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Finance Minister Bill Morneau never said it, but many of his budget’s recent measures in favour of high-tech should not have been necessary.
He and his fellow Liberals are planning to spend hundreds of millions of dollars to support clusters of innovation – communities of high-tech firms capable of spinning off one success story after another.
The formula for successful tech hubs is pretty basic. This is what you need:
Canada’s tech communities have all these ingredients but the first. The country lost its national champions when Nortel Networks slipped into bankruptcy in 2009 and BlackBerry’s hegemony over the smartphone market vanished in 2011.
Making up for these reversals matters, especially in the National Capital Region, because we have little manufacturing to speak of and desperately need a competitive private-sector industry to offset the overwhelming influence of government. It’s not just a matter of smoothing out economic cycles. The entire city benefits from diversity in industry and business culture.
Had Nortel and BlackBerry simply maintained their respective positions there’s little doubt this country’s tech sector would today be sizzling. Each firm would be surrounded by a small army of competitive suppliers. Their executives would be honing their skills in marketing, finance, sales and global strategies – not just R&D as is the case with most high-tech subsidiaries. And their headquarters would be magnets for global customers anxious to make the trek to Ottawa, Toronto and Waterloo to inform themselves about tomorrow’s technologies.
But by early 2016, Ottawa-Gatineau was no longer exceptional. Tech jobs made up just six per cent of the workforce, the same as Toronto and slightly behind the top tech cluster, Kitchener-Waterloo – where a new generation of firms is making up (barely) for the reversals at BlackBerry. It helps that BlackBerry – while much reduced in size and no longer a factor in the business of making handsets – survived. While employment levels are well short of the peak – 17,500 in 2011 – BlackBerry still has about 4,500 employees, a majority in the Waterloo area.
Nortel at its zenith 16 years ago supported nearly 16,000 employees and contractors in the Ottawa area – representing one-quarter of the region’s tech workforce. A decade later, in 2010, just a couple of thousand of these employees managed to secure jobs at the companies – Ericsson, Avaya, Ciena and others — that had successfully bid for Nortel’s remaining business units.
The top five tech firms in the capital region by employment tell the story. These include: IBM, Nokia and Ciena – three multinationals that over the years have gobbled up promising local champions (respectively, Cognos, Newbridge Networks and Nortel). The other two large tech employers are Bell Canada and Rogers Communications – service firms with a mandate to serve only the local community.
The second tier, firms that employ between 500 and 1,000 in the region, includes just three tech companies headquartered here – Shopify, Mitel Networks and Canadian Bank Note – the privately held supplier of currency, postage stamps and document readers.
Of these, Shopify and Mitel remain the great hopes for creating new anchors for the region’s tech hub. However, the firms also illustrate the supreme difficulty of replicating what was lost at Nortel and BlackBerry – not only because those former stars were built over a generation or more, but because the nature of the tech industry itself has changed.
The upshot: we are unlikely to witness the kind of employment growth that once came so easily to Canada’s tech pioneers.
When Russ Jones joined Shopify five years ago as chief financial officer, the Ottawa firm had just 50 employees. Today, he’s one of more than 1,200.
“We doubled our staff last year,” Jones says, “Our competitive position has never been stronger.”
A quarter of a million merchants worldwide rely on Shopify software to create and run online stores. The company is full of youth, ambition and potential.
Tobi Lutke, CEO of Shopify, in February, 2015.
Shopify is a “high impact firm” – to use the term employed frequently in Morneau’s recent federal budget. Companies such as these are examples of what Canadians can achieve using imagination and raw brainpower; and they are integral to the Liberal plan to create well-paying jobs for the middle class.
The government over the next year will fill in the details of its Innovation Agenda. There will be more seed capital for startups, bigger budgets for pure research and favourable tax treatment for stock options and corporate R&D. The country’s trade commissioner service has been advised that tech – clean tech in particular — is a priority.
But while Shopify is a testament to high-tech’s wealth-creating potential, it is also embodies a somewhat troubling reality – high-tech companies are not the job-creating machines they used to be.
For insight into the extent of the changes, consider how Shopify’s job-creation record – superb by today’s standards – stacks up against the performance of two of this region’s legendary makers of telecommunications gear.
Shopify took 12 years to reach its current estimated head count of 1,200. However, Mitel and Newbridge Networks hired at a much faster pace. Terence Matthews and Michael Cowpland launched Mitel in 1973 and in just 10 years the firm had 6,000 employees. Newbridge – which Matthews started in 1986 — reached the same mark after 12 years.
