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  • Blog, Telecommunications - Written by on Thursday, July 4, 2013 11:49 - 56 Comments

    iiNet threatens to ditch NBN altogether

    iinet1

    blog In one of the more outlandish statements we’ve seen regarding the at-times fraught relationship between NBN Co and its bevy of retail ISPs (RSPs), the nation’s number three fixed line telco iiNet has publicly threatened to walk away from its relationship with NBN Co, in a move which would mean NBN services would no longer be available through the telco. The Financial Review quotes iiNet regulatory chief Steve Dalby this morning (we recommend you click here for the full article):

    “NBN Co needs us more than we need them and that is not portrayed in any way by their attitude,” he said. “If nobody signs their [wholesale broadband agreement] and nobody agrees with their [special access undertaking] and they have no success as a business then they’re f—ed.”

    I’d like to write a fair bit more on this situation, and if I get time this week perhaps I will. But what I will say for now is that it is my opinion that Dalby’s threat here is purest bullshit of the highest order. I really cannot see a situation in which a national broadband player like iiNet would discontinue its relationship with NBN Co, and especially not as the fibre wholesaler is currently entering its massive ramp-up construction phase. Put simply, NBN Co doesn’t really need iiNet when it has the next two largest players — Telstra and Optus — locked in through existing government contracts. If Telstra and Optus offer NBN services, iiNet must as well. Anything else would be commercial suicide. With the evidence showing that a massive proportion of early NBN adopters pick iiNet as their RSP, iiNet does need NBN Co. Dalby’s team very much sees the NBN as a once in a lifetime chance to steal market share from Telstra and Optus, and I really doubt we’ll see iiNet walk away from this gold rush anytime soon.

    To be honest, we’ve seen this ‘take no prisoners’ approach from iiNet before. Those with long memories will recall that in January 2012, the head negotiators from most of Australia’s major ISPs — at least including iiNet and Internode, but likely Telstra and Optus as well — informed NBN Co that they were not planning to sign the comprehensive wholesale agreement which it had labored with them for some 15 months to develop.

    As with this morning’s example, at the time we saw the use of strong language by the RSPs in discussing their problems with NBN Co. As with this morning’s example, we saw negotiation through the media, specifically the Financial Review newspaper — no doubt chosen because of its credibility. And as with this morning’s example, the threats of walking away from the whole process ultimately proved to be no more than a negotiating tactic to ensure the RSPs got more from the NBN relationship than they would expect to otherwise.

    Having said all this, there is some evidence that retail ISPs are able to play a bit more hard ball with NBN Co than others. Australia’s fourth major fixed line ISP, TPG, for instance, still doesn’t offer NBN plans and appears to be waiting to get on board with the new fibre paradigm until NBN Co actually shows that it’s capable of achieving scale. We’re betting TPG will find it a little easier to negotiate with NBN Co over the precise terms of its agreement after all of those tricky little contractual details have been hammered out by Telstra, iiNet and Optus first.

    However, I’m going to call Dalby’s bluff on this one. There is, frankly, no way that iiNet will ditch its relationship with NBN Co and walk away, no matter what the circumstances. This morning’s comments are nothing more than a negotiating tactic and should be treated as such. The NBN offers iiNet too many benefits over the existing copper paradigm for the ISP to ever give up on it. And that is just the honest truth.

    Image credit: iiNet

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    1. Senectus
      Posted 04/07/2013 at 12:03 pm | Permalink |

      if they ditch NBN and everyone else does as well iinet will remain strong… its the fear of not enough wholesale customers that they’re trying to push.
      But its weak.
      The NBN is too popular for any wholesale buyer to not buy into it.

      • Posted 04/07/2013 at 12:07 pm | Permalink |

        Well, if it goes ahead as is, and the copper is switched off…iiNet won’t be strong at all without the NBN.

        Steve Dalby is a clever operator, and he’s just angling for the best deal for his company. As an ASX listed company, iiNet has a fiduciary responsibility to get the best outcome for shareholders.

        Negotiation 101: Create a little pressure, and see what happens.

        • Brendan
          Posted 04/07/2013 at 12:12 pm | Permalink |

          This.

        • AJ
          Posted 04/07/2013 at 2:12 pm | Permalink |

          Probably but if Dalby drops the NBN I drop Dalby!

        • Adam Nelson
          Posted 04/07/2013 at 4:55 pm | Permalink |

          Yes and No

          I would of atleast waited until 2015 before asking for a better deal

          I get the sinking feeling IINET would prefer a copper network because most profitable and cheaper. Which quite a Liberal voters view

    2. CMOTDibbler
      Posted 04/07/2013 at 12:21 pm | Permalink |

      I read the article as you suggested and it does not say iiNet will unilaterally walk away from the NBN.

