CATA says Chinese outsourcing deal won’t lead to brain drain

OTTAWA (OBJ) — Canadian and Chinese high-tech companies have signed an agreement to make it easier to sell products in each other’s markets.

But while the Canadian Advanced Technology Alliance (CATA) said the agreement will create growth in Canada’s IT sector, it also allowed that it may accelerate the pace of some research and development jobs leaving for China and other nations.

China’s Shenyang Neusoft Company Ltd., employer of 10,000 workers, signed an exclusive agreement last month with CATA, which speaks for a majority of the Canadian technology sector. The industry lobby group called the memorandum a “mutually beneficial partnership” that will expand Neusoft’s business in North America and that of CATA members’ in China.

Under the terms of the 10-year agreement, all North American companies that wish to take advantage of software outsourcing with Neusoft will do so through CATAAlliance.

Eighty per cent of CATA’s membership are export-oriented firms. This deal will help them, said CATA president John Reid.

“We see ourselves as the driver of these exports. (The agreement) is a way of getting the Canadian market access (to China),” he said. “We are acting directly for Canadian firms, not only giving them access to cost-effective software development, but opening the door to the Chinese market.”

China, CATA said, is the sixth largest ICT market in the world, valued at US$118 billion. Small Canadian firms like Casero Inc., want to tap into that part of the world, and were part of a recent CATA delegation to China.

“We’re constantly looking for additional markets,” said Arif Hirani, sales director for Casero. “Obviously, China is one of the largest.”

Casero recently developed a line of new broadband products, he said, and is constantly on the search for new places to sell.

“As a result of the conference, we have opportunities in the Asian marketplace, not just China specifically, but Singapore, Hong Kong, Philippines . . . the whole Asian marketplace.”

Reid said the departure of a certain number of Canadian R&D jobs to China and elsewhere is “inevitable,” but admitted that Canada must go about it correctly.

“As a business model, you have to continually look at what makes you most successful,” he said. “. . . otherwise, your competitors will. If they can lower product prices by 10 per cent, then you price yourself out of the market.

“We don’t want to lose our R&D excellence here. But at the same time, we want to make sure the companies commercialize and sell (their) products as much as possible. If you don’t sell your products, R&D isn’t going to do you any good.”

Paul Swinwood, president and CEO of the Information and Communications Technology Council, agreed.

“This is not a new approach to things, this is just the continuation of the globalization economy, because the knowledge economy is everywhere where there is knowledge,” he said.

Swinwood said he remembered IT R&D outsourcing occurring as far back as the 1960s. He said outsourcing can’t be halted, and pointed to similar deals in place with India, with Russia likely the next one.

However, the council said last fall that Canada will need 89,000 more IT workers over the next three to five years. With only 3,000 IT graduates yearly, demand for R&D skills far exceeds the potential loss.

Canada needs to react, Swinwood said, by implementing what he termed a national recognition program in post-secondary education, for “consistency, from coast to coast . . . so that somebody with a degree at the ‘University College of the North Atlantic’ will have it recognized in Toronto.

“Canada is one of the only countries in the world without a national education focus,” he said. “(Education) is separated by province, then it’s delegated to individual universities. What we need to have is a national set of learning outcomes.

“And that’s what my council is trying to put in place,” he said, adding that it has already implement one in some high schools.

There will always be IT jobs that remain local, he continued.

“The number of R&D jobs is just exploding. While some of the jobs may go off to India and China, there will still be the business jobs, there will still be the local R&D jobs . . . Your help desk may go to China. But the people who run your network are local. The guy who comes to plug your modem back in will never be outsourced.

“You can’t open the borders on one hand, and close them on the other,” Reid added.

Hirani didn’t see his company turning to Chinese R&D any time soon, but didn’t discount the notion either.

“We’re constantly researching and developing new products,” he said. “My development team is always looking at new areas. But currently, we’re doing the majority of our R&D in Toronto.”

— Ottawa Business Journal

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