BCTIA: Growing the ICT Industry in Canada

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Soumis par BC Technology Industry Association 2010–07–09 21:44:34 HAE
Thème(s) : La croissance de l'industrie des TIC

Sommaire

To build a digital economy in Canada, two consistent inter-related issues continue to confront technology innovators' talent and capital. At this time, Canada has neither the depth of talent nor capital required to grow the ICT sector to a significant self–sustaining level.

As part of its digital economy strategy, the Government of Canada must recognize that Canadian technology companies are not only competing globally for market share, they are competing for talent and capital.

This inter–reliance on talent and capital can be seen in the three major findings and recommendations of the BCTIA's submission:

  1. Canada needs to improve its commercialization outcomes
  2. Canadian ICT companies' access to foreign capital pools is critical
  3. Canada needs to compete in a global talent market

Canada has a Commercialization Issue, not an Innovation Issue
Canada produces some of the best R&D in the world. The challenge is that most Canadian technology companies view the US as part or all of their domestic market. However, the reality is many lack the expertise or ability to scale to effectively sell in the US let alone other markets. Improving commercialization and export capabilities requires a combination of capital and seasoned executives willing to take on the world.

Accessing Foreign Capital for Growth

Canada's venture capital pool remains small, resulting in the need to access larger rounds of funds abroad. Despite recent actions surrounding Section 116 of the Federal Income Tax Act, access to foreign investment continues to be a key issue.

  • Industry and Government need to do more to help companies get "investment ready" and better attract foreign investors (either VC's or Strategic Investors).
  • Policies that penalize companies for accepting foreign investment must be reviewed and unnecessary barriers to foreign investment in Canadian Venture Funds removed. Canada must simplify and clarify the tax situation to allow foreign investors to invest in Canadian Limited Partnerships on a level playing field.
  • Foreign venture capital investment needs to be encouraged through co–investment programs similar to the BC Renaissance Fund, delivered by the Government of British Columbia.

Competing in a Global Talent Market

The world recognizes Canada's capacity for growing talent. We need to do more to retain that talent, to leverage it when it moves abroad, and to use our environment to attract the world's best and brightest to Canada.

  • Canada needs to ensure that when ex–pats wish to bring their expertise home there aren't barriers (such as significant duties) to discourage them.
  • Canada needs to implement immigration policies that expedite the entry of highly skilled foreign nationals; and encourages international students, to remain in Canada once completing their studies.
  • Start–up and emerging technology companies require top talent but struggle with the ability to pay fair market compensation, frequently relying on equity–based compensation packages as a solution. The recent changes made by the Government of Canada to stock compensation have created a significant barrier for the attraction of such talent by SMEs and should be revisited.

Soumission

Digital Economy Consultations

This document is intended for submission to the Government of Canada digital economy consultations.

BCTIA Consultation Process

At the 2010 Canada 2.0 Conference, the Government of Canada launched a national consultation process on creating a Digital Economy Strategy for Canada. As the Voice of BC's technology industry, the BCTIA has developed the following submission on behalf of its members.

While each of the five chapters in the consultation paper provided by the Government of Canada is worthy of its own consultation, the BCTIA has focused its submission on the two areas that we believe are most pertinent to our members and industry – growing the information and communications technology industry and building digital skills for tomorrow. The input that makes up this submission has been provided by member organizations through a number of mediums in recent years, including the co-development of the Business Council of British Columbia's Outlook 2020 Paper on building an Advanced Technology sector in BC, and the BCTIA's 2010 TechTalentBC Labour Demand Study.

For more information or elaboration on the content provided, please contact Pascal Spothelfer, President and CEO of the BCTIA at 604-602-5230 or pspothelfer@bctia.org.

Table of Contents

Summary

Federal Digital Economy Consultation

To build the ICT industry in Canada, there are two consistent inter-related issues that confront technology innovators – talent and capital.

"I believe that investment will always flow to good people and promising ideas"

Simplistically, the two issues can resolve each other as good teams of technology innovators, with good ideas and good market access, can attract the significant patient capital that they require, while well-funded companies can often attract talent; albeit with varying degrees of difficulty depending on the business climate.

At this time, Canada has neither the depth of talent nor capital required to grow the ICT sector to a significant self-sustaining level.

