Canada's Digital Economy: Saskatchewan Speaks Up

Submitted by Saskatchewan Advanced Technology Association 2010-07-12 11:00:05 EDT

Theme(s): Digital Infrastructure, Growing the ICT Industry, Innovation Using Digital Technologies

Executive Summary

Supporting the Growth of the ICT Industry

Ranking highest in the poll of the importance of the five themes in Saskatchewan was what needs to be done to support growth of the ICT industry. Though some respondents felt that if we 'did the other four themes right, growth would happen naturally,' many others felt that in order for gains to be made in terms of Canada's competitive capacity in the global digital economy, Canada must invest in ICT at least up to par with other developed countries, and if it wants to lead, even more investment must be made in the ICT industry to innovate, and especially to improve the industry's capacity to move products and services to market.

Areas identified for priority action include a) remedy the administration of the CRA SRED program, particularly to recognize innovation and advancements in commercialization and manufacturing; b) take better advantage of the skills and innovative capacity within the ICT SME community for public sector productivity and quality initiatives; and c) using financial and tax incentives, encourage initiatives that improve real productivity and competitiveness in all sectors – most such initiatives would involve the adoption of more advanced ICT.

Improving Capacity to Innovate

Advanced technology infiltrates modern society and life on all levels, making the ICT/AT industry both the foundation-layer and the expansion/growth key to innovation. The innovation cycle involves ICT/AT creating enabling technologies that respond to specific marketplace needs, which then in turn creates entire new industries, who then require enabling technologies to grow (Ex: geomatics). This cycle needs to be much better understood by government if it is to support innovation in Canada's digital economic future.

Aggressively encourage initiatives which bring together ICT/AT professionals, the research/university community, other industries and governments to discuss the needs of users – expanded collaborations, focused on productivity, will fuel the innovation cycle.

Establishing World-Class Infrastructure

A variety of things need to occur for Canada to make progress in this area, chief among them: telecom services must be opened up and made more affordable; development of compelling content needs to be encouraged; access to bandwidth needs to increase; more 'dark fibre' must be made available; the 'digital divide' between urban and rural areas must be closed; speed and reliability of networks must be improved; and government, industry and education/research need to break down silo walls and collaborate.

High-performance network infrastructure is a critical and strategic requirement in today's world economy. Unfortunately, according to numerous international studies, Canada's position is slipping in key network areas – low capacity, lower access speeds, much higher costs, less technology diversity, slow regulatory processes and a widening digital divide. Given the current concentration of control of network assets among a very few organizations (with monopolistic tendencies), governments should rapidly look for creative alternatives — financial, regulatory, competitive — in order to reverse this decline and position Canada as a leader in deployed network capacity and performance.

Contact:

Laurel Reich, Projects Manager, SATA
Phone: 306.244.3889
Email: lreich@sata.ca
Web: www.sata.ca

Submission

Our Process…

Who is SATA?

The Saskatchewan Advanced Technology Association (SATA) is Saskatchewan's industry association for ICT and advanced technology. We believe so strongly in this opportunity for our industry to comment on something as fundamental to Canada's economic success as a national strategy for the Digital Economy that we undertook the following "rapid response" activities:

• Developed a web-based poll to determine the broad-brush priorities of the industry regarding the five themes and to gather initial comments;
• Held two focus group sessions (in Saskatoon and Regina) on June 16 and 17 to engage industry and government in discussion on the five themes;
• Conducted numerous individual phone interviews which allowed people to discuss their concerns and ideas in depth (average interview time was one hour);
• Collected e-mail comments from those who wanted to participate but were unable to either attend the focus group sessions or do phone interviews in the short timeframe available to meet the deadline for submission.

Though submitted separately, Saskatchewan's submission along with Manitoba's ICTAM and Alberta's ICT Council represents a significant ICT sector in the Prairie Region, and clearly acknowledges the need for a national strategy that benefits all.

It is also important to note that unrelated to this exercise, other market research and strategic planning exercises are underway in Saskatchewan's ICT/AT industry, which are listed in Appendix 1 - Other Saskatchewan ICT/AT Planning Exercises.