Mitel and Newbridge did nearly everything in-house, from public relations to parts production. They opened sales offices and manufacturing plants all over the world.
Not so, Shopify.
“Unlike Newbridge, we have no manufacturing,” Jones says, “Until recently, we had no sales force.”
Jones is speaking from direct knowledge. He worked at Mitel in the late 1980s and moved to Newbridge in 1992. He later served as chief financial officer for Watchfire, a Kanata firm that made web analysis software, and did a stint in California’s Silicon Valley as CFO-for-hire. There he gained more insight into just how lean tech firms can be – especially those specializing in software.
Shopify for instance, stores its critical digital information on a pair of U.S. data centres run by third party suppliers (although Shopify owns the hardware). Shopify customers who want to customize their electronic storefronts can tap into a global network of hundreds of independent design experts. These are certified by Shopify but many operate out of their homes across North America and Europe. They are not employees.
Shopify also relies on billing technology that allows their customers to pay for services using major credit cards – minimizing the need for in-house accounting staff.
Shopify has its core employees, who adapt the firm’s electronic commerce platform to web, mobile, physical and social media sales channels. Employees concentrate on making online shopping a better experience for the customers of merchants that rely on Shopify software.
However, even if Shopify wanted to step up direct hiring significantly, programming and high-level design skills are scarce. The company opened offices in Toronto, Montreal and Kitchener-Waterloo so it can tap a wider pool of potential talent. Shopify’s regulatory filings note that these cities have a “more limited pool of qualified personnel compared to other places in the world.”
In other words, the company’s Ottawa workforce – now about 550 to 600 strong – will grow only to the extent it can find talent here.
Ottawa will remain the most important location for Shopify workers for the foreseeable future. Earlier this week property developers Allied Properties REIT and Riocan REIT revealed that Shopify had signed on as the major tenant for a King St. West development that will be ready for occupancy early in 2019. Shopify will lease 112,000 square feet – a sharp rise from the 37,000 square feet it currently leases in Toronto.
The company’s lease in Ottawa covers nearly 155,000 square feet — two-thirds of which is currently occupied by Shopify. If all goes well, the company will eventually fill the remaining 50,000 square feet with its own workers.
The hunt for talent is serious business, Shopify noted in its latest annual report. “Our ability to continue to attract and retain highly skilled personnel, specifically employees with technical and engineering skills and employees with high levels of experience in designing and developing software and internet-related services, will be critical to our future success.”
The latest version of Mitel – the one reacquired by Terence Matthews in 2001 – is light years removed from the rocket that launched in the 1970s.
The early Mitel was an example of ‘greenfield’ growth. Everything about it was new – its technology, products and customers. As the firm landed sales, it added staff to handle production, invoicing, shipping, you name it. Mitel doubled in size year after year.
Today, Mitel’s revenues reflect a mixture of older products in decline and fast-rising newer technologies. In another major departure from the 1970s and 1980s, the firm has no capacity in-house to manufacture its own products: it relies on a handful of independent contractors instead.
CEO of Mitel Rich McBee
And, not least, the company is undergoing a profound shift in the way it sells its technology. Mitel increasingly is selling telecommunications as a service — customers pay for a bit at a time. This contrasts sharply with its longstanding practice of selling hardware that customers pay for upfront and operate on their own premises.
The significance is that Mitel’s revenues are being depressed in the short run as the lump sum payments by its customers are converted to a multi-year stream of service revenues. Longer term, Mitel’s sales should rest on a more solid base.
Despite these growth-crimping developments, Mitel has doubled its revenues and head count to $1.2 billion U.S. and 4,500 respectively during the past five years under CEO Rich McBee. With Friday’s announcement that it will acquire California-based Polycom later this year, Mitel’s annual revenues will jump to $2.5 billion U.S. The combined entity will employ about 7,700. This continues the pattern that has seen Mitel grow by acquiring others, not necessarily by selling more of its own products and services.
Prior to the Polycom deal, Mitel had spent $1.2 billion U.S. to buy five companies, including Aastra of Toronto and Mavenir of Texas. With each major purchase, McBee has trimmed overall employment levels to eliminate overlap and duplication. And, because most of the acquisitions have been of foreign companies, Mitel’s Kanata headquarters – with 600 employees, or 13 per cent of the total — has shrunk dramatically as a percentage of corporate operations. When the Polycom purchase closes – expected sometime before the end of September – Mitel’s Kanata operation will account for just 8 per cent of the global workforce.
