Section 4: The Information Technology Online (ITOL) Program

There is increasing evidence that companies can realise the benefits of e-commerce by collaborating on whole-of-industry solutions and standards. The focus of e-commerce is moving beyond the technology and on to how these tools can make business processes and relationships more efficient (NOIE Media Release, Dec 2001).

The ITOL program acts as a lever by providing the impetus for change and articulating the value to business organisations in participating in business-to-business (B2B) e-commerce. ... ITOL seeks to provide a base level of support but expects industry to provide the major contribution in terms of leadership, commitment, funding and other resources (NOIE, 2002a).

4.1 Overview

The ITOL Program (NOIE, 2001a) is designed to accelerate the national adoption of B2B e-commerce solutions by providing seed funding for a broad range of activities throughout Australia that:

• encourage collaborative industry based projects which aim to accelerate the adoption of business-to-business e-commerce solutions across a wide range of industry sectors, especially by clusters of SMEs; and
• foster the awareness and strategic take up of innovative e-commerce solutions within and across industry sectors which deliver sustainable economy wide returns and contribute to increased competitiveness.

Since the program began in 1996, ITOL has already allocated (in seven funding rounds) almost $7.5 million to 81 eBusiness projects across a range of industry sectors and geographic regions. The extension of the program will see over $13 million in additional funding available to ITOL through to 2006. This additional funding is being provided through the Federal Government's $2.9 billion Innovation Action Plan, Backing Australia's Ability.

The program was established at a time when many of the online services we now take for granted were largely unavailable or difficult to access. For example, as at September 2001, an estimated 67% of Australian households owned or leased a PC, placing Australia in the top five. In addition, an estimated 52% of Australian households were online in the same period, placing Australia equal 7^th with Norway behind Sweden and Hong Kong (58% each), South Korea (56%), Singapore (55%), the US (54%), and New Zealand (54%) (NOIE, 2002b).

The percentage of Australian businesses using PCs from June 1998 to June 2000 increased by 21% (from 63% to 76%). In the same period, the percentage of Australian businesses accessing the Internet increased by 93% (from 29% to 56%). At the end of December 2000 there were 696 ISPs (NOIE, 2001b).

As a result of these rapid changes, there has been tremendous interest in the ITOL program as is evident in the 148% increase in the number of grant applications received (from 60 in Round 3 to 149 in Round 6). In Round 6, only eight out of 149 grant applications received were approved for funding while in Round 7, seven out of 81 were funded.

ITOL plays a critical role in NOIE's sectoral strategy by providing grants to enable industry groups to collaborate to solve common problems on an industry-wide basis. Priority is given to e-commerce initiatives that have "the potential to generate gains across the economy rather than working individually and developing multiple and potentially piecemeal, or non-transferable, outcomes" (NOIE Media Release, Dec 2001). "In particular, projects, must exhibit a high level of broad industry collaboration, have identified long term strategies for ensuring that their solutions are sustainable, have the potential to result in large scale uptake, and be able to demonstrate positive benefits for the wider business community" (NOIE Media Release, July 2002).

A unique feature of the ITOL program is its emphasis on collaboration between and among industry groups since these industry groups are seen as having a strategic role in diffusing e-commerce technologies and in encouraging e-commerce uptake among SMEs. While ITOL does not seek to be prescriptive, each consortium implementing the B2B e-commerce project should be made up of at least three organisations. Consortium partners may include companies, tertiary institutions, industry/business associations, government agencies, educational institutions and not-for-profit organisations. Applications must clearly provide indicators of broad-based industry support such as the involvement of key organisations or stakeholders in the industry for which the B2B e-commerce solution is being proposed.

4.2 Characteristics of ITOL projects funded from rounds 1 to 5

Since this research was conducted from March 2001 to February 2002, the following discussion is based on an analysis of the 67 ITOL projects funded in the first five years only of the program's operation, i.e., during fiscal years 1996 to 2001 (See Appendix A for complete list). [It must be noted here, however, that since the research was completed, two funding rounds have since been implemented.] This analysis is based on interviews with NOIE staff and a comprehensive review of ITOL project documents.