The Poll

We asked respondents to react to the five themes in terms of priority to Saskatchewan industry. The responses by ranking score showed that the themes seen to be of first importance were (1) Supporting the Growth of the ICT Industry, (2) Improving the Capacity to Innovate and (3) Establishing a World-class Digital Infrastructure. (See Appendix 2 - Poll Results).

The Questions

We asked two basic questions of each of the theme areas as we delved into discussions by focus groups and phone interviews:

1. How does this theme exhibit itself in your business/industry? What are the key challenges in this area?
2. How can we strategically improve in this area? Who needs to do it (federal government, other governments, industry, education/research, or a combination?)

Responding to the Themes…

Supporting Growth of ICT Industry

Ranking highest in the poll of the importance of the five themes in Saskatchewan was what needs to be done to support growth of the ICT industry. Though some respondents felt that if we ―did the other four themes right, growth would happen naturally, many others felt that in order for gains to be made in terms of Canada's competitive capacity in the global digital economy, Canada must invest in ICT at least up to par with other developed countries, and if it wants to lead, even more support must be given to the ICT industry to innovate, and improve the industry's capacity to bring these products and services to their respective markets.

Some specific ideas for how this might be done include:

• Vastly improving the spirit and overall administration of existing federal programs like Revenue Canada's Scientific Research & Experimental Development (SRED) tax credit program. This was defined in various ways: reducing complexity of the application process; shortening timeframes for delivery of funds; expanding back-dating from 18 months to 24-36 months at least; ability to access funds earlier in the process rather than at the end, and overall, more dollars into these funds – an investment on Canada's part that would bring it in line with the expenditures in R&D of other G8 countries. Industry needs better awareness of and support/training in how to access and apply for SRED and other similar programs. We need the money in advance, not after, as we require capital to get the work done;
• Expand SRED's focus into pre-commercialization, and review their definition of "commercialization". Industry realizes the philosophical concerns of government regarding unfair competition in light of international trade agreements (especially where US companies are concerned) but notes that, in reality, Americans seem not to share these concerns (as evidenced by US agencies directly funding business and commercialization through Small Business Innovation Research grants and National Institute of Standards and Technology and the National Science Foundation). In any case, pre-commercialization (which often looks like "development") should be included and accepted to assist innovators in getting through the "Valley of Death" stage of new product/service development to market.

  "To our industry…it [the free trade agreement] seems to be an excuse for denying a claim, rather than a real contravening issue."

  – Michael Leydon, Vecima Networks, Saskatoon

  "There's a huge negative aura around the administration of the program [SRED]. Many firms perceive it as being very complex and administratively burdensome; have differing interpretations of what should be included in the definition and scope of 'R&D'; and require better support/training in how to access and apply for SRED and other similar programs."

  – Anne Ballantyne, National Research Council, Saskatoon

  "We need a vision on a national level to support ICT."

  – Mike Dumelie, Oxford Libero Consulting, Regina

• Consider resurrecting the Technology Partnerships Canada-Industrial Research Assistance Program. As an instrument to grow companies, it was very useful, especially for scale-up and for bringing projects to commercialization. As a repayable instrument, it was very good in Saskatchewan and Manitoba, and we had an extraordinarily high repayment rate.
• Develop a program for marketing/promotion projects to educate new consumers in new technologies. While there's money for other phases of the innovation cycle, there seems to be a dearth of access to funds to help educate the marketplace about new technologies. When new technologies are introduced, often large-scale change management programs need to be undertaken to properly show the benefits of the new technology before adaptation will take place among consumers. IRAP could consider such a program.

  "We're developing augmented reality tools for promotion of content like films, books, television. People in L.A. and N.Y. get it. People here don't get it. There really isn't an easy way to access promotion dollars for marketing/sales. Even a refundable grant program would be great…"

  – Rob Bryanton, Talking Dog Studios, Regina

• Going forward, a policy consideration may be that any public sector project contemplated for development over a threshold cumulative amount MUST involve a Canadian ICT industry-sector commercialization partner. Government departments (federal and provincial) in Canada have been the largest spenders on system development. Many projects have been or continue to be colossal expenditures with very little subsequent direct or spin-off benefits (i.e., federal gun control registry, Saskatchewan Health Information Network).
• Government needs to be an early-adopter of innovative technologies, and needs to be a model user. Being a model user means streamlining procurement processes, developing long-term orders where there is room for incremental collaborative innovation and development; reduce amount of internal R&D and use industry experts for that work.

