The ups and ups of the Canadian IT industry

Although few stop to think about the graphics chips that reside in PCs or workstations, Kowk Yuen (K.Y.) Ho has, and it’s made his company, ATI Technologies Inc., a Canadian IT success story.

Founded in 1985, the Thornhill, Ont.-based graphics chips and multimedia company now employs 1,600 people and last year generated more than $1 billion in revenue. According to Mercury Research, a graphics industry market research company, ATI ships more graphics chips for the desktop than any other vendor.

ATI specializes in integrated 3D accelerator chips and boards, and its Rage II, Rage Pro and recently released Rage 128, which features a 128-bit internal path compared to the 64-bits found in earlier chips, are used widely in Macs and PCs

Partly-based on ATI’s recent performance, Ho was named 1998 Entrepreneur of the Year by both Ernst & Young LLP and Canadian Business.

ComputerWorld Canada senior writer Michael MacMillan recently spoke with Ho about the rise of ATI, and Ho’s take on launching and growing an IT business in Canada.

CWC:What is one advantage and disadvantage of being based in Canada?

HO: The whole world thinks about the United States, so getting the recognition becomes a lot more difficult. But that is also our strength. We know we’re behind, so we work harder. And because the industry is smaller, the people usually stay with the company. If the company is doing well, they feel like part of that, not like in the U.S. where they change shop everyday. So people-stability is our strength. Last year our turnover was less than one per cent.

CWC:How has the Canadian IT industry changed since you founded ATI?

HO: At the time that we started, there were only a few IT companies but in the last few years it has definitely changed a lot. A lot of high tech companies actually went public in the last few years, and there are a lot more high tech companies in Toronto and Ottawa right now.

CWC:I’ve heard a criticism that relatively few people in Canada are willing to take a risk on IT companies, that not enough people here understand IT – do you find this to be true?

HO: Canada is a huge (natural) resources country. We have a lot of natural resources to export, so when people invest they are more likely to invest in the resource industry – and IT is a new industry. I do think a lot of [Canadians] are very knowledgeable about IT, but based on taking risk, they are not as aggressive as in the U.S. If you say natural resources, that’s the risk they know how to take.

CWC:Is this changing?

HO: ATI probably raised a lot of people’s eyebrows. Also, in the last few years, many other high tech companies have been coming out and are doing well and making a lot more noise. Personally, I feel very happy — we’ve drawn a lot of people’s attention. Just look at the Toronto Stock Exchange. Before, I think it was very difficult to find any IT companies there, but these days it’s changed. People pay attention to the IT industry now.

CWC:How does Canada’s IT culture differ from that of the U.S., Europe or Asia?

HO: I think they’re more or less quite the same, because no matter where you are the markets are the same. Sure the people (in those countries) are a little more aggressive, and the culture in Canada is a little more conservative, but when you go into the market…you need to respond to the market. Right now, it’s a global business, no matter where you’re located. You need to be flexible and respond quickly, otherwise, you’re out of the game.

CWC:Which competitor do you fear more – well established companies or aggressive start-ups?

HO: Right now we’re moving into competing with the big boys, so we’re competing with (companies like) National Semiconductor (Corp.), because we are not just limited to graphics multimedia chips now, we continue to develop different types of technical competencies in house, and also licensing from outside or acquiring whole companies. So we are expanding our core competency, and then we can evolve different product and market segments.

[ATI is] also doing more interaction, for low cost computing devices. The selling price is low, but ATI revenues will be even higher because of more interaction.

CWC:How do you thrive in a commodity market, supplying chips to hardware vendors who have thinner profit margins than software vendors?

HO: The margins depend on how you respond, because when prices go low your cost (also) reduces, and it doesn’t mean your gross margin goes down. So the market is definitely very competitive, but in the last couple of years we’ve continued improving our gross margins and our profits. And even this fiscal year, we look forward to increasing revenue by 50 per cent.

CWC:How is ATI coping with the so-called skills shortage in Canada?

HO: We don’t feel it difficult to find resources in Canada. Actually, a lot of people like to join ATI, they feel proud to work at ATI. We focus on in-house development, but we also open our eyes to license our technical competency, or acquire a company totally from the outside. So rather than only in Canada, we also have different R&D teams in the U.S., both on the east and west coast.

So we are a Canadian company with offices in Canada, and we are also a global company…because no matter where the office is located, communication won’t be a barrier. Overall, we want to attract the professionals. I don’t think it’s difficult. We can hire people from Canada and the U.S., and we may be hiring some people from outside of North America.

CWC:To what do you credit the growth of ATI?

HO: Mainly because, overall, the (graphics chip) market is growing and we have a very broad product line, and we have very good logistics — we can respond fast. We predict change very well, and then we execute very well, so wherever the opportunity comes, we grab it.

CWC:What’s your advice to new Canadian IT companies?

HO: If you’re facing difficulties or challenges, never give up.