This is pretty standard stuff for tech multinationals based in home countries with a small market. Only 12 per cent of Nokia’s 57,000 employees last year worked in Finland while fewer than 10 per cent of Ericsson’s 117,000 workers were based in Sweden. A global presence is key to survival.
Nevertheless, headquarters jobs are key to energizing technology hubs. They are global in scope – and carry real decision-making power. Mitel’s Kanata facilities manage corporate finance, sales, warehousing, distribution, R&D and general strategy. They are also accessible to local entrepreneurs hunting for a buyer for their products, advice about sales channels or someone with whom to collaborate on future technologies.
For instance, Mitel recently paid $23 million U.S. to buy PrairieFyre, a Kanata-based specialist in call-centre technology. More recently Mitel announced it will collaborate DragonWave on next-generation 5G wireless technology. It’s probably no coincidence that Mitel chairman Terence Matthews was an early investor in DragonWave.
High-tech remains a vital component of Canada’s job market – in the seven largest urban areas alone, about 460,000 are employed in the sector, or five per cent of the total workforce in these cities. This compares with less 40,000 clean tech jobs – upon which the Liberals are pinning so much hope. The bulk of high-tech jobs are in telecommunications services, software development and chip design. With the exception of the period surrounding the 2000 telecom boom, tech employment in these cities has remained between five per cent and six per cent of the total workforce since the mid-1990s.
Considering the evisceration of the country’s two high-tech flagship corporations, that’s actually not a bad result, even though we’re now at the low end of the range. But no matter how successful Mitel and Shopify prove to be, they won’t be able to make up for the loss of Nortel and the humbling of BlackBerry on their own.
We need dozens more firms like them, and it’s unlikely any will find it as easy to land sales or hire employees as their predecessors did. The good news is if any of them actually achieve global scale, they will be less likely to squander a lead so painstakingly acquired.
Email:jbagnall@ottawacitizen.com
Twitter.com/jamesbagnall1
查看原文...
He and his fellow Liberals are planning to spend hundreds of millions of dollars to support clusters of innovation – communities of high-tech firms capable of spinning off one success story after another.
The formula for successful tech hubs is pretty basic. This is what you need:
- a large anchor tenant with sales and employees across the globe;
- hundreds of entrepreneurial firms with smart plans and outsize ambition;
- access to investment money;
- top-notch local universities and
- plenty of tech wizards who have done it before and can serve as role models.
Canada’s tech communities have all these ingredients but the first. The country lost its national champions when Nortel Networks slipped into bankruptcy in 2009 and BlackBerry’s hegemony over the smartphone market vanished in 2011.
Making up for these reversals matters, especially in the National Capital Region, because we have little manufacturing to speak of and desperately need a competitive private-sector industry to offset the overwhelming influence of government. It’s not just a matter of smoothing out economic cycles. The entire city benefits from diversity in industry and business culture.
Had Nortel and BlackBerry simply maintained their respective positions there’s little doubt this country’s tech sector would today be sizzling. Each firm would be surrounded by a small army of competitive suppliers. Their executives would be honing their skills in marketing, finance, sales and global strategies – not just R&D as is the case with most high-tech subsidiaries. And their headquarters would be magnets for global customers anxious to make the trek to Ottawa, Toronto and Waterloo to inform themselves about tomorrow’s technologies.
•
The impact of wrong turns by Canada’s former tech champions can be seen most clearly in the National Capital Region – the one-time headquarters for Nortel’s R&D and where BlackBerry developed the operating system for its last-generation smartphones. As recently as 2007, more than 10 per cent of the region’s workforce was in high-tech – by far the highest in the country, and nearly double the average for the top cities.
Nortel at its zenith 16 years ago supported nearly 16,000 employees and contractors in the Ottawa area – representing one-quarter of the region’s tech workforce. A decade later, in 2010, just a couple of thousand of these employees managed to secure jobs at the companies – Ericsson, Avaya, Ciena and others — that had successfully bid for Nortel’s remaining business units.
