Canada reaffirms its status as tech hub

While the weather in Canada is cooling off, the country’s tech industry seems to be heating up – 68 Canadian technology companies ranked in Deloitte & Touche’s Fast 500 list of the quickest growing high-tech businesses on the continent, making Canada the second largest technology hub in North America.

Only the state of California had more companies on the list than Canada at 126, while the New York Tri-State area – which includes New York, New Jersey and Connecticut – combined to contribute 54 companies. It is the first time since Canada’s inclusion on the Fast 500 list six years ago that it beat out the New York Tri-State area, Deloitte & Touche said.

Other “technology hubs” include Virginia and Maryland, which combined came in third with 40 companies, followed by Massachusetts with 35. Washington and Oregon contribute 30, while the remaining 180 came from the other 41 states.

Garry Foster, national director, media and telecommunications for Deloitte & Touche in Toronto, said the big news isn’t that Canada placed second, but that the number of Canadian firms on the list increased by 10 per cent over the past year.

He said there have usually been 50 to 55 Canadian companies on the Fast 500, and this is the first year Canada has exceeded this mark.

“It is showing that Canada is maybe pulling out of the tech bust a little faster than the U.S.,” he said.

Western Canadian companies are also gaining more prominence. While 22 companies came from Ontario, 16 from Quebec and one from New Brunswick, 21 came from British Columbia, and eight from Alberta.

As for why Canada was partially insulated against the effects of the dot-bomb that hit in the late 1990s, Foster explained that Canadian businesses tend to be more conservative than U.S. businesses and as a result, there were less dot-com startups to bust.

One Vancouver-based company, which ranked 64th on the list, agreed.

Blast Radius Inc. provides services such as customer relationship management (CRM), analytics and channel management. It saw 7,065 per cent growth over the past five years, and the company credits its caution about jumping on the dot-com bandwagon for its success.

Brett Turner, executive vice-president of client development of Blast Radius in Toronto, said his company’s success has not been indicative of the climate in the Canadian IT market, but indicated he is noticing a turnaround in the economy. “I think we’ve bucked the trend quite a bit,” he said. “But I think it’s a sign of things to come.”

Turner noted that over the last three years it has been extremely tough with the burst of the dot-com bubble, as well as an economic slowdown across the country due to Canadian-specific events earlier this year, such as Severe Acute Respiratory Syndrome (SARS) and mad cow disease. “Fortunately, we were able to stay the course,” he said.

Deloitte & Touche’s Foster said Canadian companies also tend to build fewer products for the domestic market and more for the international market, contrary to U.S. firms. Foster said on average 70 per cent of revenue achieved by Canadian tech companies derives from exportation of their products.

On the list itself, software companies make up the bulk of the Fast 500 list, but Foster said it is shrinking because companies in that sector are currently merging at a fast rate, causing there to be fewer players in the market. In 2002, software companies made up 48 per cent of Fast 500; in 2003 they made up only 39 per cent.

Internet companies represented 18 per cent, up from 10 per cent in 2002.

A big increase came in the life sciences market where 19 per cent of Fast 500 companies play in that ring – up from 16 per cent in 2002.

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