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Canada’s tech sector is targeting Europe – does it have what it takes to compete?

Following its free-trade agreement with the EU – and the contrast with its noisy neighbour – Canada is promoting its tech sector to European IT buyers. We take a look at what CIOs can expect

Despite strong historic and cultural links to the UK and France, Canada is only the 16th largest exporter of technology-related products to the European Union, with a market share of just 0.5% of EU tech imports.

That is a situation the country hopes to improve as new economic and geopolitical opportunities open up, encouraging the Canadian government to target IT buyers in the EU to promote and grow its IT sector.

Ask a European CIO to name a Canadian tech company and they may mention BlackBerry – formerly a flagship, until it became a shipwreck. Similarly, Nortel was a well-known telecoms supplier in Europe until 2009, when it became Canada’s largest bankruptcy.

In contrast, Canadian IT service provider CGI was biggest winner of new UK government IT contracts in 2017, with £844m of deals, largely a legacy of its 2012 acquisition of Logica for £1.7bn.

And if you have a requirement for content management systems, you’re likely to be familiar with OpenText, Canada’s largest software company.

Frankly, that’s probably the extent of most European IT leaders’ knowledge of the country’s tech sector. However, the elimination of tariffs on Canadian IT products under the CETA free-trade deal agreed between Canada and the EU in 2017 – and the current political instability of its nearest neighbour – could mean that is about to change.

Declining industries

Canada’s historic industrial strengths in oil and gas, commodities mining and agriculture are slowly declining and the government is looking to invest in new growth sectors, particularly technology and life sciences.

With a young, liberal, media-friendly prime minister in Justin Trudeau contrasting with the belligerence and nationalism of US president Donald Trump, Canada hopes to take advantage.

“Trudeau is our best salesman – Trump is our second-best salesman,” said one Canadian economic development executive, during a visit by Computer Weekly to Montreal to meet some of the tech sector’s emerging leaders. Several people echoed the “Trump effect” as a timely driver for Canada’s plans.

Trudeau is our best salesman – Trump is our second best salesman

For example, Vancouver, on Canada’s Pacific coast, is less than two-and-a-half hours’ drive from Seattle, home to Microsoft and Amazon. Both tech giants are building sizeable development centres in the city because it is easier to bring in overseas tech talent thanks to Canada’s visa regime.

In the US, Trump’s immigration crackdown means some foreign workers aren’t allowed in, and even for those who are, the number of H-1B visas typically used for high-level tech jobs has been reduced over time.

By contrast, the Canadian government is operating a two-year pilot programme to attract global talent, whereby anyone with the requisite tech skills and a job earning at least C$80,000 can get a work visa in just two weeks.

Also, through a combination of federal and regional tax credits for businesses, the government will fund up to 50% of salary costs for e-business and research and development (R&D) activities.

Samsung, Google, Facebook and Apple are among the global tech companies looking to take advantage by investing in Canadian operations.

Innovation superclusters

In February 2018, the Canadian government announced a C$950m investment in five “innovation superclusters” – with private sector funding to match – aiming to create 50,000 jobs and grow the economy by C$50bn over 10 years.

Two of those projects cover IT. The digital technology cluster based in British Columbia will look at big data, analytics, cloud, augmented reality and machine learning, while the Scale:AI cluster in Quebec will focus on building intelligent supply chains using artificial intelligence (AI) and robotics.

The superclusters bring together companies of all sizes in collaboration with academia and not-for-profit organisations. In line with Trudeau’s inclusivity policies, the clusters will also target increased representation for women and minority groups in the programmes.

Montreal, Canada’s second biggest city, is already seeing progress from the close links between its universities and investors, with a particular focus on AI and digital media.

Ubisoft Montreal claims to be the largest computer games development studio in the world, with 3,000 employees, while visual effects company Rodeo FX worked on Game of Thrones and 2018 Oscar winner Blade Runner 2049. This talent base is attracting interest from related sectors such as virtual and augmented reality (VR/AR).

“There is a real crossover of skills between gaming and VR/AR content,” says Sebastien Ebacher, a producer at Ubisoft Montreal and founder of Arnoovo, which produces immersive content for virtual reality providers.

AI expertise

Montreal benefits from the global reputation of Yoshua Bengio, described as the “Mick Jagger of AI”. Bengio is a pioneer in machine learning and neural networks, who worked alongside Yann LeCun – now Facebook’s director of AI research – and Geoffrey Hinton, now one of Google’s top AI researchers.