4.2.1 Financial summary

ITOL spent close to $5.5 million in Rounds 1 to 5 to fund 67 projects. There were five other applications whose grant offers were withdrawn for various reasons. ITOL grants ranged from $3,500 to $145,000 with the distribution by funding period shown in Table 2.

Table 2: Distribution of ITOL grants by funding period

Most of the ITOL funded projects had proposed budgets of less than $0.5 million. Only 6 projects (1%) had budgets of more than $1 million. [During the more recent funding rounds, however, many applications were received for projects with total project costs in excess of $0.5 million.]

To create synergy of funding between the Government and the private sector, ITOL requires grant recipients to obtain counterpart funds from partner organisations. Indeed, more than half (54%) of all projects funded in the five-year period received grants that covered from 21% to 40% of the total project cost.  About a quarter received funding for less than 20% of the total project cost, while only a fifth received support for 41 to 52%. [More recently, the level of assistance has been increased to a maximum amount of $200,000, for up to 50 per cent of the total eligible project cost.]

4.2.2 Characteristics of project partners

ITOL grants were provided to different consortiums made up of a wide variety of organisations, involving partners from two or more industries. The principal grant recipient was commonly an industry association or an IT or management consultant and was also often the one who initiated the project and formed the consortium. 45% of the projects funded had four to six consortium members but a fifth had three or less while16% had between 10 to 20+ partners.

63% involved partnerships between private organisations only. The majority (70%) of projects had one or more industry associations directly involved in project implementation. Further, all 8 projects funded under round 6 had an industry association as a consortium partner and the majority of those funded in round 7 had strong links with peak bodies in their respective industry sectors. While ITOL has not funded any project specifically designed to address a business need in the education sector, 24% of the projects had an educational institution as a consortium member.

4.2.3 Project type

ITOL funded a wide range of projects, classified in this study according to the following:

• Portals - Projects designed to encourage an industry or a region to move online by providing a facility for communication and information sharing among members
• Supply Chain Management - Projects designed to improve the flow of products and services from producer to consumer
• Data Warehouse - Projects that will make industry information easier to access for business and customers
• Security Solutions - Projects designed to develop technologies to address security concerns over the use of electronic information
• Industry Network - Projects designed to establish extranets for a specific industry/sector
• Applied Solutions - Projects designed to use on-line technology to provide solutions to everyday problems encountered by businesses
• Standards Setting - Projects primarily designed to establish common standards
• Others - Training/Research on e-commerce for SME

Figure 1: Distribution of ITOL projects by project category

ITOL projects spanned almost the entire range of industries. However, there were no projects in the education sector. ITOL funds were well distributed among the different industries as shown in Table 3.

Table 3: Distribution of ITOL grants by industry

4.2.4 Project beneficiaries

The majority (60%) of the projects were designed to meet the business needs of specific industry groups. The e-commerce activities of the majority (53%) of the projects funded encompassed the entire country, while only 41% focused on one or two specific regions. Only 6% had a global scope of operations. This is shown in Figure 2.

Figure 2: Distribution of projects by scope of e-commerce activities

4.3 Recent program changes

Despite its brief history, the ITOL program has evolved considerably since its inception in 1996. In particular, the following specific changes to the ITOL application guidelines were implemented starting in Round 6 (2000/2001):

• The maximum grant amount has been increased to $200,000;
• All in-kind contributions from consortium members now have to be clearly specified in the budget proposal;
• Priority will be given to projects that can clearly demonstrate that there is broad-based industry support to the project;
• Proposals need to specify the nature of any agreements between members of the consortium including management of any resulting intellectual property.

Beginning in Round 6, grant applications are now being assessed in terms of the extent to which the project meets the following criteria:

• Market criteria - project should address a strategic need, help improve industry awareness and adoption of B2B innovative e-commerce solutions, lead to increased industry competitiveness, deliver broad benefits, have broad-based industry support, have a plan to sustain or commercialise the project when grant funding ceases;
• Product criteria - projects should be innovative, be based on open standards for interoperability, have the potential to be transferred to other sectors of the economy;
• Financial Criteria - projects should be good value for money, have clearly specified contributions from consortium members and specific uses of the ITOL grant;
• Management criteria - proposals should demonstrate capability of consortium members to undertake the project.