This inter-reliance on talent and capital can be seen in the three major findings and recommendations of this submission:

  1. Canada needs to improve its commercialization outcomes
  2. Canadian ICT companies' access to foreign capital pools is critical
  3. Canada needs to compete in a global talent market

Canada has a Commercialization Issue, not an Innovation Issue

The top sentiment that arose from input by the BC Technology Industry is that the ability of Canadians to innovate – to engineer unique, world-class technology solutions to problems – is not an issue. Canada continues to produce some of the best R&D in the world.

Where assistance is required is in improving Canadians ability to get our technologies to market. In market, Canadian technologies can improve productivity in all Canadian industrial sectors while also creating real wealth, particularly export wealth, for the technology sector.

"(The problem) is that we don't have enough people 'shooting for the moon' and building really interesting businesses (not just technologies alone)."

Canada's inability to capitalize on its R&D capacity arises from both a lack of capital and talent. With respect to capital, there is often insufficient funding for companies in the earliest stages of going-to-market. At the same time, government incentives encourage R&D over commercialization activities. This situation encourages Canadian companies to stay in the lab and iterate their technology rather than encouraging them to take solutions to market.

At the program level, the Government of Canada's SR&ED program is very well received and is recognized internationally as a useful program for creating innovation. However, no equivalent program exists to foster commercialization in Canada.

While Canadian companies are improving their commercialization capability, a significant talent shortage still exists, particularly for business talent with significant expertise in developing global companies. Canada needs more seasoned technology executives who are willing to lead Canadian technology firms to take on the world.

Scaling for Export

One strategic area for a digital economy is in helping Canadian technology companies achieve export success. Although many Canadian companies see North America as their domestic market – and choosing the US as their primary market – many companies lack the scale and expertise required to effectively sell in the US and even more so to reach Asian and European markets.

Scale is an issue for many technology companies, and it's a key catch-22 for the industry. On the one hand, the technology industry is very supportive of small businesses; in BC we have over 8,000 technology companies with employees and at least another 13,000 sole entrepreneurs. On the other hand, true productivity efficiencies in the industry come with scale.

Digital technologies are unique in that the marginal cost to produce one more copy of software, or one more hosted Software-as-a-Service (SaaS) session or process one more e-commerce transaction is effectively zero. However, reaching the markets required to sell those additional units requires more business skill and capacity, an area where many technology companies still fall short for a number of reasons.

While supporting small businesses is a commendable goal for government, with respect to the digital economy, government and industry need to be encouraging the growth of larger companies – companies with the business skill and market reach necessary to scale and create true economic wealth.

Accessing Foreign Capital for Growth

The BCTIA and its member organizations applaud the federal government for recently taking action on the issues surrounding Section 116 of the Federal Income Tax Act. For years these issues have hampered foreign investment, particularly US investment, in Canada's ICT sector.

However, access to foreign investment continues to be a key issue for Canadian companies, particularly those companies looking for larger, later stage investments to fund growth and expansion. For a number of reasons, Canada's venture capital pool remains small, resulting in the need to access larger rounds of funds abroad. Canada needs to do more to help companies get 'investment ready' such that they can better attract foreign investors (either VC's or Strategic Investors) as they expand.

Canada also needs to ensure that it doesn't penalize companies for accepting foreign investment. One example where this occurs currently is with the government's successful SR&ED tax credit program. Companies successful in attracting foreign investment can be penalized by losing their CCPC status which in turn changes the benefit structure that they receive from SR&ED.

Canada also needs to continue addressing unnecessary barriers to foreign investment including barriers to foreign investment in Canadian Venture Funds. Aside from Section 116, there are still a number of obstacles faced by foreign investors investing in Canadian Limited Partnerships. Specifically, Canada needs to simplify and clarify the tax situation to allow foreign investors, particularly US venture funds and pension funds, to invest in Canadian Limited Partnerships on a level playing field.

At the same time, it is recommended that federal government encourage foreign venture capital to Canada through co-investment programs similar to the BC Renaissance Fund created by the Province of BC.

Competing in a Global Talent Market

Lastly, in its digital economy strategy, the Government of Canada needs to recognize that the digital economy is a global economy. Not only are Canadian companies competing with global companies for market share, but they are competing with global firms for talent as well.

The world recognizes Canada`s capacity for growing talent. Canada needs to do more to keep that talent here, to leverage it when it moves abroad, and to use our environment to attract the world's best and brightest here.

According to the C100 group of Canadian Silicon Valley executives, there are over 300,000 Canadians in the Silicon Valley alone – over 3 times the number of technology professionals that we have working in the province of BC. Anecdotally, it has also been stated that Microsoft has more graduates from the University of Waterloo, than from any other university.

