Companies comprising the technology cluster in the Ottawa region can look forward to a very promising future in the next few years but entrepreneurs have to look beyond the U.S. market to achieve greater growth.
The region contains the essential ingredients for success but capitalization and support models also need to undergo fundamental changes to ensure Canadian achievers do not become takeover targets of larger foreign firms, according to technology observers.
The depth of the talent pool and technology network in the region points, towards “growth and a bright future”, said David Wolfe, a professor at the University of Toronto who specializes in technology clusters.
Technology cluster is a term used to describe a significant concentration of firms that have grown around a nucleus of research and development facilities, suppliers and capital providers. Clusters are ideal environments for networking, investment and industrial development.
There are no less than 60 Ottawa-based tech companies that are involved in convergent technologies said Jeffrey Dale, president and CEO for the Ottawa Centre for Research and Innovation (OCRI). The OCRI is a non-profit organization that works to develop knowledge-based industries and institution in the region.
There are also 125 firms in the region that are working on clean technology initiatives, he said .
Ottawa tech cluster firms, however, appear to be ideal takeover targets.
“When Canadian companies get to a reasonable and profitable size, that’s when they become merger targets for bigger firms,” said Wolfe who spoke recently on the radio program OCRIRadio.com.
The most notable takeover bid in the region was the recent purchase by IBM of Ottawa-based Cognos, one of the last major independent makers on business intelligence software, said Nathan Rudyk, president of Market2world Communications Inc., and OCRIRadio host.
But as past experiences have shown, Rudyk said, “there is nothing to be afraid of.” He said he was confident that Ottawa’s tech clusters can adapt to the situation.
For instance in the technology downturn during the late 1980s and early 1990s, tech firms in both Ottawa and Waterloo were hard hit.
“However, while Waterloo is wondering when the next phase of growth will occur in the region, Ottawa actually saw the emergence of a large number of firms in the last five years.”
He said professionals who left failing tech firms became part of the talent pool that spawned growth in the cluster.
When large companies acquire smaller firms, they either wipe out the operation and integrate everything back to the home base or recognize the acquired talent and retain them. Wolfe said the latter will probably be the case in the Cognos purchase.
Rudyk said capitalization will be pivotal for the growth of Ottawa-based tech firms.
The Ontario government has recently pledged about $165 million aid tech companies such as those in the region, he said.
“The initiative is fostering the growth but there is still room to expand government support,” said Wolfe.
He said current capitalization models should be altered to provide emerging companies with stronger muscles to resist takeover action from larger firms.
On the other hand, CEOs of Canadian companies must increase efforts to acquire R & D talent and look outward to encourage growth.
“There’s a tendency among local companies to focus on the US market. There’s huge evidence that this attitude closes the eyes to opportunities in the Asia and European markets,” according to the U of T professor.