Bengio is a professor at Université de Montreal and leads the Montreal Institute for Learning Algorithms (MILA), which claims to be the world’s biggest academic research centre specialising in deep learning. Many top international academics and PhD students in AI come to Montreal because of Bengio, and go on to form startups to commercialise their university research.

According to Naomi Goldapple, programme director at Montreal AI incubator, Element AI – which was co-founded by Bengio – there are only about 7,000 deep learning experts in the world, with most hoovered up by the big salaries on offer at Facebook, Google and other internet firms. As such, any advantage in the market for top skills is an important consideration.

Soodeh Farokhi, for example, is an Iranian computer scientist who came to Canada in 2016 to set up C2RO, a cloud-based AI platform that uses software as a service for real-time control of robots.

C2RO is part of a cohort of researchers-turned-entrepreneurs operating under the auspices of TandemLaunch, a startup incubator that provides investment, office space, expertise and contacts to take academic AI research and develop it into commercial products.

“We search for solutions at universities,” says Omar Zahr, technology coordinator at TandemLaunch. “Our technology scouts review over 4,000 deep technologies each month. Academics and technical people are not always so good at running companies, and we can help them.”

Tech startups

Other startups in the TandemLaunch portfolio include Soundskrit, which is developing smart microphones to improve audio and speech recognition for devices such as smartphones and home assistants, using technology inspired by the audio characteristics of insects.

Another firm is SpillAd, an advertising technology firm that uses sensors in smartphones to deliver “context-aware” targeted ads and track behaviour. For example, the product can tell whether a user is looking at an on-screen advert, rather than simply having an advert visible but not taking any notice.

Deeplite is another example, developing ways to optimise deep-learning algorithms so that neural networks can run on smaller, more energy-efficient devices, rather than relying on large-scale, cloud or datacentre-hosted servers.

Read more about Canada’s IT sector

Outside of the TandemLaunch portfolio, Nexalogy is another Montreal startup that provides deep analysis of social media data – to the extent that it has developed its own bespoke parallel processing server technology to handle such huge amounts of data.

Founder Claude Theoret – a former astrophysicist who researched black holes – claims Nexalogy’s technology was the first to predict a Trump victory in the US presidential race. He says the firm also worked on Justin Trudeau’s leadership campaign, helping to understand how the future prime minister was perceived by voters and how he needed to change his image.

Regional expertise

But Montreal is not the only city or region investing in its technology ecosystem. Every Canadian province has a story to tell, and local specialisations on which to draw (see below). The country’s geography helps too, with cheap hydroelectric power available to build low-cost datacentres, and cold winters helping to reduce cooling needs.

In other emerging technologies, such as autonomous vehicles, photonics, fintech, quantum computing and 5G, Canada is developing regional expertise and research capabilities it hopes will attract talent and help to export its products and services.

The country also pushes its relatively low cost of living and high quality of life as a further attraction for top tech talent to relocate. Ottawa likes to mention that citizens can sometimes ice-skate to work.

Competitive market

Canada certainly has a lot going for it, but it is starting from a lower base than the EU rivals it hopes to compete with, and against European governments that are also looking to boost their digital economies.

“The Canadian tech sector has some significant strengths, with a highly educated workforce and good digital infrastructure,” says Thomas Goldsmith, policy manager for Brexit and trade at UK IT trade body TechUK. “It has a growing AI sector and could be well placed to benefit as these technologies, and the market for them, develops more widely.

“But its biggest challenge is that it is entering a highly competitive market. Take Google’s DeepMind – it might have opened its first overseas centre in Canada, but the HQ is in the UK, with most of its research activity here. Likewise, many other companies have significant R&D activities in the UK and Europe, and the British and French governments are also actively investing significant sums to promote their domestic AI industries.”

For the first time, Canada is sending a delegation to London Tech Week this year, to promote its IT sector and to raise awareness of what it can do for European tech and digital leaders. There is a lot of work to be done, but Canada has a clear opportunity to develop a greater presence in European technology markets.