  "Innovation is fostered whenever a company has a stable backlog of orders for their products or services. As a result, changes to Saskatchewan public procurement policies can foster innovation. One only has to look at what happened in World War II when all the major aircraft and automotive companies enhanced their products and processes as they filled large and long term orders. Orders breed innovation, and governments and public sector institutions are the biggest purchasers…"

  – Tim Haubrich, AECOM, Saskatoon

• Government needs to assist in "incentivising" the venture capital sector to invest more in ICT/AT. The federal government needs to make investment in ICT more attractive to venture capitalists and angel investors. Saskatchewan's industry is mostly small-medium sized enterprises (SMEs), and we need to connect more industry leaders and innovators with the venture capital community.

  Government should consider:

  • Tax credits or other risk-reduction strategies, and
  • Funding and encouraging industry-university/research-funder events (such as the annual Regina ICT Forum) that create networking and business-making opportunities. These should include ensuring that CEOs and other decision-makers of major ICT/AT companies attend these events, so that opportunity isn't diluted by representation from companies without deal-making authority;
• Increase the availability of skilled workers in the ICT/AT sector. Enrolments in Canadian universities in Computing Sciences and other advanced technology related majors have been declining since the "dot com bust" in the early '90s. High-tech companies now face a serious impediment to innovation because of the lack of any significant skilled work force pool from which to draw. Out-sourcing to countries like India and China is a current in-vogue short-term solution, but we believe it's not to Canada's longer-term strategic benefit. A more sustainable growth approach should include creating a healthy cycle inside Canada of energizing the job market in ICT/AT, which creates incentives for students to consider the career path and enrol in the programs that will make them skilled ICT workers.

  Government should consider:

  • offering low-interest loans for students who go into ICT programs;
  • marketing/promotion grants programs for industry associations to target youth and raise awareness about the opportunities in ICT/AT.
  • recruiting and encouraging foreign workers skilled in ICT/AT to immigrate, and make it easier for them to do so.

  "Innovation will only ever be accomplished effectively by smart, hardworking individuals…Many immigrants bring with them needed IT skills. This has always been a limiting factor for us here in Prince Albert. So to combat this we are on the verge of outsourcing to India. Would it not be better to in-source? Well, that may be another story, but certainly from a Canadian perspective, a great alternative.

  The sense of entitlement that we in Canada are currently growing needs to diminish. Canada was built on immigrants and on their innovation. Growing the initiative in our country is, I believe, important. This can be one important step towards that goal.

  In summary, IT is important to the innovative fabric of Canada. And, since people create such innovation, then fostering the spirit of innovation and entrepreneurship in concert with a strong work ethic is the recipe to get there."

  – Craig Fisher, Solid Innovation Inc., Prince Albert

This discussion is of course linked to the "Building Digital Skills for Tomorrow" theme, but we see it as being a major concern in this theme area as well.

Improving Capacity to Innovate

One of the key philosophical questions around which this discussion revolved was internal: Is ICT/AT an "enabling" industry, or an industry unto itself? Leaving the political definitions and implications aside (how the industry is viewed versus how it views itself), it seems satisfactory to look at the cycle of innovation as the answer to the question.

What drives innovation? Frequently, it comes from a need expressed; by a demand for an improved product, process or service. It comes from questions like "Imagine what we could do if we could…" and "I wish we had something that would do this…" These questions come from outside the industry. If industry is hired then to create solutions with creativity, imagination, skills, knowledge and experience, is it enabling other industries? Well, yes, of course. But then what happens when those innovations are brought to the marketplace? They aren't just answers for the one organization or individual who happened to ask the question. They become complex sets of technologies, processes and services that turn into industries unto themselves. (Geomatics is a good example of an industry that was created out of a technology need expressed by the oil and gas industry.)

