Catalyst Interactive is a Canberra-based e-learning company that, in some senses, emerged as a response to the difficulties posed by Australia's vast continent and small population.

Although distance or e-learning is one of the fastest growing segments of the ICT sector worldwide, it is expected to grow to a US$25bn a year market by 2005, up from less than US$5bn last year, it has special relevance for Australia. Set up in 1995 by Michael Grosser, a former teacher, and two others, CI was one of the first local companies to spot the opportunity in developing computer-based learning products for the Australian market, government departments and agencies which were among its first customers.

That early start, says Mr Grosser, has given CI a competitive edge that is now helping it win a growing share of its business offshore - some 30 per cent of last year's revenues of about A$5m came from export earnings, partly from a large contract with the Los Angeles Department of Water & Power.

"People here have had to be innovative to deal with the distance issue," he says. "The government was an early adopter of new technology - it was keen to trial new technologies to reach and provide better services to the population."

The government was also quick to catch on to the savings it could make. CI delivered one of its first contracts, a training programme for the department of education in 1996-97 for less than A$250,000. The conventional face-to-face approach would have cost the state A$1.5m mainly because of the expense involved in flying staff from 800 sites around Australia to training centres.

CI began by producing customised e-training programmes for its clients, both digitising the material but also helping develop the content and providing after-services.

It still provides customised services but last year it launched LearnSwitch, a programme that enables users, even those with little technical or design knowledge, to create their own e-learning courses. Mr Grosser says CI is developing other products and that such development work will increasingly be a strategic focus for the company, despite the high costs.

Competitors claim CI tends to offer relatively unsophisticated products and services and that it has been able to win business, especially from government bodies, because of its knockdown prices.

"They offer good value for money but the problem with this type of on-line training is that it is often dull, with limited interaction and not strong on instructional design, the things that make it engaging for the learner," says an executive at a rival firm.

However, the company is prospering and has an impressive client list headed by local blue chips Qantas, News Corp and Telstra. It plans to take on up to another 20 staff in the next six months, bringing the total to 70 up from 20 just three years ago. Turnover for the year to end-June is expected to reach A$6m, rising to A$10m next year when a new A$8m contract kicks in. The contract, its largest ever, involves helping train Australia's armed forces to use a new generation of reconaissance helicopers being supplied by Eurocopter.

Within Australia, CI has set up a small network of offices and a sales team. Internationally, however, Mr Grosser says it would be almost impossible for an Australian company of CI's size to go it alone and he has been assembling partners - Deloitte in Europe and more recently Sun MicroSystems in 13 Asian countries.

Market conditions preclude an IPO but the group, still owned by its three founders and debt-free, is considering approaches from potential merger partners and has received offers of funding from venture capitalists. Although CI has self-financed itself until now, Mr Grosser says that could change. "It's going to get more difficult for us to finance ourselves if our focus remains on developing other products,” he said.