    3. djos
      Posted 04/07/2013 at 12:31 pm | Permalink |

      Lol, just Telco’s jostling for a better deal as usual and to be expected with a new comms minister now in place!

      Seriously, what are they going to do when Telstra starts turning off the PSTN in each completed area? they really dont have much power to do anything!

    4. Brendan
      Posted 04/07/2013 at 12:31 pm | Permalink |

      Having read the article, and taking into account the inevitable AFR editorial lean against the NBN, it doesn’t read at all like iiNet is walking.

      It actually reads very much like exasperation at the current negotiation status. In that NBNco are being a bit dictatorial and Telstra-like in operation. Which is hardly surprising.

      As Michael points out above, this is much more, as I read it, a case of “stop being a dick” more than a threat to just walk out.

      • TrevorX
        Posted 04/07/2013 at 1:41 pm | Permalink |

        I think it’s both somewhere in between and something stronger – iiNet are saying that they will keep customers on copper. If the industry as a whole decides to link arms against NBN Co to get the concessions they want and all of them stop selling NBN contracts, no matter how popular it is people won’t be able to get connected. This will dramatically affect profitability which could have a disastrous effect on long term ROI taking into consideration interest rates on borrowings which will necessarily be higher and held for longer if take up rate is substantially affected. That is their gambit – force NBN Co to eat some humble pie and relax on some of the concessions, or potentially face a hostile reseller environment who could work together to cripple your business.

        Long term, the real losers will be the Australian people, so FFS NBN Co wiggle where there’s room – save the stonewalling for the circumstances where there is no other option.

        • Brendan
          Posted 04/07/2013 at 2:06 pm | Permalink |

          I’m not going to speak on behalf of Dalby to offer motivation, so I can only comment on what I read and how I interpret it.

          It reads like a gambit to push pricing down, and has a “don’t be a dick” tone to it. Followed with a “NBNco might be f**ked” if everyone decides it’s all too hard, and takes their bat-and-ball and goes home.

          NBNco is charged with making money. ISPs need to make money. There’s a natural conflict there. There’s also a natural balance to be struck, one would expect.

          It’s also really in everyone’s best interest to find a sensible outcome; I read that as basically the point.

          And anyone deciding this is somehow specific to Labor’s policy, needs to remember that Turnbull will also be charging NBNco with building the LNP vision. So wether it’s fibre or copper access, pricing will always be a source of conflict.

    5. Soth
      Posted 04/07/2013 at 12:34 pm | Permalink |

      When a Perth Wildcats basketball rolls past the NBN office that’s when you need to start getting worried :)

    6. Paul Grenfell
      Posted 04/07/2013 at 12:36 pm | Permalink |

      Probably just pushing to get the best deal possible, but honestly, he has no back door once copper is turned off.. If they damage the nbn as is, dump them..

    7. Deep Thinker
      Posted 04/07/2013 at 1:42 pm | Permalink |

      Steve Dalby is right. NBNco needs the ISPs more than the ISPs need NBNco. The ISPs already have existing revenue and profit streams over the copper network. (The copper network is only switched off if the vast bulk of customers are migrated.) Telstra can delay signing the WBA and still earn ongoing wholesale revenue from the CAN instead of receiving the migration payments. No loss. NBNco’s financial situation on the other hand is extremely precarious. This is just a teaser trailer of an ugly government monopoly in action.

      • Daniel
        Posted 04/07/2013 at 1:50 pm | Permalink |

        No iiNet’s loss more than NBNCo, because they can always go back to Telstra’s decommission plan cut the copper of within 20 days, instead of 18 months.

        And since the rollout of the NBN has commenced they have done little to none on their rollout of the infrastructure (i.e. DSLAM’s).

        It’s about time ISP’s like iiNet stop threatening and get with the program (after the last idiotic message about NBN delays benefiting iiNet) or people will start to vote with their wallet.

        This is complete utter nonsense, and quiet frankly very disappointed with the amount of crap that iiNet has been putting out (just as bad as Telstra whinging).

    8. simon
      Posted 04/07/2013 at 1:43 pm | Permalink |

      maybe i need to rethink what ISP i go with when i can get NBN after this

      SkyMesh is looking good right about now

    9. Lionel
      Posted 04/07/2013 at 2:00 pm | Permalink |

      “Steve Dalby is right. NBNco needs the ISPs more than the ISPs need NBNco”
      Rubbish. This is only true if the customer doesn’t do the logical thing. Go to another ISP who offers NBN connections. A rediculous claim.

