Download ICT in Ontario

About half of all ICT outputs in Canada
originate in Ontario
30,000
ICT GDP by Province, 2001 and 2002
(Percentage change in brackets)
25,000
(in millions of dollars)
(1.5%)
20,000
15,000
(-2.3%)
10,000
(-1.4%)
(6.1%)
5,000
(0.0%)
(9.0%)
(8.5%)
Territories
British
Columbia
Alberta
2001
Source: Statistics Canada
Praires
2002
Ontario
Quebec
Martime
MEDT’s Approach:
• ICT is a priority sector
• Support for research,
researchers and research
infrastructure
• Commercialization COE’s
• Innovation Infrastructure
• Cluster Networks
• Facilitation and
Partnerships
1
Ministry Priority = Better Workers for Better
Jobs in an Innovative Economy
ICT Industries Employ:
• 56% (over 36,000) of
Percentage of Workers with a University Degree,
2002
40
R&D scientists and
engineers (i.e.
professionals) in
Canadian business.
• 60% of all Masters’
30
degrees (over 4,800)
among R&D
scientists and
engineers.
20
10
0
ICT
Source: Industry Canada, 2002
Total Economy
• 32% of all Ph.D.s
(over 1,300) among
R&D scientists and
engineers.
Source: Industry Canada, 2002
2
Martin Task Force – Innovation contingent
upon increased BERD
Majority of Canada’s largest and most innovative ICT companies
are in Ontario
Top 10 ICT companies in Ontario by level of R&D spending, fiscal year 2003
Company
R&D
Revenue
Research
Expenditures
Intensity
FY2003
FY2003
$000
$000
R&D as % of
Revenue
Nortel Networks Corporation* (e)
$2,788,985 $13,748,715
20.3
Bell Canada
$1,000,000 $16,698,000
6
ATI Technologies Inc.*
$328,959 $1,941,488
16.9
IBM Canada Ltd. (fs)(e)
$322,400 $5,275,000
6.1
Creo Inc.*
$144,768
$810,120
17.9
Zarlink Semiconductor Inc.*
$124,453
$271,611
45.8
Cognos Incorporated*
$109,461
$772,277
14.2
PMC Sierra, Ltd. (fs)
$99,072
$171,442
57.8
Research In Motion Limited*
$91,030
$429,885
21.2
Geac Computer Corporation Limited
$68,256
$623,667
10.9
Industry Sector
Comm/telecom equipment
Telecommunications services
Computer equipment
Software and computer services
Software and computer services
Comm/telecom equipment
Software and computer services
Electronic parts and components
Comm/telecom equipment
Software and computer services
Source: RE$EARCH Infosource Inc. 2004
3
Collectively ICT companies are the
most R&D intensive
R&D Spending by top 100 Canadian R&D spenders, FY 2003
without Nortel
8,000
6,000
6,000
FY2003
FY2002
Source: Research Money Inc., Canada's Top 100 Corporate R&D Spenders List 2004
FY2003
Manufacturing
Services
Automotive
Aerospace
Manufacturing
Services
Automotive
Aerospace
Primary
Goods & Serv
0
Life Sci
0
2,000
Primary
Goods & Serv
2,000
4,000
Life Sci
4,000
ICT
(in $000,000s)
8,000
ICT
(in $000,000s)
R&D Spending by top 100 Canadian R&D spenders, FY 2003
with Nortel
FY2002
Source: Research Money Inc., Canada's Top 100 Corporate R&D Spenders List 2004
• Even without Nortel’s dominating presence in
R&D, ICT is the largest investor in innovation.
4
80% of output and employment now coming from software &
services. However, ICT manufacturing still plays an important role
in creating new knowledge.
Private sector R&D spending in ICT,
2004 intentions
ICT
Manufacturing
68%
ICT
Wholesaling,
Rental and
Leasing
3%
ICT Services
29%
Source: Statistics Canada, special tabulations for Industry Canada
5
ICT is doing more with less - output increases
despite slower growth in employment
Ontario ICT manufacturing vs services
Index (1997 = 100)
220.0
200.0
Growth in ICT mostly in
the services sector.
