Australia “off the radar” for US tech investment: Rackspace chief

The local head of US hosting giant Rackspace has risked provoking indignation among start-ups for claiming that Australia is “off the radar” of US technology firms investing in overseas markets.

Rackspace, a US technology service provider worth $US7.5 billion, has announced the launch of a Sydney data centre in an effort to win corporate and government clients.

The company is also committed to the Australian start-up scene, having launched the Rackspace Startup Program here. The program offers free cloud hosting for start-ups associated with Startmate, Pollenizer and BlueChilli.

NSW Deputy Premier Andrew Stoner, who attended the launch of the date centra, described the move as “fantastic news for the state’s reputation globally as the nation’s ICT and digital hub”.

According to Mark Randall, country manager of Rackspace for Australia and New Zealand, Australia is seen as a less lucrative market, which is why the investment wasn’t made earlier.

“I wish it had been earlier of course,” Randall told The Australian Financial Review.

“I think Australia is often off the radar more than it should be in that the technology world is US-centric so for most US tech companies what they’re hearing about is China, India and the big growth in those markets.”

“Australia has not enough of the mind share, which I think is unfair when you look at the share of the cloud services and IT services market Australia is bigger than China or India.”

In addition, Randall said it cost much more to do business in Australia than overseas.

“Our bandwidth [internet and data] costs are five times what they are anywhere else in the world and our labour costs are pretty much double,” he said.

Mick Liubinskas, co-founder of tech seed fund Pollenizer, told StartupSmart Rackspace is a huge company, so their understanding of the local market would be fairly accurate.

Having said that, Liubinskas says the number of Australian start-ups securing foreign investment is increasing.

“Accel Partners have [recently] made three investments [in Australian companies] and Retail Me Not sells globally,” he says.

“From what I’m hearing investors are looking at us as undervalued but they’re looking at that as opportunities.”

Liubinskas says entrepreneurs “don’t get de-motivated easily”, so negative commentary has little impact. He also believes Australian companies are often more realistic about their prospects.

“We know we’re not Silicon Valley or Israel but we’re producing good companies regardless. We’re playing on a world stage… The job’s there to be done,” he says.

“We have great access to US investors – we just have to prove we’ve got good stories. My feeling is that in the next 12 months there will be a few significant wins.”

“We’re working towards being a world player – we’re certainly not lying dormant – and I’m really excited about the next 12 months.”