      “This is just a teaser trailer of an ugly government monopoly in action.”
      A monopoly that has wholesale prices that allows iiNet to offer NBN plans around the same price or less than their on net plans. Pure whinge to try and push prices down further.

      • Jason
        Posted 04/07/2013 at 2:09 pm | Permalink |

        Iinet has been buying their competitors , its no surprise iinet is acting like this i said ages ago

        iinet and internode would be thorns for the nbn

        accc needs to look into iinet buying out the competition

        • Adam Nelson
          Posted 04/07/2013 at 4:57 pm | Permalink |

          +1 I agree

    10. Steve Dalby (iiNet)
      Posted 04/07/2013 at 2:03 pm | Permalink |

      As you know very well, Renai, the media prints what it wants from an interview.

      You are amongst the worst offenders in this industry when it comes to sensationalism. You’ve done it again here, making assumptions and beating them up for your own purpose.

      You reckon you’re ‘calling my bluff’ yet you haven’t even spoken with me. Big deal. You haven’t got a clue what is going on, but you’re an ‘expert’ anyway.

      Why didn’t you call me, like the AFR did, and get my full comments and have a real story ? Who else have you called to get first hand comments ?

      Just as a simple point of clarification, when I said to the AFR that “NBN need RSPs more than we need them”, I was talking about the industry, not iiNet alone. He knew that, but didn’t spell it out. OK, that’s a risk you take when talking to journos.

      • Shannon Pace
        Posted 04/07/2013 at 2:09 pm | Permalink |

        so your comments have nothing to do with the negotiating process with nbn co?

        • Tim
          Posted 04/07/2013 at 2:29 pm | Permalink |

          What ‘negotiations’? Everything is equal with the NBN – the smallest provider pays the same prices as the largest ones…

          The *only* difference I could possibly think of is that iiNet want to be paid monies for moving customers off DSLAMS?

          • Brendan
            Posted 04/07/2013 at 2:46 pm | Permalink |

            Appears it is less negotiation and more dictation. As in “this is the deal, like it or get out”. ISPs will be looking for wiggle room (obviously). NBNco has to make a buck. That’s always going to lead to friction.

            • Posted 04/07/2013 at 3:24 pm | Permalink |

              Dalby’s iiNet did just agree to sell TransACT’s FTTH infrustructure to NBN co recently.

              That suggests there are deals being made and I doubt that would have happened if TransACT (a fully owned iiNet subsidiary) weren’t planning to offer services over the NBN.

      • Daniel
        Posted 04/07/2013 at 2:42 pm | Permalink |

        Well, that’s because you made comments to the AFR before the IT media, let alone things like Whirlpool and Delimiter.

        Perhaps come back when you got your thought proceed better.

        When do the normal people here in this conversation get a voice ?

        • Robert
          Posted 05/07/2013 at 8:45 am | Permalink |

          Since when is iiNet obligated to speak to one media outlet over another? When the issue is a business issue and not a technology issue, it makes more sense for them to talk to a business-focused publication. Not to mention that the tech media in Australia is full of ignorant, self-opinionated arseholes with clicbait agendas

          • Robert
            Posted 05/07/2013 at 8:51 am | Permalink |

            Let me finish that…

            Clickbait agendas that apparently over-rule their obligation to provide fair and unbiased reporting of the facts. I am not saying all Australian tech media journos are like this, and probably not even the majority – but enough that I can’t count them on both hands, and to taint the opinion, and thus value, of the industry. A shame really, there are some genuinely good journos in there fighting an uphill battle against their colleagues…

      • Deep Thinker
        Posted 04/07/2013 at 4:11 pm | Permalink |

        Just as a simple point of clarification, when I said to the AFR that “NBN need RSPs more than we need them”, I was talking about the industry, not iiNet alone.

        That was obvious to me. Hence, my comment above about NBNco being in a weak position while the copper network is still alive and kicking. Once it gets shutdown, all Australians will be held hostage by this new ugly government monopoly.

        • Alex
          Posted 04/07/2013 at 4:21 pm | Permalink |

          “…all Australians will be held hostage by this new ugly government monopoly.”

          As opposed to being held hostage to the old, slower, dated, obsolete, Telstra monopoly you mean?

        • Daniel
          Posted 04/07/2013 at 4:35 pm | Permalink |

          You do realise that Malcolm wants to “buy” not “lease” Telstra’s copper, and then rollout Fibre-To-The-Node network? Right? Right?

          One sided argument much ?

          • Brendan
            Posted 04/07/2013 at 4:53 pm | Permalink |

            Sorry Daniel, can you point me to where Turnbull has allocated funding in his policy for access to Telstra owned copper assets?

