The strategic costs of adopting technology
7 Dec 2020|

At the recent Australian e-commerce summit, Prime Minister Scott Morrison praised technology adoption as a means of driving economic returns. Australia doesn’t need to be a Silicon Valley, he said, it just needs to be the best at adopting technology.

It’s worth digging into this, as the story around technology for economic development and national sovereignty is complex.

There are five main reasons to pursue a technology-adoption strategy.

The first tends to be maturity—or lack thereof. Start-ups, for example, will typically adopt a tech stack rather than try to build their own. It’s quicker and often cheaper, allowing them to prioritise the little capital they have. More often than not, such decisions are time-limited. There’s frequently an expectation that once a company gains sufficient momentum and income, it will build something that embeds or supports its specific product or service.

The second reason is related to the maturity issue—some organisations decide that technology is not a core competency. Technology in these cases is perceived as a cost centre and efficiency is the dominant paradigm. Short-term budgeting, an expenditure mindset and a lack of strategy also favour that approach.

Then there’s the fear of ‘orphans’, a third reason. Building bespoke platforms and systems risks undue reliance on unsupported and lagging technologies. Where there’s a lack of technological sophistication, or an unwillingness to invest in such capability, adopting an established platform and support may help resolve concerns over, for example, redundancy and security. It’s a form of risk transfer.

That can, however, lead to the fourth reason: capture. The costs of leaving a particular technology and adopting a new one, or building one’s own, may be too high, especially where more and more business functions become intertwined with and dependent upon the provider’s broader offerings and even good will. With few options, captured organisations may be subjected to price gouging and technological hand-me-downs. In the meantime, the chances are the workforce has become deskilled, weakening the organisation’s own bargaining position.

Last, there’s using adoption to access more advanced technology, and so better position the organisation or nation. That’s not advocated here but it’s an approach that may lend itself to a more unscrupulous strategy of reverse engineering the technology or systems, or simply stealing it and its intellectual property for business or national advantage.

The urgency in the prime minister’s speech reflects elements of the first and second and the more altruistic aspect of the fifth reason. Adoption is cheaper and faster than building, and it can give that leg-up to access new business.

Strategically, that’s not enough. Information technology is deeply embedded in our organisations, our personal lives and national well-being. Countries that see it primarily as a cost centre—or just ‘a magic box in the corner’—will weaken, become increasingly vulnerable in a competitive world, and fall behind.

True, adoption will always be part of a well-rounded, competitive approach to technology. It enables experimentation—a try-it-and-see approach to newer technologies. And it can help weaker players compete. But it cannot be the only, or even the primary approach in the modern world.

Adoption brings other attributes at which Australians may look askance. For example, as more and more AI is being built into and back-boxed with vendor’s platforms, it also embeds others’ assumptions, cultural norms and attributes. The government itself has pushed back on, for example, ‘high-risk vendors in 5G networks’ on security grounds.

Increasingly, the collection of personal data and the use of algorithms are being questioned, as with Facebook, Tik Tok and Tencent-associated games. Those are in the social domain: what about technologies that shape government decisions about welfare, taxation or security status?

Moreover, adoption means less control or visibility into the system’s operational analytics—often beaconed back to the company, which after all holds the intellectual property. There’s less insight into research or product roadmaps, which can limit planning, and as research and development is undertaken overseas, may constrain influence and capability-building as well.

Australia needs a strategy that makes it more than a technological dependant. That means more than adoption; it also means not cutting Australia off technologically or spending profligately in pursuit of a purely nationalist approach. Australia needs the best of both worlds: access to leading-edge technologies, while building a capability to support Australian interests. Government’s own use of technology cannot be dominated solely by an efficiency or convenience paradigm. Building your own can bring hard-won expertise that is hard to duplicate through other means.

Being able to design, develop and implement technologies, and contribute to the foundational science, is a key measure of sovereignty. There’s often a trade-off between sovereignty and income: sovereignty is a public good that can be costly to produce. On defence matters, Australian governments have frequently been willing to develop and build locally at increased economic cost. Developing technology with clear use cases has an economic and sovereignty multiplier effect beyond military capability.

Building local technologies is also soft power that contributes directly to hard power, especially in cyber as well as in emerging areas such as quantum computing and space capability. Such activity and knowhow forms a contribution to our existing alliances and may help build new ones. Helping to embed democratic values into technology—reflecting the importance of privacy, for example—helps withstand creeping techno-authoritarianism, aspects of which are already evident in our own societies.

Adoption-only—and even adoption-mainly—policies risk relegating Australia to the second and third tiers in a technologically competitive world. Such policies also mean accepting the cultural norms and priorities of others.

It need not be so. Australia could pursue strategic niches, much as Israel has done in defence and information technologies or the Netherlands in agri-food and horticulture, where there is market need, strategic drivers and a supportive ecosystem. It would mean investing in technology creation and adaptation, supporting venture capital, enabling the conditions for scaling, reducing regulation and creating a favourable taxation environment. That would allow Australia the options, not excluding adoption, for a more strategic approach to technology and help it avoid the capture trap.