The most logical answer to the question, then, is that ICT/AT is both an enabler, providing infrastructure support to the rest of society on many levels; and a creator of new industries all unto themselves which occur in response to expressed needs, but then go on to continue innovating in new arenas.

In other words, advanced technology infiltrates modern society and life on all levels, and this needs to be much better understood by government if it is to support innovation in Canada's digital economic future.

Governments should actively encourage/facilitate sector-specific Innovation Forums that target SMEs as well as the research/university community and that encourage the presence of real decision makers in large industry players and require it of crowns, and large-user government departments and then actively support subsequent collaborations.

Some suggestions for how government could do this include:

• Philosophically, build the highway (infrastructure) and create the financing and then step out of the way and let business get working;

  "Make all IT firms with 5+ employees eligible investments for the new Tax Free Savings Accounts. A small IT company that qualifies for SRED Tax program could raise money from people allowing them to use their tax free accounts, therefore protecting their returns from tax and making the investment much more attractive. This allows friends and family to invest with a much more positive approach, knowing that any profits would be allowed to grow tax free, offsetting in part the risk involved in investing in smaller firms. This concept would allow small IT companies participating in SRED to qualify as eligible investments for investors, without having to be publicly traded, or use a Venture Capital firm as a middle man, etc."

  – Dave Reid, Terminal Systems, Saskatoon

  "Take the focus away from simply creating jobs and put the focus on driving innovation. If we are focused on innovation the jobs will create themselves. What do I mean? Innovation is not continually handing projects to the old boys' network. It's engaging new and exciting companies that can easily provide as much value and innovation as large companies…"

  – Tim Peterson, Non-Linear Creations, Inc., Regina

• Practically, open up provincial telecom service options for more competition (competition drives innovation);
• Legislate the requirement that creators/innovators retain intellectual property (IP) rights;
• Ensure that policy and programming development is supported by industry professionals who act as advisors to bureaucrats;
• Anything the federal government builds should be in the public domain; internal technology development is not 'proprietary' when the people have funded its development;
• Government departments and Crown corporations should be required to work with industry partners in technology development, so that industry can then commercialize the products or processes and not have them sit on the shelf;

  "Government needs to hire less and engage the outsource community more. It may seem in self-interest coming from a consultant but I know of dozens of companies employing between 25 and 250 people with huge amounts of talent and no opportunities to provide their vast expertise with Government primarily because of a lack of openness in Government. Waiting for RFPs on MERX is not a way to engage the outsource community."

  – Tim Peterson, Nonlinear Creations Inc, Regina

• Focus should be visionary — on setting goals for next-generation infrastructure; not on the current status quo;
• Enable more collaboration between large and small; make it 'safe' for big and small business to work together; and help small business by giving big business incentive to work on innovation with smaller specialized pockets of expertise;

  "The innovation environment in the region must be addressed. That is what will provide the region with a competitive environment and advantage. The other aspects include: early and late stage funding for start-ups; good tech transfer capabilities and networks; supportive government policies; executive mentoring; incubation capabilities and so forth."

  – Glen Schuler, Managing Director, University of Saskatchewan Industry Liaison Office

  "Government should adopt procurement policies that foster the collaboration between global players and small and medium sized companies…"

  – Nicole Martel, Interlogiq, Quebec

• Improve the Canada Foundation for Innovation's Centres of Excellence program to make it easier for industry in Canada to participate.
• Re-think and re-frame the mind-set in the public sector that deflates innovation: the concept that (for example, in health care), we can't cut costs. Costs can be cut! Put an entrepreneur's mind to how it can be done; get technological innovators on the job…allow the discussion; do not continue to allow sacred cows to exist at the expense of innovation that the private sector could create with government in these huge public areas like the Crowns, health care and education.

  "We need all three to work together. I don't see government viewing the private sector industry as a partner in the economy. My feeling is (on all levels) that governments are organizations that feel they have to put up obstructive/protective processes so they don't get 'raped and pillaged' by the private sector. Consumers don't see it that way – they see us as service-providers…"

  – Rene Carpentier, Paradigm Consulting, Regina

Government should consider:

• Creating an ongoing major mechanism for collaboration, like an annual Procurement Day or Public Sector Innovation conference, where Crowns, Health Care, Education and others identify their list of issues and challenges, and put their problems and needs out there as available for solution-generation by industry. (The Saskatchewan Mining Association had a day like this; it was over-subscribed and very successful.)
• The Department of National Defence has done excellent days like this. Could they be done more often, and involve more sectors?
• Such an initiative could be much more effective than attempting to locate Industrial Regional Benefits (IRBs).

