Whirlwind day on the Ontario junket. We spent much of our time hearing from 1) service providers and 2) economic development folks, with a couple of attorneys thrown into the mix for entertainment’s sake. Then onto a bus to head to Waterloo, home of Waterloo University and “national champions” (though the sign making that claim as we headed into town didn’t specify national champions of what).
My brain is awash with stats. Did you know that 90% of Canada’s trade is with the US? Did you know that Ontario builds one of every six cars in North America? Did you know that 56.6% of Ontario’s population has attained a post-secondary education (vs. about 37% for the US)? Did you know there are 320,000 people in the IT and communications industry in Canada? Did you know that even Canadians get Ontario and Ottawa mixed up in conversation?
What stuck with me (without greatly referring to my notes at this late hour) were three things:
First, the Canadian government has made some smart moves around encouraging a business atmosphere (without handing over the stock and reins of decision-making to the corporations). For example, there’s a remarkable R&D incentive program that rewards companies in the form of tax write-offs and refunds, which also applies to new development work being done by software companies too. This can return between a quarter and a third of the money spent on R&D activities to the company paying the tab. A speaker from the Canadian IRS, the Customs and Revenue Agency, said he has seen tax credits as low as $85 and as high as $155 million. In the services business, this adds another cost consideration into the mix when you’re considering where to source your R&D-type projects. (I’ll be doing a longer story about this soon, because, as one meeting organizer said, “many companies are leaving money on the table” by not exploiting this.)
The second example of encouragement resides within its universities — with a policy that is referred to as “inventor-owned IP.” University faculty retain the rights to the IP they develop in the course of their research. The universities don’t automatically own it, like they do in the States. Surely, this has a positive impact on the caliber of people universities can attract — and therefore on the level of the work that goes on in the various tech and science departments. (And, in fact, the guy who founded RIM — the company that invented the Blackberry — is cited as a major Waterloo University success story.)
The second point that struck me about today’s indoctrination is this: Canadian companies are conservative. This translates into a slow decision-making process. They outsource extensively, but they don’t offshore much, because it’s iffier (with a few high-profile exceptions). No doubt, the existence of local offices of India-run service providers and the presence of the smart people running those offices will change that mentality in time. But major growth into the Canada market for services almost comes across as a secondary consideration for Wipro, TCS, Hexaware and others that are here. Primarily, these are customer-facing intermediaries that want a geographic presence for key clients (especially in the automotive and financial services areas). And, as I’ve written before, that nearshore presence is probably of great comfort to US executives who find that time zone thing important in their decision-making.
Along the way, I picked this up… A speaker from Keane, which has a presence in Halifax and Toronto, provided these numbers:
- Bringing application outsourcing from the US to Canada can reduce costs 10%-20%.
- Bringing application outsourcing to Canada and using tech talent in India for development and testing can reduce costs 25%-50%.
Business process functions show similar savings, though the blended solution increases them slightly.
My third “takeaway” from the day was this: The Waterloo Region, which includes the cities of Cambridge, Kitchener and Waterloo, is actually short of tech talent. One attorney said there are currently a thousand tech openings. If you’re looking for a tech job, go north, young person, go north.
Tomorrow, we visit some local IT operations. I won’t have a chance to report on them until Monday.