While active repatriation programs have had limited success to date, the Government of Canada does need to ensure that when and if these Canadians are willing to come home, that there aren't any barriers (such as significant duties) that discourage them from doing so.

Canada isn't the only country that is producing great technology talent. According to the Kauffman Foundation, recognized leaders in entrepreneurship research and advocacy, over 50% of Silicon Valley start-ups have at least one foreign-born founder. Canada needs to ensure that it can also attract these foreign nationals with programs that expedite entry to Canada, and that encourage international students, particularly graduate students, to remain in Canada after they complete their studies here.

Lastly, the Government of Canada needs to ensure that Canadian technology start-ups have the ability to attract and retain top business talent. Typically, to attract top talent means a total compensation package that includes equity-based compensation including stock options. However, for SME's to effectively provide equity-based compensation, the Government of Canada needs to reconsider the recent changes to stock compensation. The new rules on employee stock option taxation and other equity-based compensation is detrimental to talent attraction and needs to be revised.

Building Digital Skills to Create a Digital Economy

To create a digital economy requires a talent base of employees (and consumers) who are digitally literate and who understand and appreciate the productivity and connectedness that a truly digital economy can create. Digital skills are not simply 'left-brain' skills like programming and engineering, but increasingly include `right-brain' skills like graphic design and multimedia creation and manipulation.

A digital economy also needs to support information literacy. Through the Internet, Canadians now have fingertip access to all of the world`s information. However, accessing that information, and processing it efficiently and effectively are crucial skills for all Canadians.

The necessity of digital skills is not limited to the technology industry, but permeates all sectors of our economy. Canada needs 'Power Users' in all industries – those people who have the technology literacy and the fortitude to bring new digital technologies into their workplace and set new standards for productivity and collaboration. A workforce with better digital skills is essential for the improvements in productivity Canada sorely needs. Companies will only invest in productivity enhancing tools, including IT and other digital applications, if their workforce is able to use these tools effectively.

While Canada`s technology industry continually needs new programmers and technologists to grow, we also need a lot of business skills such as sales, marketing, and management talent. These business people are required to take our technology to market and deploy it such that consumers and companies can reap its benefits.

A digital economy is a knowledge economy, and a strong education system needs to be its backbone. With a focus on digital and information literacy, our education system needs to be strong from Kindergarten to graduate school and into lifelong learning.

In the K-12 education system, digital literacy is being hampered by a general lack of digital technology and more importantly, technology mentorship. Canada needs to do more to put software and hardware in our schools, but more importantly, we need to teach our teachers how to use the technology effectively and how to teach others to do so.

While it is recognized that many of the students have access to better equipment at home than they have at school, this is not an excuse to minimize investment in technology in the classroom. On the contrary, Canada's education system cannot afford to create a new 'digital divide' between those students who have access to leading-edge technology at home and those who do not.

To encourage children to learn and explore technology, it is recommended that Canada's education system do more to help students get hands-on with technology. Students of all ages need to learn how to use digital technologies, and how to apply their digital skills to solving everyday problems. For younger students, this means more camps and competitions to encourage children to explore technology while for older students it means more practical opportunities to learn the application of technology in the workplace through apprenticeships, co-operative education and industry projects.

Consultation Questions

Q. Do our current investments in R&D effectively lead to innovation, and the creation of new businesses, products and services? Would changes to existing programs and services better expand our innovation capacity?

R&D and Innovation Support

While Canada can still do more, BC Technology companies believe that R&D and Innovation is generally well supported in Canada by programs like SR&ED, NRC-IRAP, NSERC and the National Centres of Excellence. Specifically, the SR&ED tax credit program provides a strong level of support for ICT compared, particularly in provinces like BC where it is combined with a provincial SR&ED program.

"Emphasis is heavy on R, light on D (or innovation / commercialization)"

What Canada lacks is not the ability to innovate, but the ability to get our companies and their innovations to market, particularly to export markets. Canada needs to find ways to better support the commercialization process and help Canadian companies leverage their R&D investment for wealth creation.

"Without these (commercialization) capabilities, all of the investment in SR&ED and other programs does the heavy lifting of enabling innovation, but fails to capture the windfall that follows successful commercialization."