Establishing World-Class Infrastructure

Development of and access to a "world-class" network infrastructure should be a national strategic priority. Virtually every OECD country has realized the importance of high-capacity, reliable networks and has undertaken serious initiatives to put these in place. Canada lags.

The telecommunications environment in Canada is dominated by a small number of very large carriers on one hand and by very large government bureaucracies on the other. Collectively, these create inertia where innovation, particularly rapid innovation, is increasingly difficult. The challenges associated with the relatively high cost of network services in Canada, as well as Canada's famous "digital divide" are directly attributable to the interactions between large carriers and large government departments.

Canada needs initiatives strongly supportive of network neutrality and initiatives which will free up substantial amounts of spectrum for rapidly emerging wireless services. The wireless industry is the most dynamic and technologically innovative area in the ICT sector worldwide today. The government can take steps to position Canada as a strong player in markets for wireless devices and services. In particular, the government must insure that the requirement for R&D (2% of adjusted gross revenues) remains as a condition for the ownership of spectrum licenses.

It's clear that in order to bring the Canadian infrastructure to "world class" level several key things must happen.

First, telecom services like Voice Over Internet Protocol (VOIP), T1, and wireless networking must be opened up and made more affordable. It's currently too difficult to deploy new products because of the expense.

Second, development of compelling content (applications, etc.) need to be encouraged, as people want and will pay for and use new technologies, and this revenue can pay for the network.

Third, access to bandwidth is critical for Canada's competitiveness in the global digital economy, and we are lagging. For example, there is no infrastructure that allows sending high-quality video and audio in real time and how this plays out in loss of business opportunity is described dramatically in this recent Saskatchewan story:

Fourth, the "digital divide" (rural versus urban access to speed, broadband, etc.) needs to be closed up. There are solutions available for broadband spectrum use, and they involve making this "freer" and less controlled by the major telcos. Government should work with industry to build more towers in more remote areas to serve Canada's far-flung populations and help build economic development in those areas by allowing them to connect with and do business with the rest of the world.

Fifth, government must act quickly and speak more broadly to others in the industry regarding access to and use of "dark fibre." Government could enact policies which would encourage the installation and activation of high bandwidth fibre and wireless facilities by non-traditional parties, such as cities, municipalities, railways, power utilities, first nations and other groups or agencies. The existence of competition is one mechanism which may reduce the current very high cost of services from the existing telco/cable oligopoly.

In the past, Saskatchewan had complete immunity from CRTC regulation. Slowly it has come under more regulation. It's important that the case be made that a robust competitive environment for communications/Net will foster innovation in ICT and other areas. There should be no special allowances that give any telco an advantage.

What this means is that if you want competition in Saskatchewan, companies either need to create their own infrastructure or play by SaskTel's rules. Saskatchewan is the only place you can't buy access to dark fibre from the incumbent telco. The CRTC has imposed a requirement on incumbent telcos to make this access available everywhere else, but allowed SaskTel an exception. We believe this was an unfortunate decision.

There are specific examples of economic development opportunity that evaporated because of lack of adequate competition — especially large companies who wanted double/triple redundancy and access to dark fibre.

Sixth, reliability and speed of the network are critical to business success, and to building of the digital economy. This is truly a "backbone" issue; we are daily as a society becoming more and more reliant on network-based systems; not just as nice-to-do, but as a critical component of our business' functionality. Here's one Saskatchewan example from the aerospace industry:

Finally, government needs to create an atmosphere of collaboration among the current "silos" of government, industry and education/research sectors. Modifying procurement practices so they're done in a way that's more industry-friendly and built on a platform of cooperation rather confrontation would see positive results.

