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Where must Ottawa's tech sector go from here?
By Roman Zakaluzny, Ottawa Business Journal Staff
Mon, Apr 9, 2007 12:00 AM EST

A growing chorus of executives are saying change is needed quickly to ensure a bright future for the local tech sector, but what form that change must take remains a subject of debate.

The day after one Ottawa tech executive said too much emphasis is placed on engineering and product development versus sales and marketing, tech mogul Sir Terrence Matthews said companies should be investing more in R&D and encouraging innovation.

Mr. Matthews' comments, in a speech he delivered to an Ottawa Centre for Research and Innovation (OCRI) event, came the day after Sciemetric CEO Steve Panyko put forth the idea of a half billion-dollar fund to help Ottawa startup and growup firms develop strategic marketing plans, which he asserted are too often neglected in favour of product engineering.

Mr. Matthews added a new dimension to the discussion.

"For many years, we in the telecommunications and IT sectors have referred to Ottawa as 'Silicon Valley North.' But is it really? Have we lost our way? Are we really just a small branch plant in the global high-tech economy?" he asked.

Yes, Mr. Matthews said, answering his own question.

"Look around you – Ottawa is in trouble" he said.

"OCRI's own figures show Ottawa with only 1,803 (IT) companies, down from 1,811 last year. We just don't have the scale needed to be considered a true technology cluster."

Not to anyone's surprise, he said Ottawa will not be rivalling San Jose anytime soon in size or depth. However, the city's not even on par with other Canadian IT hubs. Toronto and Vancouver, he said, have more telecom and IT companies than the Ottawa area, with Calgary and Montreal close behind. As well, Montreal, Toronto and Calgary are further ahead than Ottawa in the biotechnology and pharmaceuticals sectors.

"Ottawa now has only one world-scale software firm left – Cognos – where it used to have several," he said.

Mr. Matthews noted Canada as a wholedropped five spots over the past two years in a global index on network readiness, down to 11th from 6th. Mr. Matthews also said Ottawa is faring badly on a number of other indicators, even ones where the figures seem positive.

"The total number of high tech jobs in the region has rebounded," he said, "but they're not of the same quality or pay levels: fewer engineers and more technicians; fewer software designers and more website maintainers."

Mr. Matthews saved special criticism for the federal government, saying it opts to locate institutions like the National Research Council's Institute for Information Technology in Fredericton, not Ottawa, and that departments like National Defence buy their wares from U.S.-based companies instead of Canadian ones.

"That's been CATA's opinion here for many years," agreed Barry Gander, executive vice-president from the Canadian Advanced Technology Alliance. "We have to be the first customer. If not, we don't have much of a hope here in Canada."

Mr. Gander attended both executives' breakfast discussions, and said the two agreed on many points.

"Terry Matthews was saying now we're facing the biggest transformation in IT that the world has ever seen," he said. "Canada is in trouble. We're now in 11th place versus 6th place in terms of technology readiness, and our own government is uninterested in buying Canadian.

"What (Mr. Panyko) was saying before, is we have to be first creators of products," he continued. "I think they go together very well. They're saying the same thing . . . We must create a commercial presence in the world, based on new innovation and design. And that's what (Mr. Panyko) was talking about, in the sense that his company has a new innovation, and they've taken the world by storm."

In a sense, said Mr. Gander, Mr. Panyko's Sciemetric is the "poster child" of what Mr. Matthews was advocating.

Where Mr. Panyko and Mr. Matthews diverged somewhat, though, is on what areas of a business need the most attention and capital.

Mr. Panyko said too much is placed on R&D. Mr. Matthews, on the other hand, said innovation still needs to be encouraged throughout a small company's growth process.

"The Ottawa area needs to do much more to encourage more companies developing new technologies, new hardware, and new capabilities not available elsewhere," Mr. Matthews said. "If we can't be big, then we must be smart. We must innovate and design, not service and maintain."

Ted Burnett, vice-president of business development at bitHeads, agreed with Mr. Panyko's assessment of the situation. He's seen Ottawa's small high tech firms pull back their marketing efforts once the going got a little rough.

"It's not that they fail," he said. "If things are a little soft – and they remember the downturn that we went through before – they say 'let's protect ourselves here and pull back.' Part of the cutback is the marketing budget. And that's not the way American companies do it."

Mr. Panyko, originally of the United States, is on to something, he said.

"The point is, here (we're) more risk averse than companies in the U.S. There, they're more aggressive. There, if they fail, they can come back in a different suit and try again. Americans are more willing to bet the farm on things."

On the topic of raising cash, Mr. Matthews and Mr. Panyko are seeing eye-to-eye. Cash is hard to come buy, and this is where government, perhaps city hall, can take the lead.

"Small tech companies have difficulty raising Canadian money for growth," Mr. Mathews said. "Just look at OCRI's own venture capital figures for this year – only $8 million to date . . . For all of last year, the total was $265 million, down significantly from a few years ago."

Both men put some of the onus on the City of Ottawa to turn things around.

"The city itself could be doing more to support this important wealth generation and job creation activity within its borders," Mr. Matthews said. "Ottawa still has the highest numbers of engineers, scientists and PhDs per capita, and we need to ensure this remains the kind of community (in which) highly educated and creative people want to stay."

However, he also challenged the local business community to do more.

"Get out there and meet your potential partners," Mr. Matthews said. "Establish relationships in other countries. Tap into existing local vendors who know their area. Leverage the distribution channels of existing companies in the Ottawa area.

"If Ottawa is to retain, or regain, its reputation as Silicon Valley North, we've got to do a better job of supporting, growing and retaining our high tech companies and the people that power them."

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