For much of the ICT sector, innovation is not about true technology innovation, but instead about deploying advanced technologies into new markets, particularly sectors of the economy (like government, health and education) that are regarded as technology laggards. The R&D effort behind these market transfer innovations is often view by Canada's technology programs as traditional software development. As such, traditional incentives do not apply – even though the market risks can be high, and the economic benefits of the innovation can be substantial for Canada.

With respect to incentives, Canada should find new ways to incent the adoption of innovative technologies that rewards the business risk of business model innovation through ICT's as well as incenting companies to take technology risks.

The advantage of Internet and mobile technologies is that they allow for the creation of new business model innovations within traditional sectors of the economy. Unfortunately, while much of this innovation can create productivity advances in those markets, the existing incentives for this type of innovation are minimal.

With respect to specific R&D programs, programs like the NRC-IRAP program are well received although BC technologies do cite that budgets are small and that the program is often over-subscribed. This oversubscription makes the program unreliable for those companies considering or requiring its support. Of course, a continual effort to streamline processing to make funding proposals and reporting easier is always recommended.

"The budgets (especially NRC-IRAP) are too small to make a meaningful difference. Even when there are projects that would meet their criterion for funding, the lack of budget makes funding unlikely."

"IRAP is a fine program but it seems to be a bit of a hit or miss proposition to get funding as often the program managers don't know when or if they will have money to distribute"

"Simplify the paperwork around IRAP. I just recently went through IRAP submission. The amount of paperwork was daunting."

In total, to create a digital economy, Canada needs to increase its current expenditure on R&D as well as commercialization activities. BC technology companies express varying levels of opinion with respect to whether university research should be expanded or not, however most support initiatives to streamline the technology transfer process in order to help Canada capitalize on the intellectual property being created in university research labs by commercializing it.

"While it is desirable to remove barriers to success, we have to be careful not to provide crutches that encourage over-reliance on government funding sources."

"Increase funding and support for commercializing university research; attempt to bring universities and industry closer together."

Scaling for success is a common concern of many BC technology companies. In a digital economy, the marginal cost of creating one more piece of software, of hosting one more internet session or of processing one more e-commerce transaction is effectively zero. However, to take advantage of this situation requires the business skill and talent to reach new customers, or encourage existing customers to buy more. Such scenarios often require larger and more sophisticated companies, albeit companies that are by definition still medium-sized (50 to 500 employees).

Most programs, like SR&ED and NRC-IRAP tend to favour small companies. For example the SR&ED tax credit, while an important program, provides refundable tax credits for lower revenue companies while only providing non-refundable credits for larger companies. In the middle is a gap where medium-sized companies, particularly emerging high-growth companies, are often too large for many programs, and too small for others.

To maximize the commercial benefits of our innovation, Canada needs to review its programs to ensure that we are providing the right incentives to scale – and not providing disincentives. Canada needs to ensure that we have the right environment to create larger companies (albeit still medium-sized companies on the world scale) that have better global market reach while still being small enough to stay innovative and adaptable.

The Importance of Export Markets

Exports are critical for the growth of Canadian ICT companies and BC technology companies have a very strong export focus with many considering North America as a single market.

"Those of us in the ICT sector understand that the market is global, and I seldom hear from ICT companies that don't consider North America to be their domestic market. Going beyond NA is where we need to do more work."

Despite the strong export focus, many companies do cite the need for a strong domestic market in order to help prepare their companies for marketing abroad. A strong domestic market is also needed from the perspective that many sectors of Canada's economy can be using ICT's more effectively to increase their productivity.

Scaling for export is a key issue that the Government of Canada needs to review. Specifically, Canada needs to ensure that we have the programs and services available to help Canadian companies scale their operations and take advantage of global market opportunities.

"Encourage more Canadian firms to become early adopter customers; investing in technology and more importantly on the continuous process change needed to take advantage of technology."

"It may be more expensive to develop a foreign market, but sometimes the early adopter market for a given product may be found outside of Canada"

One program that the Federal government should review and consider emulating is the Province of BC's new Global Business Accelerator Centres. These new centres, the first of which is in Bangalore India, provide Canadian companies with market intelligence and strategic market advice, office facilities to help establish an on-the-ground presence, and connections to pre-qualified local service providers to expedite the logistical issues of establishing a presence in the market.