Canada’s regional tech strengths

Ottawa

The Canadian capital, Ottawa, is “capitalising on a lot of disruptive technology trends”, according to Adam Dewar, business development project manager at Invest Ottawa. The city is a centre for research into autonomous vehicles. Ford has committed C$338m to a connected vehicle development centre, and BlackBerry has a centre for its QNX automotive operating system software. Dewar says Ottawa is “Canada’s most tech-intensive city”, and last year conducted Canada’s first demonstration of an autonomous vehicle on a public road communicating in real time with city infrastructure such as traffic lights. Ottawa employs about 77,000 people in IT-related jobs.

Edmonton

The capital of Alberta province, Edmonton is Canada’s most northerly city, with over one million inhabitants. It is also one of the largest producers of medical marijuana – Canada is expected to legalise the drug this year. Edmonton has among the lowest taxes, lowest average age and highest birth rate in the country – the latter unconnected to the long winter nights and local marijuana expertise, of course. But it is also a hub for AI and open data – the first North American city to adopt the International Open Data Charter and with the highest score in Canada’s Open Cities Index 2017. Google’s London-headquartered DeepMind machine learning business opened its first lab outside the UK in Edmonton, attracted by the academic talent at the University of Alberta, ranked second in the world for AI and machine learning research. The city employs 19,000 people in 1,300 tech companies.

Calgary

Best known as an oil and gas town – Canada’s equivalent of Aberdeen – Calgary has suffered from the drop in global oil prices. As a result, it is turning to the tech sector and claims the highest concentration of entrepreneurs and startups per capita in the country. Calgary developed local skills through the data-heavy energy industry, with expertise in 3D visualisation and geospatial technology for mining and exploration. This, combined with its position as Alberta’s banking and finance hub, has brought a focus on blockchain development. “Blockchain is going to be very big for us,” says Terry Rock, CEO of startup accelerator Calgary Technologies. The local government is investing C$100m in new and existing tech businesses. The city is also the centre of the Alberta SuperNet, a high-speed broadband network connecting 429 communities across the region, enabling high-speed internet access to 80% of Alberta residents. GE and IBM have innovation centres in Calgary focused on AI and IoT research for the oil and gas industries. The city employs 22,000 people in IT.

Quebec City

The capital of the French-speaking province of Quebec, the city has a unique appeal for French tech companies, with Thales and datacentre firm OVH housing development centres there, along with Swiss-Swedish engineering group ABB, and Japanese firms Fujitsu and Olympus. Quebec City has a particular focus on optics and photonics, as well as autonomous vehicles, IoT and smart cities, and animation/gaming. The city is home to 9,000 researchers across 600 labs, with 19,500 workers in IT.

Winnipeg

The capital of Canada’s Manitoba province, Winnipeg benefits from its central location. It is home to Sightline Innovation, one of Canada’s biggest machine learning companies, and houses Canadian Tire’s main cloud computing facility. In 2017, local visual effects technology firm Thinkbox Software was acquired by Amazon Web Services, and in 2016 Winnipeg-based online food delivery firm SkipTheDishes was bought by the UK’s Just Eat for C$200m in one of Canada’s largest tech startup acquisitions. The city has more than 20,000 IT employees working for over 1,300 companies, more than 160 computer science academics and exported C$183m of technology last year.

Vancouver

Canada’s third-largest city benefits from being part of the British Columbia digital technology supercluster, from its proximity to Seattle, and by being in the same time zone as Silicon Valley. Microsoft is building a new city centre campus with the University of British Columbia, and Amazon is opening a 3,000-employee R&D centre. It is also home to games maker EA’s largest development studio. The city hosts some of Canada’s biggest tech events, such as the BCtech Summit, Siggraph 2018 and TED. Some 75,000 people work in IT, generating C$23bn in sector revenue.

Saskatoon

The capital of Saskatchewan is in the heart of Canada’s farming, foresting, mining and commodities industries. Saskatoon is one of the smaller regional cities, but houses the province’s first tech incubator, Co.Labs, which uses city funding to attract innovators and entrepreneurs. About 8,000 IT employees work at 80 companies in the city.

Toronto

Canada’s biggest city also boasts its largest tech hub, with 400,000 IT workers in 14,000 companies – largely as a result of being the country’s financial services capital. Google, Cisco, IBM and Microsoft all have their Canadian headquarters in Toronto, with IBM conducting blockchain research. Fintech is seen as a local strength. The city claims to have one of the largest clusters of mobile app companies in North America, and the world’s highest concentration of AI startups.

This was last published in June 2018

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