This story is part of the ICT sector series.
To learn more about export opportunities for companies in this sector, please also read “Canada’s ICT sector is built for exporting.”
Canada has a growing information and communication technology (ICT) sector with a total of 36,000 companies working in the space in 2014. An Industry Canada report found the majority — 32,000 — are working in the software and computer service industries. They are also largely small companies — 31,000 of them have 10 or fewer employees, while the large firms (those who employ more than 500 people) number approximately 120. Some of those, however, are subsidiaries of foreign corporations. The larger companies tend to be in manufacturing.
ICT is unique in that companies in this sector can also find themselves in other sectors, such as healthcare, life sciences, aerospace and automotive.
Generally, the sector breaks down into three categories: ICT manufacturing includes companies that make computer and peripheral equipment, communications equipment, electronic components, audio and video components and magnetic and optical media. ICT wholesaling software and computer services comprises software publishers, computer systems design, data processing and electronic and precision equipment repair and maintenance. Finally, communications services is made up of wireless and wired telecommunications carriers and cable and other program distribution.
To get an industry perspective on this important and growing sector, ExportWise spoke with Robert C. Watson, president and CEO of the Information Technology Association of Canada.
ExportWise: What are the major opportunities and challenges impacting Canada’s ICT sector?
Robert C. Watson: This time in Canadian business is unprecedented for the ICT sector. Not only have you got every industry sector looking at digital strategies and innovation — energy, health, even the service industry and automotive — they are all are going through major and dramatic changes in digitizing their businesses.
As well, in Canada particularly, every government at every level — federal, provincial, regional, municipal, First Nations — are all looking at innovation agendas to move their economies forward to become less dependent on the resource-based industries. The underpinning for anyone’s innovation agenda has to be digital strategy. The ICT industry is very competitive and completely motivated to move forward and it’s made up of everything from single individuals in their basements making up source code or applications to the large multinationals. Canadian-owned companies are worldwide leaders and we also have foreign-owned companies investing in Canada.
The sector is unique in that way. Digital modernization is fundamental. It’ll make us more user-friendly.
EW: How many Canadian companies would have $50 million in revenues and 150 to 200 employees?
RCW: Statistics show there are 31,000 companies with fewer than 10 employees, so we are a country of small- and medium-sized enterprises (SMEs). That’s great because it means we’re a country of entrepreneurs. We’re not huge risk-takers though I would argue that starting any business is taking a risk, placing your livelihood on the line — small guys particularly. I think we’re getting a good influx of startups and they actually grow to a certain size, however, the thing we’re working on now is how do you get them to scale easier? How do you get them from a medium-sized company to being bigger and performing on a global basis? You can be a $10 million company that’s doing business all over the world. We’ve got to be able to set the platform for them to be able to do that and I think that’s what the federal government and every provincial government is working on.
EW: What are the revenues for those 31,000 companies with 10 employees or fewer?
RCW: We don’t have that number, but between 2007 and 2014, ICT sector revenues grew from $133.4 billion to $169.8 billion — a 27 per cent increase. The ICT sector employs more than a million Canadians directly or indirectly. Suffice it to say, the sector is quite significant and it’s growing. It’s not growing as fast as it should and that’s what we need to work on.
EW: What are the goals of your organization?
RCW: We’re a national organization so we’re uniquely placed. We represent every part of the industry and a large part of our membership is SMEs. Companies that are one-person software and app people, all the way to the large Canadian companies and large multinationals. And we have clients in every industry sector — health, automotive, services. We work with associations across Canada to deal with the uniqueness of the provincial model. We’re there to support government in its modernization.
EW: What are the characteristics of successful ICT companies?
RCW: If I knew that, I’d own one! But in seriousness, they’ve got to be nimble. They’ve got to be able to react fast. They don’t need to have a lot of bricks and mortar, but they do need to be able to react fast and get a hold of talent when they need it. If you’re a Canadian company or a foreign-owned company in Canada, and you’re having an issue with your site, you need the world’s best and the brightest.
We need to allow flow of workers worldwide. IT businesses are an infrastructure — like highways and water systems. We’re building an information structure for digitizing. There should be some financial considerations for that. Should there be accelerated appreciation rates for capital investments? Should there be better credits for research and development in program development? Issues like that can help out the industry and take better advantage of it. We also need to be more proactive in getting angel investment. The infrastructure you’re building for an ICT sector is building a backbone for these businesses to operate.
EW: What role does exporting play in Canada’s ICT sector?
RCW: We’re hitting some out of the park and there are places where we could do better. We do have the foundation of entrepreneurs in Canada from those developing applications to media applications and the whole gamut is ICT-based. We have centres of excellence across Canada — B.C., Waterloo, Toronto, Ottawa and Montreal. But what the federal government is doing with trade agreements is very important. They help manufacturers of hardware and materials, but also the ICT industry. ICT is not only software manufacturing. We manufacture software to support the hardware.
EW: What trade deals are best for ICT?
RCW: Every trade deal is a good one, but every one could also be better. We’ve keenly watching the CETA agreement with Europe on behalf of our members. Also NAFTA, and the Trans-Pacific Partnership. We’ll be working with government to ensure the interests of the ICT sector are represented.
EW: Do you have any advice for SMEs in this sector wanting to export or scale globally?
RCW: I would say they should consider it seriously, but be careful because you can go into the wrong countries and it can eat up a lot of your efforts with no sales. It seems attractive, but it takes a sober second look to pick the right opportunity to start off with. If they decide they want a partner in the country they’re going to, pick wisely. And we can help them, even if it’s a SME that isn’t an ITAC member. They should give us a call and we can help and guide them. The last couple of years, we’ve done trade missions to support our SMEs. We’ve done a couple to India and a couple to the United Arab Emirates and we’ll continue to support our SMEs. That’s fully supported by government so it’s a very good program.
EW: What’s in store for Canada’s ICT sector?
RCW: I think the industry is poised to not only be there to help Canadian governments and Canadian companies move to the next stage of development, it’s quite keen to export as well, which is great. We should do better than we’re doing on export, but I think, with the new attitude in Canada about innovation and digital strategies, it will be a time to come together and I think it will be very buoyant for our industry.