As an expansion of the traditional trade commissioner service in key global markets, export accelerators can help Canadian companies establish their presence on the ground – learning the market, finding relevant partners, developing distribution channels and signing first deals. With the US being a key market for many Canadian technology companies, accelerator centres in key cities like Washington DC, Silicon Valley, Seattle, San Diego, Chicago, Boston and Dallas would be extremely helpful for easing market entry.

Role of Government as a Model User

The Government of Canada can also play a role in building a digital economy by further investing in ICT's to increase its own productivity while improving access to services for all Canadians. With respect to productivity expenditures, the federal government can both increase investment directly, by investing its own infrastructure, and indirectly by encouraging recipients of transfer funds to invest in their productivity.

It should be noted that the BC Technology Industry is not looking for a specific 'Buy Canadian' program as our companies recognize that this policy can have protectionist ramifications by blocking Canadian companies from selling to other countries.

However, wherever Canada can improve communication of internal opportunities to Canadian companies, and wherever Canada can increase its internal risk thresholds to give Canadian startups a better opportunity to bid, those improvements should be made.

"There should be a more defined communication channel for entrepreneurs like myself with innovations that will greatly assist the government in their duties."

Simply ensuring the government maximizes technology for a streamlined and transparent procurement processes would be extremely well regarded. While the MERX service is well received, more widespread deployment by departments, agencies and those organizations funded by the government would be beneficial, as would encouraging the use of electronic submissions.

Similarly, a system similar to the GSA in the US that allows vendor products to be pre-approved for procurement at preset prices would also be seen favourably as a means to ensuring that all Canadian companies have access to the government procurement process.

Another area where the government can use its procurement policies to create a digital economy is through expansion and promotion of the Industrial and Regional Benefits (IRB) program, better known as offsets. As Canada makes important and significant improvements to its defense capacities, the offset benefits should be better directed to sectors of the economy that encourage the use and production of digital technologies. These offsets could be direct investments in Canadian ICT companies or indirect investments through Venture Capital firms. Where the offsets are invested through intermediaries like VC funds, it is recommended that a multiplier be applied to the offset requirements for even greater leverage and building of Canada`s venture sector.

Q. What is needed to innovate and grow the size of the ICT industry including the number of large ICT firms headquartered in Canada?

To innovate and grow the size of the ICT industry in Canada, we need to grow a healthy structure of small, medium-sized and large companies. Currently, Canada has an imbalance of small companies which results in lower productivity in our industry due to scalability.

The Importance of Anchor Companies

To grow the ICT industry in Canada requires the attraction, creation and retention of larger ICT firms, specifically companies large enough to act as anchor companies in the various burgeoning ICT clusters across Canada (Vancouver, Waterloo, Toronto, Ottawa, and Montreal). Anchor companies provide the training ground for management talent, act as a focal point for global promotion, and serve as spawning ground for new spin-out companies.

While Canada is unlikely to attract large ICT firms to move their headquarters here, more can be done to encourage the development of more medium-sized organizations, such that those organizations can either merge and acquire other firms, or provide an impetus for further investment in Canada should they be acquired for foreign companies.

Acquisitions by foreign interests are a likely scenario for many technology start-ups due to the preponderance of ICT firms to consolidate, and the significant gravitational pull of places like the Silicon Valley. Where acquired companies have a sizable presence in Canada, that presence is less likely to be reduced post acquisition and there are several examples here in BC where the acquired firms have actually grown substantially.

Attraction and Retention of Qualified Talent

Growing large firms requires a significant pool of qualified management. The best option for Canada is to grow our own talent pool, and industry initiatives like the ACETECH Academy for CEOs here in BC have helped to build this pool.

However, growing experienced talent is a lengthy proposition while that talent gap exists now. Therefore, Canada needs to improve mechanisms to attract new talent, particularly experienced managerial talent, to help grow our ICT industry. Aside from growing our own talent, Canada needs to create the right incentives (and remove the right disincentives) to retain the great talent that we do build here.

"Fundamentally, Canada's problem is not one of research or technical capabilities – the problem is one of commercialization talent. Canada is a 'branch town' and lacks large companies where the requisite commercialization talents (sales, marketing, product management) are traditionally incubated and honed."

Compensation in the technology industry is unique compared to many industries as equity-based compensation is often a key component of total compensation – particularly for founders and senior managers, but also for many less senior staff.

The new rules on employee stock option taxation and other equity-based compensation is detrimental to talent attraction and retention and needs to be revised. The Employee Stock Option Plan (ESOP) rules create a large potential liability for companies wanting to go public. This is an unintended consequence of the program changes and one that affects company's ability to raise the capital that they require to grow and become anchor companies.