            We cannot assume any such thing. There is no statement to that effect in the policy, to the best of my knowledge. Which is remarkable given FTTN is wholly reliant on it.

            But there you go. A policy that requires access to a copper network that is neither currently owned, or leased by NBNco.

        • Hubert Cumberdale
          Posted 04/07/2013 at 5:59 pm | Permalink |

          “all Australians will be held hostage by this new ugly government monopoly.”

          Fibre hostage vs Copper hostage. I’m OK with this. You should be too. Thanks for stopping by.

          • Mathew
            Posted 06/07/2013 at 12:14 am | Permalink |

            >> “all Australians will be held hostage by this new ugly government monopoly.”

            > Fibre hostage vs Copper hostage. I’m OK with this. You should be too. Thanks for stopping by.

            I guess you don’t remember what being held copper hostage was like? Telstra delayed the introduction of ADSL to protect ISDN and Frame Relay. Telstra imposed speed tiers of 256/64Kbps, 512/128Kbps and 1500/256Kbps.

            Do you know what changed this situation? Internode installed their own DSLAMs in exchanges and on Internode infrastructure connections were ‘as fast as the line could handle’. A connection could be tuned for latency, throughput, reliability or combination. It took years for Telstra to offer faster plans.

            We are returning to those days.

            • Posted 06/07/2013 at 10:01 am | Permalink |

              No we’re not.Why? Because NBNCo is a government regulated monopoly.

              You think if there was more regulation applied than just the USO then Telstra would have gotten away with exploiting its monopoly like that?

            • Hubert Cumberdale
              Posted 07/07/2013 at 4:50 pm | Permalink |

              “I guess you don’t remember what being held copper hostage was like?”

              I do. As a result of being held hostage by copper I am currently limited to 13mbps down and less than 1mbps up. I would prefer to be held hostage by fibre as it will give me a choice of connecting with plans ranging between 12/1mbps and 1000/400mbps no matter where I live in the fibre footprint.

              In the future mathew please refrain from addressing me on this (or any other) website. I do not consider anything you have to say valid in any way or that you bring anything of value to the NBN debate. You are at best background noise. That is all.

              • djos
                Posted 07/07/2013 at 4:54 pm | Permalink |

                That’s putting it very kindly mate, I’m amazed Renai continues to allow the blinkered Lib trolls to comment, it’s clear they can’t think for themselves and merely parrot the Lib/IPA talking points!

      • quink
        Posted 04/07/2013 at 4:51 pm | Permalink |

        I’m sorry, I didn’t buy it to begin with, regardless of the premise.

        If Telstra walks from the NBN, fair enough. If Optus/TPG/iiNet walk from the NBN, fair enough. Whoever does is screwed, unless they all do it together.

        And here’s the thing though… the telco’s won’t walk. They can’t. Because even if the NBN topples over completely, you’d be in exactly the current clusterf*ck between you guys and Telstra Wholesale for the next decade except no government willing to help you out. If any telco bails on the NBN, they’re dead (or at best undead) in the face of Telstra, ACCC or no ACCC.

        This: “iiNet threatens to ditch NBN altogether”, yeah, no.

        > If NBN Co’s stance did not change, Mr Dalby said telcos would stay on their current systems instead of moving customers onto the $37.4 billion NBN.

        This? Yeah, right. You stay on the same thing and see your margins – off-net or on-net – tank in favour of Telstra’s more and more with every passing year.

        • quink
          Posted 04/07/2013 at 4:54 pm | Permalink |

          And I submit as evidence the recent FAD. Thanks, ACCC, for a useless decision. That improved your margins a little but was it enough to even come back to end-users? Nah.

          Imagine that but with no NBN on the horizon at all and no room to differentiate your product past ADSL2+ Annex M on any nationwide scale. You need the NBN more than it needs you and your fairly tiny user base, No. 2 behind Telstra’s by a very long margin and profit margin.

          • Deep Thinker
            Posted 04/07/2013 at 5:27 pm | Permalink |

            That improved your margins a little but was it enough to even come back to end-users?

            That is why iiNet is excited about the NBN. Current artificially low NBN wholesale pricing means their cost is lower than what they pay TW; but they are absorbing the higher profit margins and not passing the gains on to end users in the form of lower retail pricing.

            If you read the broker reports, this is the bull case for buying stocks like IIN.

            • quink
              Posted 04/07/2013 at 6:15 pm | Permalink |

              The amount Internode charges for UNI-V which they themselves near enough called exploitative, as in we’ll charge a crazy amount and see if it sticks to the wall, bugger the almost non-existant wholesale cost, confirms that for me.

