAuth.
While this error talks about AuthSub, I’ve now discovered it is really a generic error message, and applies to any case where the scope of access doesn’t match what you’re asking for, whether it is OAuth or AuthSub. This confusing error message had me off the scent for a while as I started to wonder whether OAuth was supported as widely as I had expected, whether there was a difference between paid and free accounts, and so on…
The problem in my case is that I’d requested a scope to http://docs.google.com/feeds/, but using the example code at Google’s Documents Developer Guide I was then going on to interrogate https://docs.google.com/feeds/.
To emphasise, GOOGLE THINKS THAT HTTP IS COMPLETELY DIFFERENT TO HTTPS IN ITS NON-STANDARD ‘SCOPE’ TRACKING EXTENSION TO OAUTH.
To make matters worse, even when you explicitly ask for https based feed scopes, Google doesn’t even show them to the user. Seems like in some cases, Google thinks the http vs https distinction doesn’t matter, but when it does care about it, it doesn’t give you an error message that’s any use at all.
Google can't make up its mind if https and http are interchangeable in a scope: each of these scope requests were with https prefixes.
Unfortunately, Google’s own access summary interface doesn’t clarify which versions of the domains are http, and which one’s are https.
So, in summary, if you’re getting a “Token Invalid – AuthSub token has wrong scope” error when you’re trying to use OAuth (or even AuthSub for that matter?), make sure the scope you’re requesting is using the same protocol as you’re using – http vs https makes a very big difference.
A primer for SMEs who want to work with Defence
by Geoff McQueen on Mar.04, 2010, under General
This week, ICT Illawarra hosted Air Commodore Anker Brodersen, Director General Defence Preparedness, and his colleague, Rick Souness, who runs the Defence Materiel Office’s (DMO) Business Access Office, as they ran a half day workshop and a follow up day and a half of one on one interviews for Illawarra based technology companies.
For half a day on Monday morning, Anker and Rick presented to a few dozen businesspeople – representing a wide range of small and medium businesses in the general technology space – taking us through what Defence is doing at the moment, and how we can take advantage of the opportunities large changes in big organisations always bring. In terms of Defence, the changes surrounding Anker’s work are are massive – through around 15 distinct programs happening throughout Defence, they’re working to save $20billion over the next 10 years. This requirement is baked into their forward funding arrangements – it isn’t aspiration, but very, very real.
Anker spoke first, giving the audience an overview of the wider Defence organisation. There were more acronyms then you could poke a stick at, but the main take-away I took on board was that there are two main parts to Defence and its expenditure – the big capital expenditure part which eats up lots of billions of dollars over a long period, and then the operational expenditure on personnel, training and deployment issues (abbreviated as POC).
While thinking about Defence spending leads people to naturally think about capital acquisitions, the big ticket military hardware stuff – especially when things don’t work out so well, like with recent investments on Submarines and Helicopters – around half of the money spent on Defence each year goes into running the organisation and executing missions, whether training, humanitarian or combat related. While a lot of Defence’s capital expenditure is run through large, multinational ‘Prime Contractors’, other operational requirements for Defence provide a more of a realistic opportunity for domestic firms, including SMEs.
In addition to painting a big picture of “what does Defence spend money on”, Anker also provided a great insight into why they spend money; the rationale and things that drive Defence, and specifically why they’re different to almost everywhere else. Defence is a ‘command’ or planned economic system. It doesn’t have competitors – there’s only one Army in Australia, and they don’t tender for the work in a competitive process. The fact taxpayers are expecting people to risk their lives also creates an interesting dynamic to whether something is “necessary”. And finally, while Defence has been able to successfully increase their efficiency through contracting services to the private sector, it isn’t possible for the organisation to contract away risk (and responsibility): while the Australian Submarine Corporation built the Collins Class submarine, it is the Defence Department that has to answer to the Australian people when things go wrong.
These factors mean Defence is looking for different types of ROI compared with the private sector.
For example, when Qantas buys a jet, they maximise their ROI by keeping the plane in the air and as full of paying passengers as they can, earning as much money as as they can for their monthly lease finance payments to have the jet. The plane is well maintained and operated safely, but within these parameters, they fly the crap out of it until it gets to the end of its useful life, and then they sell it or give it back to the finance company.
Defence, on the other hand, buys F-111′s, for example, and has a target service age. The equipment gets regular refits to keep its technology up to date, but the airframes will be keep in service for decades and decades – the priority is to maintain the required level of readiness and to maximise ROI by keeping the platform operable for as long as possible.
