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Ottawa’s tech sectors get back on track

Investment surge, employer demand signal strong growth.

Mike Levin
Business Edge
August 4, 2005

Gary Davis can size up the unemployed technology-sector workers who stream through his office in a few seconds.

“I can tell by the tone of their eyes whether they’ve been out of work for weeks or years. It can be overwhelming, but recently the stares haven’t been as bad,” says the director of the non-profit Ottawa Talent Initiative’s (OTI) action centre, a grassroots networking and employment-counselling operation.

Started in September 2004 and staffed by unemployed workers, OTI is the first, and hopefully last, stop for many of those hit by the downturn in the high-tech industry that began more than five years ago.

Since it opened its doors in the heart of Kanata’s technology district, the centre has provided free counselling to about 1,500 people. About 10 per cent of them have also used the facilities to find work.

“Things are definitely changing. In November, there were very few interviews; now almost everyone is getting them. Requests from employers are coming right across the board, a very positive sign for the whole industry,” Davis says while standing beside OTI’s Wall of Glory, which has a paper gold star for each newly employed worker.

“We’re seeing senior sales people being offered jobs for the first time in four years,” Harmon says. “This tells me that new investment is confident of sales.”

At the height of the tech boom in early 2000, there were about 79,000 workers employed at 1,100 Ottawa companies. About 15,000 of those workers lost their jobs.

There has been a big turnaround this year, however, and in late June there were 71,000 workers, according to the Ottawa Centre for Research and Innovation (OCRI).

The employment statistics are reassuring, but one number in particular excites OCRI president and CEO Jeffrey Dale – the number of companies has risen to 1,700.

“It’s not the big companies hiring as much as the small and medium-sized ones, the ones started by those who lost their jobs and boot-strapped their way to growth,” Dale says. “The rebound we’re in is because these companies are product-ready and revenues are driving employment now.

“Actually, there’s lots of job growth in all kinds of companies,” he says. “It says a lot about the entrepreneurial talent we have in this city.”

Dale sees 10 to 15 per cent of new jobs coming in software development and sales, and about 10 per cent in wireless technology companies. He adds that photonics, which attracts about half of venture capital (VC) funds, will be the employment driver for the remainder of the year.

Venture capital funds also are surging back into Ottawa and while they are spread across all tech sectors, there is renewed focus on communications applications.

In the first six months of 2005, Ottawa attracted about $250 million, which analysts believe is about 25 per cent of Canada’s total.

“A wave is starting to happen because there is lots of traffic originating at the edge of telecom convergence, which is Ottawa’s main technological strength,” says Pat DiPietro, managing general partner of Toronto-based venture capital firm VenGrowth.

“What I’m really excited about is all the companies that started in 2001 that are now beginning to see returns. This year they need scaling money,” he says.

DiPietro uses Meriton Networks – which has this year’s biggest single investment, a third round of $64.5 million – as an example.

The company’s optical telecom solutions have found a huge customer in British Telecom, which has made a $22-billion commitment to Internet-protocol-enabled networks in Europe.

Other IP applications such as gaming, wireless communications and security also are gaining traction.

The big carriers are again buying applications for their networks and employment growth is coming at companies that can fill those slots.

Two VenGrowth-backed companies – SiGe Semiconductor (WiFi products) and Liquid Computing (scalable servers) – have seen large increases in sales and have quadrupled staff during the past four months: SiGe to 100 and Liquid to 50.

“Generally, two in 10 VC-funded companies make it big, but the talent level is so high here that the number could well go higher,” DiPietro says.

Tropic Networks also has received VC funding, with a fourth round of $41.5 million to help push its high-bandwidth, optical-network products.

“This metro-optical market is very hot right now and the investment figures you’re seeing speak volumes about the kind of environment we have in Ottawa for service providers and interesting solutions,” says Kym Ashton, Tropic’s marketing manager.

At LaBarge Weinstein LLP, partner and tech specialist Deborah Weinstein sees current employment figures as a small spike and says that it is still early days for many companies, despite the inflow of investment.

“Sustainability can only happen if companies can continue to ramp up their activities above the $2 million to $20 million level we’re seeing now. Unless you have an environment with several $50-million to $100-million companies, you’ll never attract the best people who can scale international sales,” she says.

“It will be another two or three years before we know whether this current crop can continue to grow,” adds Weinstein, who says that some of the recent job growth has come from multinationals outsourcing some of their research and development to Ottawa firms, highlighting the transient, and therefore unpredictable, nature of technology employment.

The OCRI’s Dale, however, is so confident of Ottawa’s skillsets that he is predicting jobs levels will reach 100,000 by 2008, which likely means importing bodies.

“Immigration into Ottawa helped drive original growth, but so many left during the bust. We need to get some of them back from the U.S., Europe and Asia. I can see it starting to happen, and they’re returning because of (the investment rebound) and the city’s lifestyle,” he says.

Davis also believes renewed investment is too good an opportunity to let slip through the fingers of OTI’s clients. He spends much of his time networking with tech firms, helping bridge the gap, however temporary, between current employee demand and supply.

“We say to companies, ‘tell us what you need and we’ll get it to you,’ even if it means going outside Ottawa. We’ve always been a one-shot initiative, to help the 1,700-plus companies here be as competitive as they can,” he says.