The top five tech firms in the capital region by employment tell the story. These include: IBM, Nokia and Ciena – three multinationals that over the years have gobbled up promising local champions (respectively, Cognos, Newbridge Networks and Nortel). The other two large tech employers are Bell Canada and Rogers Communications – service firms with a mandate to serve only the local community.
The second tier, firms that employ between 500 and 1,000 in the region, includes just three tech companies headquartered here – Shopify, Mitel Networks and Canadian Bank Note – the privately held supplier of currency, postage stamps and document readers.
Of these, Shopify and Mitel remain the great hopes for creating new anchors for the region’s tech hub. However, the firms also illustrate the supreme difficulty of replicating what was lost at Nortel and BlackBerry – not only because those former stars were built over a generation or more, but because the nature of the tech industry itself has changed.
The upshot: we are unlikely to witness the kind of employment growth that once came so easily to Canada’s tech pioneers.
•
When Russ Jones joined Shopify five years ago as chief financial officer, the Ottawa firm had just 50 employees. Today, he’s one of more than 1,200.
“We doubled our staff last year,” Jones says, “Our competitive position has never been stronger.”
A quarter of a million merchants worldwide rely on Shopify software to create and run online stores. The company is full of youth, ambition and potential.
Tobi Lutke, CEO of Shopify, in February, 2015.
Shopify is a “high impact firm” – to use the term employed frequently in Morneau’s recent federal budget. Companies such as these are examples of what Canadians can achieve using imagination and raw brainpower; and they are integral to the Liberal plan to create well-paying jobs for the middle class.
The government over the next year will fill in the details of its Innovation Agenda. There will be more seed capital for startups, bigger budgets for pure research and favourable tax treatment for stock options and corporate R&D. The country’s trade commissioner service has been advised that tech – clean tech in particular — is a priority.
But while Shopify is a testament to high-tech’s wealth-creating potential, it is also embodies a somewhat troubling reality – high-tech companies are not the job-creating machines they used to be.
For insight into the extent of the changes, consider how Shopify’s job-creation record – superb by today’s standards – stacks up against the performance of two of this region’s legendary makers of telecommunications gear.
Shopify took 12 years to reach its current estimated head count of 1,200. However, Mitel and Newbridge Networks hired at a much faster pace. Terence Matthews and Michael Cowpland launched Mitel in 1973 and in just 10 years the firm had 6,000 employees. Newbridge – which Matthews started in 1986 — reached the same mark after 12 years.
Mitel and Newbridge did nearly everything in-house, from public relations to parts production. They opened sales offices and manufacturing plants all over the world.
Not so, Shopify.
“Unlike Newbridge, we have no manufacturing,” Jones says, “Until recently, we had no sales force.”
Jones is speaking from direct knowledge. He worked at Mitel in the late 1980s and moved to Newbridge in 1992. He later served as chief financial officer for Watchfire, a Kanata firm that made web analysis software, and did a stint in California’s Silicon Valley as CFO-for-hire. There he gained more insight into just how lean tech firms can be – especially those specializing in software.
Shopify for instance, stores its critical digital information on a pair of U.S. data centres run by third party suppliers (although Shopify owns the hardware). Shopify customers who want to customize their electronic storefronts can tap into a global network of hundreds of independent design experts. These are certified by Shopify but many operate out of their homes across North America and Europe. They are not employees.
Shopify also relies on billing technology that allows their customers to pay for services using major credit cards – minimizing the need for in-house accounting staff.
Shopify has its core employees, who adapt the firm’s electronic commerce platform to web, mobile, physical and social media sales channels. Employees concentrate on making online shopping a better experience for the customers of merchants that rely on Shopify software.
However, even if Shopify wanted to step up direct hiring significantly, programming and high-level design skills are scarce. The company opened offices in Toronto, Montreal and Kitchener-Waterloo so it can tap a wider pool of potential talent. Shopify’s regulatory filings note that these cities have a “more limited pool of qualified personnel compared to other places in the world.”
In other words, the company’s Ottawa workforce – now about 550 to 600 strong – will grow only to the extent it can find talent here.
Ottawa will remain the most important location for Shopify workers for the foreseeable future. Earlier this week property developers Allied Properties REIT and Riocan REIT revealed that Shopify had signed on as the major tenant for a King St. West development that will be ready for occupancy early in 2019. Shopify will lease 112,000 square feet – a sharp rise from the 37,000 square feet it currently leases in Toronto.
