Canadian businesses under-investing in technology says report

Canadian businesses have been under-investing in their technology infrastructure, and that’s one reason why Canada’s prosperity relative to the U.S. has declined in the past 20 years, says a recent report.

Titled Realizing Canada’s Prosperity Potential, the report by the Institute for Competitiveness & Prosperity was released last month. The Institute is a non-profit organization dedicated to studying Ontario’s economic issues.

“Canada is the second most prosperous country in the world of any meaningful size — over 10 million people — after the United States,” Roger Martin, Institute chairman and dean of University of Toronto’s Rotman School of Business told a gathering of journalists and Microsoft Corp. customers at Microsoft Canada Co.’s Heroes of Innovation event in Toronto yesterday.

Martin said Canada’s prosperity gap with the U.S. exists because Canadians under-invest in the country’s future prosperity.

For example, said Martin, in Canada – especially in regulated industries – competition isn’t as stiff as in the U.S. As a result, Canadian companies are less motivated to keep pace with technological innovations, he said.

According to the report, the private sector accounts for 80 per cent of all capital investments, including hardware, software and other machinery. Between 1991 and 2003, private Canadian companies spent, on average, 13.1 per cent less than their American counterparts on capital.

This effect has been detrimental to the economy because capital investments enable workers to be more productive, which increases prosperity, the report said. If Canadian capital investment had stayed on par with the U.S., Canada’s gross domestic product (GDP) would be $400 more per capita.

In the public sector, capital investments in Canada match those of the U.S. public sector. “Canadian companies should keep pace with world leaders in their industry, even if they are not in direct competition with them,” Martin said.

But John Larsen, CIO at Stolt Sea Farm Inc., a Norwegian company with its Canadian headquarters in Toronto, doesn’t necessarily agree that companies need to stay on the bleeding edge of technology.

“In my mind innovation is doing the best with what you have,” Larsen said. He said Stolt’s might not necessarily be on the bleeding edge of technology but its Microsoft Navision ERP platform lets the firm keep track of its clients easily and stay more competitive.

Ninety-per cent of Stolt’s business comes from selling farmed Atlantic Salmon, Larsen said. However, Salmon is a low margin commodity so Stolt’s can’t simply compete on price. Where the company can compete, he said, is by responding to customer demands that Salmon be of the same size and quality throughout the year.

Larsen said Stolt’s uses Windows Terminal Server-based thin client infrastructure, which lets it operate with only 13 IT staffers. In addition, he said the firm only spends one per cent of its revenue on IT. All these factors help it better serve the industry, he said.

With thin clients, Larsen said he can visit the parent company’s head office in Norway and access all his applications from Toronto from a thin client.

John Kemp, director of information technology services at Alliance Atlantis Communications Inc.’s Canadian head office in Toronto believes technology is definitely a way firms can differentiate themselves from competitors.

“Because we’re a global company, the ability to communicate across three continents on a common platform is a good thing,” he said. “We’re heavily dedicated to data; we have lots of images go over out network. We needed a quick way to deliver technology and Windows allows that.” Alliance Atlantis is almost exclusively a Microsoft shop except, Kemp said.

“The Wintel platform is cheaper than doing it on Unix,” he said.

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