In general, Canada should examine its rule sets from the taxation point-of-view and specifically check for rules that create the unintended consequences of discouraging growth.

"It helps to have early adopters close to home because logistics are simpler/cheaper for chronically underfunded startups"

Attraction of Foreign Investment

While the BCTIA and its membership laud the Canadian government for making progress on issues regarding Section 116 of the federal Income Tax Act, such that it is removing barriers to foreign investment, more work needs to be done to attract investment to Canada.

Foreign investment is available, and it often brings with it access to markets and talent. In the United States, the Venture industry is currently undergoing a 'right-sizing' as it is believed that there is actually too much capital relative to the current number and size of opportunities. Therefore, many investors are seeking to put their money elsewhere. Canada can and should be a logical choice for that investment.

Currently, the capital pool in Canada is very small relative to the potential of our firms. Larger capital pools, necessary for medium-sized technology companies to fund market expansion, are almost non-existent in Canada.

It is noted that while Venture Capital has been a significant investment vehicle for funding start-up technology companies, digital technologies reduce the costs of start-up organizations to amounts below the levels in which VC funds are interested in investing.

To help with access to capital in creating a digital economy, the Government of Canada should help with programs in the earlier stages of growth for digital technology companies such that they can get started and grow to a sufficient size where Venture Capital is available for further growth. In other words, Canada can take a greater role in getting technology companies 'investment-ready'.

"Access a deeper pool of angel/seed financing to develop to a stage of true VC readiness."

"The current VC model makes it tough for them to invest in some digital media because the opportunity is too small."

"The role of VC's is diminishing (for certain sectors) as Angel funding and Angel syndication becomes more and more important."

"Canada should permit immigrant investors who invest in ICT even

Q. What would best position Canada as a destination of choice for venture capital and investments in Global R&D and product mandates?

Venture Capital is attracted to great companies, to favourable tax environments, and to jurisdictions with free flows of capital. While creating great companies is the role of entrepreneurs, creating a great environment for capital is the role of government.

"The best way (to attract larger Venture Capital pools) is to create a large pool of good prospects – which may mean increasing support for early-stage companies."

With the recent economic downturn, and 10 years of poor returns for many funds, the Venture Capital industry is currently in a process of right-sizing itself and potentially finding new business models that better reflect the realities of creating digital economy companies in today's environment.

"We need to recognize that VC is an international business, so funds need to be able to syndicate cross-border in both directions – it is unrealistic to expect US VC's to co-invest with Canadian VC's in Canada if Canadian VC's can't invest in US companies introduced to them by US VC partners – this inhibits development of the VC ecosystem."

"The problem in Canada is that the VC industry isn't yet sustainable because a group of fund managers with reliable and repeatable track records hasn't emerged, and it will take at least another decade. until then, government involvement will be required in various forms."

One role for the federal government would be to emulate programs like the successful Venture Capital programs that have been created in BC, specifically the Small Business Venture Capital Act, which provides retail and angel investors with refundable tax credits for investments made into Venture Capital Corporations(VCC) or directly into SME's registered with the Province of BC as Eligible Business Corporations (EBC).

"Government should encourage/facilitate private investors. It should not become an investor."

Another consideration proposed by BCTIA members is to allow Investors to keep more of their capital gains from technology investing, thereby improving potential for long term returns. Similarly, another BCTIA member recommended tax-free rollover of capital gains that allows investors who have had a windfall from one company to reinvest those profits into another (and ideally several other) technology start-ups.

Here in BC, there are several notable examples of successful technology entrepreneurs who have gone on to become angel investors in the community, investing in and mentoring new legions of entrepreneurs. Canada needs more of this type of investment activity and should do whatever it can to encourage it.

"Allow Canadian investors to keep more of their returns".

"Tax-free rollover of capital gains made on tech, back into tech, would be a way to keep money in the game."

Canada also needs to continue addressing unnecessary barriers to foreign investment including barriers to foreign investment in Canadian Venture Funds. Aside from Section 116, there are still a number of obstacles faced by foreign investors investing in Canadian Limited Partnerships. For one, investing in a Canadian venture fund as a limited partner may be considered "carrying on business in Canada", subjecting the investor to a Canadian tax liability and having to file Canadian tax returns.

