How the digital revolution has sparked Canada’s massive services export potential

How the digital revolution has sparked Canada’s massive services export potential

The founders of Miovision Technologies Inc. knew from the get-go that their traffic data platform would appeal to customers well beyond Canada.

“Traffic is a global problem,” says Tony Brijpaul, co-founder of the Kitchener-based company, which helps cities improve traffic flow by helping them plan for and better manage their traffic networks.

“For Miovision there really was, from the beginning, a global opportunity to grow revenues, our presence and our customer base.”

In 2007, two years after Miovision was founded by Brijpaul and his University of Waterloo engineering classmates Kurtis McBride and Kevin Madill, the company made its first sale to The Traffic Group, based on Baltimore, Maryland.

Miovision’s business has accelerated rapidly since then, with revenues rising by about 30 per cent each year.

Today Miovision has served more than 13,000 municipalities in 50-plus countries. About 70 per cent of its revenues are in the U.S., 10 per cent in Canada and 20 per cent in other parts of the world including Europe, Australia and some parts of Asia.

The digital revolution – an opportunity for Canada

Miovision is just one of a growing number of Canadian technology companies exporting to global customers, taking advantage of a digital revolution among products and services across numerous industries that includes everything from cloud computing and the Internet of Things (the industrial Internet), to intelligent software and automated vehicles.

This digital transformation has led to “dramatic growth in traded services and Canada’s global sales of services as a result,” according to a recent report from The Conference Board of Canada titled, Canada’s New Trade and Technology Paradigm: Finding the Right Policy Mix.

“Traded services get less attention than resources or manufactured exports, but they should not be merely an afterthought since they represent half of global trade and close to half of Canada’s total trade when it is measured according to the value it adds,” the report says.

What’s more, the Conference Board notes that three out of the five fastest-growing Canadian exports over the last decade were financial services, computer services and management services.

“Services have been the most dynamic part of global trade in recent years,” the report says, adding that digitization is also transforming traditional industries such as manufacturing and engineering.

“In the future, manufacturing and engineering companies will really be data companies with huge amounts of customer behaviour and logistics data.”

Consider the recent announcement by General Motors to hire up to 750 engineers and software developers in Canada to help create driverless- and connected-car technology for the global market. GM is also opening a new centre for software engineers in Markham, Ont.

Mark Reuss, GM’s executive vice-president of global product development, purchasing and supply chain, said the global company chose Canada for the expansion because of its “clear capacity for innovation, proven talent and strong ecosystem of great universities, startups and innovative suppliers.”

Canada’s financial services sector is also working on ways to build up its technology startup system. For example, the TMX Group recently announced that it is funding an independent working group to look at ways to boost access to growth capital for companies in Canada’s innovation economy. The Advancing Innovation Roundtable will report back in early 2017 on ways to help Canadian technology companies scale their operations and access capital beyond the initial seed and start-up stages. The focus will be on sectors such as technology, clean tech, life sciences and advanced manufacturing.

“Where Canada lags behind our global peers is in the development of market-leading technology companies with significant scale,” said Salil Munjal, general partner at Vancouver-based Yaletown Partners, an investment firm focused on technology companies.

According to the Conference Board, “Those that can best leverage the acceleration of global data flows will be in the best position to take full advantage of global markets in the future.”

Diversification critical for global competitiveness

A growing number of Canadian companies are already capitalizing on the new economy and exporting their products and services to eager buyers around the world.

Beyond Miovision, other examples include Vancouver-based Global Relay, a cloud-based archiving and compliance technology company that caters to the financial services industry. Others include Ottawa-based Kinaxis, which delivers cloud-based supply chain solutions, and Mississauga, Ont.-based RedKnee Solutions Inc., a global provider of telecom billing software.

Companies such as these are providing hope that Canada’s economy can diversify and find meaningful growth from sectors beyond traditional resources and manufacturing.

The “explosion” of high-value Canadian-based businesses proves just how strong the demand is for these industries, says Claudia Verno, director and senior economist at Export Development Canada (EDC).

The growing list includes a wide range of services spanning software development and information technology companies to technical and scientific services, such as architecture and engineering.

“It’s a paradigm shift in the economy,” Verno says. “It’s how we are going to operate in the future.”

Diversification is expected to not only help wean Canada off its reliance on resources, but also to help make the nation more competitive in a global economy that the Conference Board says is rebalancing in favour of high-value business services involving a broad-range of technologies and platforms.

“We need to reframe how we think about economic growth,” Danielle Goldfarb, director for the Conference Board’s Global Commerce Centre and co-author of the report, said in an interview.

Canada faces a “dramatically changed global economic and business context,” she says, which includes slower economic growth and a business environment dominated by increased flows of data, people, services and investment.

As a result, the Conference Board is urging policymakers to develop new policies, programs and regulations to help create opportunities for companies and foster demand for their technologies and services at home and abroad.

“All companies will need to be technology and data-driven to succeed in this next era,” the Conference Board warns, adding Canada should support technology adoption across its traditional strengths in resources, services and manufacturing.

“Many would consider Canada’s relative strength in resource extraction to be a ‘non-digital’ activity. However, digitization now makes it easier to sell services related to resources globally and provides the tools to more effectively coordinate global supply chains.”

To help push this agenda, Goldfarb writes that future trade deals need to go further to advance and promote innovation. That includes investment not just in physical infrastructure, but also the next generation of broadband and technological infrastructure.

“Canada’s future trade gains will not look the same as in the recent past, and we will need a new strategy to fully seize these gains,” she writes, adding that low or no tariffs aren’t enough.

“Policies should lay the foundation for all businesses to become tech companies and position themselves to leverage a data-driven future.”

The report suggests the Canadian government needs to refine its trade strategy to ready companies for the next generation of economic opportunities.

“More disruptions are on their way and Canada will need to position itself to leverage the benefits of new technological developments while mitigating any negative impacts.”

Global data flow set to drive trade

Canadian companies must not only reinvest in their productive capacity, but also look beyond the U.S. to drive growth, experts say.

“Global data flows — almost negligible a short while ago — will explode and drive new forms of trade, which require new policies, programs and regulations,” Goldfarb writes in her report, noting that digitization is already reshaping resource, manufacturing, and services companies in Canada worldwide.

“All companies will need to think carefully about how to store, assess, and leverage these immense amounts of data, and lead or quickly adopt innovations that will make them relevant in today’s and tomorrow’s data-driven economy.”

Verno also points to an EDC report, Chasing the Chain: Canada’s Pursuit of Global Value Chains, which highlights how Canadian businesses are becoming increasingly engaged with overseas markets — a more diversified business model it describes as “integrative trade.”

“Doing business well abroad also means doing it well here at home,” says the report by EDC researchers Daniel Koldyk, Lewis M. Quinn and Todd Evans.

Canadian companies are now relying much more on outward investment and foreign affiliates, and less on the U.S.

“This approach allows them to increase production efficiency, capture consumption growth in emerging markets, tap South-South trade networks and overcome barriers to market access,” the EDC report states.

It also helps to boost revenue, generate follow-on exports and contribute to the Canadian economy by supporting jobs at home, as well as research and development activity and professional services such as accounting, consulting and legal services.

Miovision’s Brijpaul also believes government support is critical to empower Canadian technology startups, which he notes generate thousands of jobs and drives investment not just in Canada, but also around the world.

“The prospects for Canadian technology companies will only get better over time,” Brijpaul says. “We are an industry that is only getting stronger by the day.”

 

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