      • Adam Nelson
        Posted 04/07/2013 at 6:07 pm | Permalink |

        Both yourself (Steve Dalby) and your co-partners have been somewhat “anti-nbn” stand.

        Being self described “sensationalist” you would mostly gain from a Liberal NBN rollout. But I am not gonna go down that path or bad investment in DSLAM (which likely to be written off)

        I understand that you maybe frustrated with paying so much for NBN, But threatening to stop wholesaling the NBN is rather preemptive strike to get a better deal. in 2013 it’s too early to haggling a better deal and only time ISP should expect a better deal is around 2015-2016

        2015-2016 would be a critical milestone for the NBN rollout project and ISP have something to negotiate with. Which is normal for any wholesale discussions

        I compare NBN to Telstra in 1997-2000′s when wholesaling was expensive too. Eventually over time the cost came down and profits of ISP increased

        2013 is that exactly the same period

        • Deep Thinker
          Posted 04/07/2013 at 6:17 pm | Permalink |

          I compare NBN to Telstra in 1997-2000′s when wholesaling was expensive too. Eventually over time the cost came down and profits of ISP increased

          “Cost came down” because the ACCC was willing and able to devalue the capital value of the CAN (which upset Telstra a lot). Under the current NBNco SAU, the capital base which NBNco is allowed to recover cannot be devalued.

          Copper regulation: ACCC sets arbitrary wholesale charges (no fixed rules or methodology) —-> implies a capital value for CAN.

          Fibre regulation: Capital value of NBN set in stone —–> fixed formula/methodology determines wholesale charges. No scope at all for ACCC to devalue the fibre network and push total cost lower.

          • Adam Nelson
            Posted 04/07/2013 at 6:22 pm | Permalink |

            It will happen man. Patients

            Even Conroy was stated on public record it will

    11. DenisPC9
      Posted 04/07/2013 at 4:07 pm | Permalink |

      More bloody obfuscation going on.

      I suspect iiNet are frustrated with progress and charges from NBN and I suspect the media aren’t truthfully reporting all, just doing what they have done for the past nearly a decade, “selectively quoting”.

      We can vote with our wallets with the ISPs/RSPs but they aren’t dumb enough to pull the pin.

      We can’t really vote with anything with less than straight media.

      We can Vote at the upcoming Election and we would be fools to vote for anything other than those who are rolling out the NBN or those Independents who support it.

      Yes, I know, I know the NBN may not be high on the average voters list. But this is an IT oriented mag reporting an NBN article!

    12. Guest
      Posted 04/07/2013 at 4:41 pm | Permalink |

      for those who think rsps have no power
      what happens if nbn gets activated and all, or almost all, customers wait the 18months to switch? NBN would be farked.

      while nbn co has end users on it, they make revenue. no users, no revenue. for 18months per area anyway. that wouldn’t end up pretty

      • quink
        Posted 04/07/2013 at 5:01 pm | Permalink |

        And all the users will stay on Telstra’s infrastructure. Is that what iiNet would really want?

        I don’t think so. iiNet would still pick NBN Co over Telstra Wholesale if it came to choosing an enemy.

        • quink
          Posted 04/07/2013 at 5:01 pm | Permalink |

          s/enemy/frenemy

        • Deep Thinker
          Posted 04/07/2013 at 5:19 pm | Permalink |

          Companies have no permanent friends or enemies. They have permanent interests.

          Note the famous fist fight over a small Melbourne printing press decades ago and the brutal battle for rugby league rights between Murdoch and Packer years ago, and now their joint investment in Foxtel and Channel 10.

    13. Greg
      Posted 04/07/2013 at 6:38 pm | Permalink |

      Agree
      By the way they have to use the NBN when the Telstra copper gets decommissioned

    14. Markie
      Posted 04/07/2013 at 7:01 pm | Permalink |

      A little bit bullshit indeed, as Hungry Beast is wont to say.

      However, if they don’t hook up to the fibre NBN then, after quite a few years, I’ll be getting a new email address…

      • Soth
        Posted 05/07/2013 at 9:54 am | Permalink |

        I miss that show :(

    15. Bob Cooper
      Posted 05/07/2013 at 7:19 pm | Permalink |

      I’m an IInet subscriber and want access to NBN. If IInet won’t provide me with it then I and I assume many hundreds of thousands of others will become customers of another ISP

    16. Posted 09/07/2013 at 12:11 pm | Permalink |

      Just going to put this out there; but iiNet already owns its own fibre infrastructure and probably has more connected customers than the NBN. Go check out the ISP TransACT and who it’s owned by :P

      #australianjournalismfail




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