Appendix 1 – Other Current Saskatchewan ICT/AT Planning Exercises

Saskatchewan ICT Primary Market Research Report
May 4, 2010
http://www.sata.ca/file/SaskatchewanICTPrimaryMarketResearchFINAL2010.pdf

SATA Industry Development Goals Survey
May 5, 2010
http://www.sata.ca/page.php?page_id=61

Appendix 2: SATA Theme Poll Results

SATA Theme Poll Results

Appendix 3: Some Additional Comments from Participants

Appendix 4: A Few ICT Innovations from Saskatchewan

First Automated Teller Machines (ATMs) in the world.

• first ATM in the world was set up in Saskatchewan in 1977 by the Saskatchewan Credit Unions based on technology developed by Co-operators Data Services Ltd.
• first Master Card payment card introduced in 1982
• first debit card piloted in 1985

Startco Engineering is making it easier for mining and petroleum companies to keep their equipment running. Develops equipment to detect electrical failures and ground faults, and protects equipment from damage. www.startco.ca

Ground Effects Environmental makes it easier to clean up environmental spills. Ground Effects has developed more than 70 ground-breaking technologies to clean up soil, air and ground water contamination. www.groundeffects.org

A Saskatchewan interactive technology company, zu.com communications, made it easier to find the nearest Tim Hortons. Zu designed and built an iPhone application using built in geo-location. www.zu.com

The Petroleum Technology Research Centre improves CO² reduction & storage in Saskatchewan. This project injects CO² into oil well reservoirs to interact with the heavy oil, increasing the amount produced. The remaining CO² is then trapped in the reservoir. www.ptrc.ca

I-Tracks holds majority market share in North American market research technology. Itracks is a world-leading expert in online focus groups and the patent holder for qualitative applications. The sophisticated online suite of qualitative, quantitative, community and panel services are easy to use and come equipped with a wide range of multi-media capabilities. www.itracks.com

SED Systems is a world leader in satellite systems. SED Systems - built the ground control stations and communications technology for the worldwide Inmarsat satellite system and well as for XM Satellite Radio. www.sedsystems.ca

Vecima Networks bridges the last mile. Vecima Networks Inc. - provides the radio frequency modules for more than 40% of the world's DOCSIS cable-based internet services. Vecima Networks Inc. developed the solutions to deliver services to a converging worldwide broadband market, including what is commonly known as "triple play" (voice, video and data) and "quadruple play" (voice, video, data and wireless) services. www.vecima.com

International Road Dynamics keep traffic moving. IRD - provides highly automated weigh-in-motion technology and management systems for many of North America's busiest highways. www.ird.ca

Solid Innovation automates route accounting. Solid Innovation, located in Prince Albert, develops, markets and sells sales route accounting systems, serving clients all across Canada, the United States, the Caribbean, South America and Cyprus. www.solid-innovation.com and www.RouteAccounting.com.

Tiny Eye uses technology to deliver unique and superior speech therapy. TinyEye Therapy Services is an award winning health innovation company that develops and delivers speech language therapy. In May 2010, they had completed over 20,000 on-line speech therapy sessions with children all over the world and is the world's leader in this area of tele-health. www.tinyeye.com

To learn more about what's being developed by Saskatchewan Advanced Technology Companies, visit www.sata.ca/directory.php

If the following document is not accessible to you, please contact the person below for assistance in obtaining the documents in the appropriate format.

Guylaine Verner
Industry Canada | Industrie Canada
300 Slater Street, Ottawa ON K1A 0C8 | 300, rue Slater, Ottawa ON K1A 0C8
Guylaine.Verner@ic.gc.ca
Telephone | Téléphone 613-990-6456
Facsimile | Télécopieur 613-952-2718
Teletypewriter | Téléimprimeur 1-866-694-8389

This document is better viewed and printed in PDF format:
Canada's Digital Economy: Saskatchewan Speaks Up (PDF, 899 KB)

Suggested URL:
Canada's Digital Economy: Saskatchewan Speaks Up

Information on Downloading a PDF Reader
To access the Portable Document Format (PDF) version you must have a PDF reader installed. If you do not already have such a reader, there are numerous PDF readers available for free download or for purchase on the Internet:

• Adobe Reader
• Foxit Reader
• Xpdf
• eXPert PDF Reader