Furthermore, there still remains uncertainty under the Income Tax Act as to whether LP investment gains will be classified as business income or capital gains by the Canadian Revenue Agency. Uncertainty on how gains may be taxed can be a barrier to foreign investment. Foreign investors can also not receive LP assets on a tax-free rollover basis as is often done when venture funds distribute shares of an investee company to their limited partners without winding-up the partnership.

Q. What efforts are needed to address the talent needs in the coming years?

To address the talent shortage in the coming years (starting again in 2011 in BC), there are a mix of efforts that need to be undertaken with respect to both building talent within Canada and attracting talent from abroad.

"I would like to see more encouragement (maybe even a requirement) for foreign university graduates to stay on in Canada"

With respect to building talent within Canada, efforts need to be undertaken from K-12 through to post-secondary programs and into lifelong learning programs for technology workers.

In the BCTIA's 2010 Labour Demand Study released in February 2010, one of the key findings was that the industry in BC would add back the approximately 6% of employees that were lost during the recent recession taking BC back to a new peak for technology employment levels at just under 79,000 employees.

While software engineers have the greatest plurality of jobs required this year, there is also significant growth in business-related positions expected as seen by the impending demand for Executive Management and Senior Sales and Marketing positions. This high demand for growth in non-technical managerial positions, particularly sales and marketing, is a consistent trend from the previous 2008 and 2007 studies.

To build the talent pool, the BC technology industry needs to provide larger numbers of highly-qualified, technically skilled workers over the next few years. Meanwhile, the technology industry needs to continue to provide more co-operatve education opportunities to help provide important work experience for these new graduates.

To help the Canadian ICT industry to attract global talent, the federal government can help with immigration programs that expedite the entry of skilled workers into Canada including immigration programs that encourage international students to remain in Canada after they complete their education here.

To help with the attraction of global talent, the Government of Canada also needs to augment the recent changes that they made to stock option compensation to make it easier for SME's to use equity as compensation. This will help to attract and retain the required top business talent.

"Our employees have taken smaller compensation packages in order to participate in the company's future success by way of stock option."

"Most startup employees recognize the value of stock options although some have been burned in the past."

"While employees do not consider options as part of their cash compensation, they do value the potential upside that options provide."

Q. What do you see as the most critical challenges in skills development for a digital economy?

To create a digital economy requires a talent base of employees (and consumers) who are digitally literate and who understand and appreciate the productivity and connectedness that a truly digital economy can create. Digital skills don`t just include 'left-brain' skills like programming and engineering, but increasingly include 'right-brain' skills like graphic design and multimedia creation and manipulation.

A digital economy also needs to support information literacy. Through the Internet, Canadians now have fingertip access to all of the world`s information. However, accessing that information, and processing it efficiently and effectively are crucial skills for all Canadians.

The necessity of digital skills is not limited to the technology industry, but permeates all sectors of our economy. Canada needs 'Power Users' in all industries – those people who have the technology literacy and the fortitude to bring new digital technologies into their workplace and set new standards for productivity and collaboration. A workforce with better digital skills is essential for the improvements in productivity Canada sorely needs. Companies will only invest in productivity enhancing tools, including IT and other digital applications, if their workforce is able to use these tools effectively.

While Canada`s technology industry continually needs programmers and technologists to grow, we also need a lot of business skills such as sales, marketing, and management talent to market and deploy our technology and to help consumers and companies reap its benefits.

A digital economy is a knowledge economy, and a strong education system needs to be its backbone. With a focus on digital and information literacy, our education system needs to be strong from Kindergarten to graduate school and into lifelong learning.

Strong Research-Oriented Universities

Although immigration is important for attracting some of the best and brightest minds to Canada to lead technology development and deployment, a digital economy needs to be home-grown as all Canadians need to digitally literate.

At the core of the technology leadership behind a digital economy is the need for strong research-oriented universities. World-class universities are important for attracting the best and brightest to Canada, and to train and retain those born here.

"One noticeable ingredient of all of the world's leading technology centres is the presence of leading universities which create concentrations of excellent people".

Industry-Focused Education Programs

As strong as our universities may be in research, we also need our schools to work closely with industry to provide the appropriate level of knowledge transfer (in both directions) to ensure that our graduates are job-ready and that our students are studying real-world problems.

"I would prefer it if there were more vocational courses with closer coupling with industry."

With respect to lifelong education, more needs to be done to help technologists evolve from being practitioners to leading the next generation.