However, output growing
faster than employment.
Consolidation Threat? How
does this impact Cognos, Open
Text and other leading Ontariobased global software leaders?
180.0
160.0
140.0
120.0
100.0
80.0
1997
1998
ICT mfg emp
1999
2000
ICT serv emp
2001
ICT mfg GDP
2002
2003
ICT serv GDP
Source: Statistics Canada
6
Global Reality: low end of innovation spectrum
• Most routine, low skill manufacturing and services. Majority that don’t
require proximity to markets and have been outsourced.
• Characterized by emergence of new competitors able to offer same
level of service at lower cost
– Tech support, application development, back office operations and routine
assembly can be outsourced and moved offshore.
– China, India, Philippines, Russia and others emerging as key competitors
for jobs and investment in IT services and manufacturing.
• Outsourcing and new global environment can present benefits for
Ontario’s ICT companies
– Improve productivity.
– Ontario ICT companies have been exploiting global growth markets
through “offshore” partnerships.
– Ontario can be an offshoring recipient.
7
Global Reality: centre of innovation spectrum
• Manufacturing and services are more complex but
competition is quickly growing. Some niche markets exist in
convergence areas such as medical devices but market
share is quickly eroding as emerging markets become more
sophisticated.
• Overseas markets are not only competing on cost but are
increasingly competing on quality.
– According to PWC, many of India’s top outsourcing firms have
attained software quality standards ahead of North American
competitors.
– According to a Deloitte Survey 19 per cent of companies identified
improved quality as their main driver for offshoring.
8
Global Reality: high end of innovation spectrum
• Complex, emerging and convergence technologies in niche market
areas, which requires highly skilled & specialized labour and cutting
edge capital inputs.
• Emerging economies are beginning to compete for researchintensive jobs.
– In September 2004, Bill Owens, CEO of Nortel said at an event hosted
by OCRI that Chinese telecom manufacturers, Huawei Technologies
and ZTE are forcing established players like Nortel and Lucent to cut
cost and adopt more flexible product strategies. At the same time,
these companies are becoming increasingly sophisticated in their R&D
capabilities.
• Tech multinationals are investing directly in facilities and R&D on
location in Asia to capture market opportunities. Several well known
examples:
– Nokia plans to develop 40% of its new handsets at a research center in
Beijing.
– WiPro employs 6,500 people in and around Bangalore doing R&D for
others, including nine out of ten of the world’s top telecom
manufacturers.
9
Success of ICT is linked to companies
focusing on high-end technologies
Sectors
Niche Activities
Players – Companies/Research
Institutes
Microelectronics
•Digital imaging equipment
•MEMS
•Semiconductor design
•ATI Technologies
•Dalsa
•Zarlink Semiconductors
•Tundra Semiconductors
Software &
related services
•Business Intelligence
software
•Digital entertainment
•Encryption technology
•Open Text
•Cognos
•Hummingbird
•Alias
•Dreamcatcher Interactive
Telecom
•Wireless
•VOIP
•Nortel
•Research in Motion
•Bell Canada
•Redline Communications
10
The Competitive Environment
Skills
Networks
Government
Universities
Business
Industry –
MNE & SME
Technical
The Innovation System
Attract & Retain
Capital/Investment
Basic
Applied
R&D
Increase Innovation
Reduce Cost
Increase Trade
In a perfect world
Ontario can
compete in a
competitive
environment by
ensuring that its
Innovation
System is
11
working.
What’s Missing?
Skills
Networks
Government
Universities
Business
Technical
Industry –MNE
SMEs
Basic
Applied
R&D
Skills: need the right mix of
business and technical skills.
Ensuring that new grads not
only have the best technical
skills but also business and
management skills as they enter
the workforce.
Networks: ensuring that
Universities, Industry and
Government are able to work
together in achieving their goal.
Also, SMEs need to be included
in the innovation process.
R&D: support for basic
research; enhanced focus on
demand pull.
These three areas need to work
together in order to be effective.
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