The Truth About What Gives Australia Bite

Increasing investment in Australia creates need for Equinix’s new ME2 data center

Snakes, spiders, sharks, jellyfish, crocodiles (or Crocs as we call them). A new edition to the Crocodile Dundee movie series that turned out to be a giant Superbowl ad for Australian tourism. Ask around outside Australia and these are some of the things that spring to mind when you mention this vast country to the uninitiated.

Here on the ground the view is a little different. The reality of what makes Australia great is a little more…subtle. If you’re a start-up in the tech industry you’re more likely to get consumed by an international corporation in expansion mode than by a Great White off Bondi.

To begin to appreciate why Equinix and our customers are investing here at the rate we are, it’s worth thinking about some of the following:

  • Australia is an economic powerhouse that punches above our weight. Australia entered its 28th consecutive year of economic growth last year, unprecedented expansion for a developed economy. Though growth may be slowing slightly this year, Australia is forecast to realize average annual real GDP growth of 2.7% over the next five years[1] – the highest among major advanced economies.
  • Though we may have a relatively small but growing population, Australia’s economy is the 14th largest in the world and fifth in Asia[2]. With globally competitive mining and resources, finance, tourism, agriculture and education sectors, Australia is forging ahead in technology too, as it transitions to a services-based economy.
  • Its enviable combination of economic stability and dynamism supports Australia’s remarkable quality of life[3]. Three of its major cities, Sydney, Melbourne and Adelaide, were ranked in the top ten most liveable cities by The Economist last year[4].
  • Our high GDP per capita -11th globally[5]. Our economic freedom, for which we’re ranked 5th in the world, and our ease of doing business – 18th in the world. Of course, this is not to mention our beautiful environment.

In short, the optimistic outlook of the economy is attracting more companies to enter the market. At the same time, competition and the consumerization of technology increases customer expectations, and both local and international companies must digitally transform if they are to keep up – and they are.

Investment mecca

For all of these reasons, Australia has attracted enviable levels of investment – and not just from Equinix, though we’ve played a significant part.

In Sydney we’re preparing for the launch of our eighth data center, named SY5 – a US$160 million (approximately A$224 million) investment for Equinix. In Perth, we’ve spent almost US$10 million (A$15 million) to expand our PE2 data center over the past year, while today in Melbourne we announced the development of ME2, an initial investment of US$84 million (approximately A$117 million).

Since opening in Port Melbourne in 2015, our ME1 data center has fostered a now mature ecosystem in the city with well over 200 customers interconnecting across multiple industries. An ever-wider variety of enterprises want to directly connect with each other and global partners to drive their digital transformation. This new wave includes retailers, manufacturers, healthcare organizations, legal firms and logistics providers, among others.

Yet with the city forecast to have a digital economy worth approximately US$36 billion (more than A$50.8 billion) by 2020, more was needed.[6] It’s why we have ME2, which set to open in Q3 2019 with an initial capacity of 1,000 cabinets.

We continue to invest to support growing demand for digital transformation, as companies in Australia look to serve their customers consistently better and faster.

Tech dynamism

But it’s not just the enterprise businesses that are going places in Australia. Elsewhere in tech, there’s a huge amount of dynamism. Here’s just a few recent examples:

  • 700 fintech start-ups existed in Australia in 2018[7], raising over US$655 million (A$988 million). New open banking rules are expecting to drive a burst of further international investment[8] in this sector in 2019. There’s already been a huge rise in deals taking spending to US$600 million (A$842 million) in 2018.
  • US customer relationship management software giant Salesforce has become the latest multinational to express confidence in Australia’s rapidly growing tech ecosystem. It’s establishing a US$50 million (A$71 million) Australia Trailblazer Fund[9] run by its division that previously backed companies including Dropbox, Twilio and Box.
  • There are predictions that more US multinationals will increase investment[10] in Australia, as tech unicorns like Canva and Deputy increase the profile of the local start-up sector offshore.
  • Australia already boasts of 500 medtech companies worth US$7.3 billion (A$11 billion), 350 edtech companies forecast to be worth over US$1 billion (A$1.7 billion) by 2022, and 300 agtech and foodtech companies.

A rendering of ME2 in Melbourne, Australia

Government support

In addition to being in the midst of its own digital transformation drive, the Australian Government has a host of initiatives underway to encourage growth and investment in tech and beyond. It recently announced the launch of a high tech hub[11] in Sydney’s Redfern neighborhood where local Australian tech hero Atlassian is re-locating its office.

Our government sees the benefit of having an epicenter for innovation, a hub for tech companies that enables a powerful network effect – just like in Silicon Valley, and within Equinix IBX data centers.

Government is also removing barriers to success across other industries across Australia. As just one example, the Industry Growth Centres Initiative[12] is focused on helping Australia to transition to smart, high value, export-focused industries.

The Australian Government will invest US$158 million (A$238 million) over four years, from 2017/2018 to 2020/2021, in six sectors that it has identified as areas of competitive strength and strategic priority – advanced manufacturing; cyber security; food and agribusiness; medical technologies and pharmaceuticals; mining equipment, technology and services; and oil, gas and energy resources.

What it all means

Given all of this, it’s perhaps not surprising then that by the end of 2017, foreign investment in Australia reached over US$2.16 billion (A$3.26 billion)[13], an increase of 3% from the previous year. Among those leading this investment are the US (27%), the UK (15%) and Belgium (9%), with regional neighbors Japan, Hong Kong and Singapore bringing up the rear.

So yes, Australia is home to fast moving predators and plenty of things that can sting you when you’re looking the other way. It’s just that they’re likely to be the latest start up or mover and shaker in the enterprise sector as they are to be featured in National Geographic.

[1] https://www.austrade.gov.au/International/Invest/Why-Australia/Robust-Economy/robust-economy

[2] https://www.austrade.gov.au/International/Invest/Why-Australia/Robust-Economy/robust-economy

[3] https://dfat.gov.au/trade/resources/Documents/australia-is-a-top-20-country.pdf

[4] https://edition.cnn.com/travel/article/worlds-most-liveable-cities-2018/index.html

[5] https://dfat.gov.au/trade/resources/Documents/australia-is-a-top-20-country.pdf

[6] http://www.invest.vic.gov.au/why-melbourne/tech-city-melbourne/australias-tech-city

[7] https://www.austrade.gov.au/International/Invest/Why-Australia/Dynamic-Industries

[8] https://www.afr.com/technology/fintech-gold-rush-tipped-as-kpmg-finds-australian-investment-hit-842m-in-2018-20190222-h1bllf

[9] https://www.afr.com/technology/us-tech-giant-salesforce-creates-a-50m-australian-vc-fund-to-back-startups-20190227-h1broc

[10] https://www.afr.com/technology/us-tech-giant-salesforce-creates-a-50m-australian-vc-fund-to-back-startups-20190227-h1broc

[11] https://www.smh.com.au/politics/nsw/start-ups-will-scramble-atlassian-s-new-sydney-home-a-tech-epicentre-20190226-p510c8.html

[12] https://www.business.gov.au/about/industry-growth-centres-initiative

[13] http://www.abs.gov.au/ausstats/abs@.nsf/mf/5352.0

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