Technology skills tend to have a limited lifespan. Workers either need to continually upgrade their technology skills or they need to find new career paths, often in the business and management aspects of companies, that allow them to leverage their expertise.

"Create more programs to train technical people on how to run companies, seek financing and grow companies."

Digital Literacy in K-12

In the K-12 education system, digital literacy is being hampered by a general lack of digital technology and more importantly, technology mentorship. Students need to have access to the hardware and software required to communicate and collaborate in a digital economy, but more importantly, they need teachers who understand and appreciate digital literacy and who can teach and coach kids to use and explore the technology.

Canada needs to do more to put software and hardware in our schools, but more importantly, we need to teach our teachers how to use it effectively and how to teach others to do so.

"I have a friend who teaches elementary school and he has never used MS Excel. And another one who doesn't even use a computer. Not good."

"Schools need far more support for 'digital tools' than they currently get"

"The teachers are the ones lacking the understanding of the new technology"

While it is recognized that many of the students have access to better equipment at home than they have at school, this is not an excuse to minimize investment in technology in the classroom. On the contrary, the education system cannot afford to create a new 'digital divide' between those students who have access to leading-edge technology at home and those who do not.

"Kids are already learning these skills outside of school"

To encourage kids to learn and explore technology, it is recommended that the education system do more to help students get hands-on with technology and to learn how to use it, and how to apply their skills to everyday problems.

For younger students, this means more camps and competitions to encourage children to explore technology while for older students it means more practical opportunities to learn the application of technology in the workplace through apprenticeships, co-operative education and industry projects.

"Summer programs for youth; competitions"

"Provide kids (K-12 and Post-Secondary) with more opportunity to apprentice and work on projects with industry"

BC Technology Industry

The following is an outline of the major industry sectors in BC and their relative strengths with respect to number of companies, number of employees and annual revenues.

Technology Sector Statistics
Data compiled from Profile of the British Columbia High Technology Sector (2008), Wireless in BC (2007), New Media BC, Aerospace Industry Association of BC. Sectors contain overlapping data due to companies being listed in more than one sector.
Information & Communications
Hardware, Software, Telecommunications and IP over Everything
6,000 companies
46,000 employees
$9 billion in revenue
Wireless
Hardware, Software and Broadband Internet
500 companies
6,000 employees
$2 billion in revenue
Life Sciences
Pharmaceuticals and Medical Devices
100 companies
2,600 employees
$900 million in revenue
New Media
Interactive Multimedia, Gaming and E-Learning
1100 companies
15,000 employees
$2 billion in revenue
Aerospace
Engineering, Manufacturing and Training
190 companies
1,550 employees
$450 million in revenue
Clean Tech
Hydrogen; Fuel Cells; Power Electronics; Energy Storage; Wind, Ocean and Solar Power; Environmental Technologies
1,390 companies
21,000 employees
$2.8 billion in revenue
Global Companies with a Presence in BC

3M Touch Systems
Alliant Techsystems Ballard Power Systems Inc.Footnote *
Boeing
Broadcom Corporation
CDC Software
Dolby Canada
Eastman Kodak
Electronic Arts
Harman International Industries
Honeywell Video Systems HSBC Group

IBM
Intel
Kensington
MacDonald, Dettwiler and Associates Ltd. (MDA)*
Microsoft Corporation McKesson Corporation
Netapp Nokia
Open Solutions
Pixar
Plug Power
Phillips Lighting
Robert Bosch GmbH

Sage Group
Salesforce.com
Schneider Electric
Scientific Atlanta – a Cisco Company
Sierra Wireless*
Seiko Epson Corporation
SAP Sophos
TELUS*
UTStarcom
Vivendi Universal
Walt Disney

About BCTIA

British Columbia Technology Industry Association
www.bctia.org

Growing BC's technology industry.one company at a time.

The BC Technology Industry Association is an industry-funded organization supporting the growth of British Columbia's strong knowledge economy. Our network of 2700+ member companies are all sizes and from all technology sectors and collectively employ over 60,000 workers in BC.

We deliver programs and services that directly influence the growth and success of our companies, such as PODIUM, our industry promotion program, Xcelerate, our executive education program, and PEER2PEER groups, where our members connect to share and learn.

As the voice of the technology industry, the BCTIA is committed to the ongoing growth, sustainability and prosperity of the technology industry and the transformation of British Columbia to a knowledge-based economy.


Footnotes

  1. * back to footnote reference * Headquartered in BC

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