Google wants to relocate engineering team from US to New Zealand – Immigration NZ allowing

Google is setting up its first New Zealand-based engineering team – a group that will work on new areas for an existing, un-named privacy and AI project.

But staffing up the team will depend, in part, on whether the Government can pry open the borders a little wider.

The new engineering team is part of three-pronged push by the tech giant to expand its NZ presence, which also involves moving into a larger office and “hardwiring” local customers like Trade Me into new cloud data centres across the Tasman (more on both below).

Country director Caroline Rainsford – who spoke to the Herald with Urs Hölzle, a top Google executive who recently relocated from the company’s Mountain View, California, head office to New Zealand for a year – said the engineering project would involve sourcing staff through three avenues.

One is relocating an existing engineering team from the US to NZ. A second is hiring locally (two roles will shortly be advertised, meaning those who want to work for the tech giant no longer have to pack their bags for California) and partnering with local tertiary institutions. And the third is encouraging highly skilled Kiwis to come home.

Rainsford said Google already has a “minimum viable team” of engineers who have volunteered to shift from the US to the NZ, and the company anticipates more will make the move over time to supplement local hires and returning ex-pats.

Rainsford said recent moves by the Government to issue more visas have been a “step in the right direction, but it’s still very tough”. However, she said Google is working “constructively” with the government agencies involved and was confident the new engineering team – or at least its first wave of recruits – would be in place by the end of the year.

Rainsford said companies were struggling for talent across the board in the face of NZ’s tech labour squeeze, which has affected everything from specialised high-end positions to core roles in areas like analytics and digital marketing.

As pandemic border closures have revealed an over-reliance on immigration, numerous tech companies have told the Herald they are short on staff. Vodafone and Datacom are among those who say AI and machine-learning roles are particularly hard to fill. Even assuming local training inhouse and corporate training efforts are ramped up, the nature of artificial intelligence and other cutting-edge areas means some specialist staff will always have to be imported from offshore.

Google NZ currently has around 50 staff in Auckland and Wellington, primarily in management, support, government lobbying and sales roles. The company won’t say how many it plans for new NZ-based engineering team.

Rainsford did say that Google now has around 800 engineers in Australia, where Google Photos and Google Maps development is based (from a total Aussie complement of around 1800).

And Hölzle noted that earlier in his career, when he was working for Google in Switzerland, there were seven engineers. The company’s European development team now numbers more than 4000.

Although he is not directly tied to the Auckland engineering hub project, his own experience indicates Google is capable of making at least some headway in the face of border restrictions. An Immigration NZ spokeswoman said: “NZ can confirm that Mr Hölzle met the border exception criteria to be granted a visa under the Covid-19 support instructions.”

In June, Immigration NZ said only 15 highly skilled tech workers had come in under an Other Critical Worker visa which, among other criteria, requires that the recipient fills an open role with an annual salary of at least $106,000.

New digs

Certainly, Google is preparing for a larger team in NZ. When the Herald visited earlier this week, the finishing touches were being but on its new offices – across around 1300sq m on the sixth floor of the new seven-story building at 10 Madden St, one of several properties developed by NZX-listed Precinct Properties around Wynard Quarter on Auckland’s waterfront. The Herald understands Google has also taken an option on space on the fifth floor.

The new offices are Google’s third location in Auckland, but the company said it is the first to be purpose-built. The tech giant earlier had a small team in the old PwC Tower, and is currently in GridAKL, the shared workspace at 12 Madden St, which is also part of Precinct’s portfolio (Precinct is also the company behind the $1 billion Commercial Bay development that includes the new PwC Tower, home over Amazon’s new Auckland office and Rocketwerkz).

Google would not comment on the cost of the fit-out, which has a Kiwiana theme, but a rep did say that it was designed by high-end firm Warren & Mahoney.

Worldwide, the tech giant has asked most staff to return to the office for at least three days a week. A Google NZ rep said the local operation already has a hybrid work-week, with many working three days from the office and two from home.

'Hard wired' to Australia

Google’s third major announcement is the launch today of what it bills as its first Google Cloud Dedicated Interconnect location in New Zealand.

It follows moves by cloud rivals Amazon Web Services, which recently expanded its NZ office, and Microsoft, which has begun construction of three hyper-scale data centres in northwest Auckland – making it the first of the Big Three to break ground on local server farm.

Google has no plans to open a local data centre (or at least none it has publically shared) but Hölzle said his company has invested in dedicated bandwidth on two transtasman cables, meaning its NZ cloud clients like Trade Me be connected to its Google’s giant data centres (or Australasian “Google Cloud regions”) in Sydney and Melbourne. The latter has just opened.

Hölzle said the Dedicated Interconnect setup functions as a private secure network across the Tasman, meaning NZ customers’ data “never traverses the public internet” as they plug into its services in Sydney and Melbourne.

“We’re investing in our Cloud infrastructure to serve the needs of our growing base of customers in Aotearoa NZ and Australia. Our Dedicated Cloud Interconnect in Auckland will hardwire New Zealand into our global infrastructure backbone, and Kiwi organisations of all sizes will benefit from the speed, scalability and security of our expanded Cloud region footprint in AUNZ as they continue to drive their digital transformation agenda,” Hölzle said.

Local revenue on the rise

Google has reported increased revenue in New Zealand over its past couple of financial years, in part by fulfilling a 2018 pledge to book revenue generated in NZ to Google NZ, rather than invoicing it to subsidiaries in lower-tax Ireland or Singapore.

But the tech giant’s taxable income has remained relatively low.

As the same time it booked more revenue to NZ, an-house service fee payments from Google to its US corporate parent ballooned from $85 million in 2018 to $511m in 2019.

for the 12 months to December 31, 2020, Google NZ has reported revenue that rose to $43.8m from 2019’s $36.2m. The revenue figure was net of the service fee, which increased to $517m.

The fully-owned subsidiary anticipated it would pay $3.3m in tax, on a par with 2019.

Net profit was $7.8m from last year’s $8.12m.

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A Google NZ spokeswoman said the service fee had increased because of a “new operating model”, which was compliant with tax law.

Massey University School of Accountancy lecturer Dr Victoria Plekhanova told the Herald that recent moves by Big Tech subsidiaries (which include Facebook NZ’s non-filing, and Microsoft NZ switching ownership of its local operation from a Bermuda-registered subsidiary to one in Ireland) suggested the Government’s recent moves to tighten the rules around revenue-shifting were “an inadequate response to the tax challenges of the digitalisation”.

Google parent Alphabet this morning posted US $50.44 billion in third-quarter sales from advertising, a 69 per cent increase that the Wall Street Journal said was helped by a red-hot US market where ad-spending is on track to be the fastest in the postwar era. YouTube’s ad business collected US$7b in revenue, increasing 84 per cent from a year earlier.

The Journal said the results should deepen investor confidence that Alphabet emerged stronger after the Covid-19 pandemic accelerated e-commerce purchases, online food orders and streaming video consumption, analysts say. The burst in digital activity has led companies to pour marketing dollars into ads across Google search, Maps and YouTube, underscoring the pre-eminence of the company’s products.

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