The company’s lease in Ottawa covers nearly 155,000 square feet — two-thirds of which is currently occupied by Shopify. If all goes well, the company will eventually fill the remaining 50,000 square feet with its own workers.
The hunt for talent is serious business, Shopify noted in its latest annual report. “Our ability to continue to attract and retain highly skilled personnel, specifically employees with technical and engineering skills and employees with high levels of experience in designing and developing software and internet-related services, will be critical to our future success.”
•
The latest version of Mitel – the one reacquired by Terence Matthews in 2001 – is light years removed from the rocket that launched in the 1970s.
The early Mitel was an example of ‘greenfield’ growth. Everything about it was new – its technology, products and customers. As the firm landed sales, it added staff to handle production, invoicing, shipping, you name it. Mitel doubled in size year after year.
Today, Mitel’s revenues reflect a mixture of older products in decline and fast-rising newer technologies. In another major departure from the 1970s and 1980s, the firm has no capacity in-house to manufacture its own products: it relies on a handful of independent contractors instead.
CEO of Mitel Rich McBee
And, not least, the company is undergoing a profound shift in the way it sells its technology. Mitel increasingly is selling telecommunications as a service — customers pay for a bit at a time. This contrasts sharply with its longstanding practice of selling hardware that customers pay for upfront and operate on their own premises.
The significance is that Mitel’s revenues are being depressed in the short run as the lump sum payments by its customers are converted to a multi-year stream of service revenues. Longer term, Mitel’s sales should rest on a more solid base.
Despite these growth-crimping developments, Mitel has doubled its revenues and head count to $1.2 billion U.S. and 4,500 respectively during the past five years under CEO Rich McBee. With Friday’s announcement that it will acquire California-based Polycom later this year, Mitel’s annual revenues will jump to $2.5 billion U.S. The combined entity will employ about 7,700. This continues the pattern that has seen Mitel grow by acquiring others, not necessarily by selling more of its own products and services.
Prior to the Polycom deal, Mitel had spent $1.2 billion U.S. to buy five companies, including Aastra of Toronto and Mavenir of Texas. With each major purchase, McBee has trimmed overall employment levels to eliminate overlap and duplication. And, because most of the acquisitions have been of foreign companies, Mitel’s Kanata headquarters – with 600 employees, or 13 per cent of the total — has shrunk dramatically as a percentage of corporate operations. When the Polycom purchase closes – expected sometime before the end of September – Mitel’s Kanata operation will account for just 8 per cent of the global workforce.
This is pretty standard stuff for tech multinationals based in home countries with a small market. Only 12 per cent of Nokia’s 57,000 employees last year worked in Finland while fewer than 10 per cent of Ericsson’s 117,000 workers were based in Sweden. A global presence is key to survival.
Nevertheless, headquarters jobs are key to energizing technology hubs. They are global in scope – and carry real decision-making power. Mitel’s Kanata facilities manage corporate finance, sales, warehousing, distribution, R&D and general strategy. They are also accessible to local entrepreneurs hunting for a buyer for their products, advice about sales channels or someone with whom to collaborate on future technologies.
For instance, Mitel recently paid $23 million U.S. to buy PrairieFyre, a Kanata-based specialist in call-centre technology. More recently Mitel announced it will collaborate DragonWave on next-generation 5G wireless technology. It’s probably no coincidence that Mitel chairman Terence Matthews was an early investor in DragonWave.
•
High-tech remains a vital component of Canada’s job market – in the seven largest urban areas alone, about 460,000 are employed in the sector, or five per cent of the total workforce in these cities. This compares with less 40,000 clean tech jobs – upon which the Liberals are pinning so much hope. The bulk of high-tech jobs are in telecommunications services, software development and chip design. With the exception of the period surrounding the 2000 telecom boom, tech employment in these cities has remained between five per cent and six per cent of the total workforce since the mid-1990s.
Considering the evisceration of the country’s two high-tech flagship corporations, that’s actually not a bad result, even though we’re now at the low end of the range. But no matter how successful Mitel and Shopify prove to be, they won’t be able to make up for the loss of Nortel and the humbling of BlackBerry on their own.
We need dozens more firms like them, and it’s unlikely any will find it as easy to land sales or hire employees as their predecessors did. The good news is if any of them actually achieve global scale, they will be less likely to squander a lead so painstakingly acquired.
Email:jbagnall@ottawacitizen.com
Twitter.com/jamesbagnall1
查看原文...