Anker answered a lot of questions from the floor and gave us some frank insights into the changes Defence is going through, and also undertook to look into a few specific issues raised by some of the companies in the room more experienced with working with Defence.
After a coffee break, Rick then took to the stage and basically explained how he and his team are the ideal first point of contact for SMEs, particularly if they’ve got a product or service that they think would be of benefit to Defence. He covered the various programs and activities that his office either manages or channels enquiries through. The main highlights were:
- The Business Access Office (BAO) themselves, the first port of call for most SMEs wanting to do business with Defence: http://www.defence.gov.au/dmo/id/publications/dmobao_Sep09.pdf. They’ve got offices in every Capital city, and a 1800 phone number you can call.
- There is a Defence + Industry website, where businesses can register, set up a capabilities profile, and get alerts about opportunities in Defence. This also helps people within Defence find your business/product/services.
- The Unsolicited Promotional Product Offers (UPPO) Scheme, which is administered through the BAO, and which represents a good opportunity for companies to pitch their offerings to Defence. The process is that you get in touch with the BAO, pitch (not sure how), you’ll either tell them who within Defence is your target, or they’ll help you work it out, you then pitch to the unit of Defence who would be your customer, and then they decide whether they don’t want it (now), they want it and will need to go out to (a select) Tender, or they’re prepared to go into negotiation with you and buy it directly.
- The Unsolicited Innovation Proposals. Like inventions that aren’t COTS type products, which you think might have a defence application. It goes through the DSTO. More info at http://www.defence.gov.au/dmo/id/ic/duip.cfm.
Rick also covered a bunch of other things and answered questions, before the questions got more specific, then it became an Anker and Rick show with each of them taking the specific questions as they best know.
In short, while Defence is a big organisation, there are doors that are open to your offers and solicitation. Your mileage will vary depending on whether a section of Defence has a need for what you’re trying to sell, and you’ll need to have a lot of patience no matter what (you’re dealing with a very big government department after all), but the fact Defence has big wide open doors (admittedly with high hurdles and no certainty you’ll be successful) was news to me.
In networking over lunch, I was told by more experienced SMEs that having good, professional but not pushy relationships with prime contractors was also an important way of doing business with Defence: while SMEs might like to think they deserve the opportunity to contract directly with Defence for what they do, the size and complexity of an organisation who’s mission spans the globe, and which employs over 100,000 people, often in very demanding circumstances, means Defence needs to focus its efforts on working closely with fewer contractors than the tens of thousands of SMEs who could be helping them fulfill their mission. From an SME’s perspective, it isn’t nice, but it makes sense, and the tip I got was that if you do good work through a prime, they’ll keep getting you back in again and again and again and again.
A big thanks to Anker and Rick for taking the time to come to Wollongong, and for not only speaking to us, but speaking with us: Anker and Rick both then did a day worth of one on one interviews with many of the businesses in the room, an opportunity I really appreciated them taking the time to make available.
Aussie tjoos.com gets acquired
by Geoff McQueen on Mar.04, 2010, under General
A couple of good friends of mine, two of the warmest and most giving people in the Australian startup community got a big wet kiss – and a big cheque – after their startup, Tjoos.com, was acquired by Los Angeles based Internet Brands overnight.
Founded by the necessity of globe-trotting lovers needing to sort out visa issues to stay together (one a Dutchman, the other a girl from Atlanta), Tjoos.com allows people from all over the world to find deals – usually through digital coupons and promotional codes – which save them money.
In the midst of a pretty massive global recession, Tjoos managed to grow at more than 150% in the last year. Obviously, this kind of success and the strong cash generated by their transaction based traffic led to a very compelling offer from Internet Brands. The details are confidential, but suffice to say Bart and Kim don’t need to work another day in their lives if they don’t want to.
Bart and Kim have contributed so much to the Australian Startup Community over these last few years. They’ve been the energy behind Startup-Australia.org, as founding members of Silicon Beach Australia, and their sweat, tears and sleep deprivation have bought numerous Startup Camps’s to reality around Australia (along with Brian Menzies and many other supporters).
Outside the hard work and innovation in a competitive market to build a successful business, they deserve this on a ‘karma’ level more than almost anyone else I can think of in our community. They give so much, and it is great to see them get back their generosity, with interest.
I’m really really really really happy for Bart and Kim, and you can be sure of one thing: their success is only going to speed  up their contributions to building a greater startup community here in Australia, something Bart has been so strong in the last few years that he was awarded Startup Person of the Year by Technation.
Congratulations Bart and Kim!
