Loyalty, low costs and innovation enabled Canadian technology-based companies to outpace their American counterparts in revenue growth according to a recent survey by financial auditing firm Deloitte & Touche LLP.
Five Canadian companies were among the top ten North American firms that made it this year to the Deloitte Fast 500, an annual ranking of the fastest growing technology, media and telecommunications organizations based on their five-year average revenue growth.
The Canadian firms posted an average 3,876 per cent five-year revenue increase from 2001 to 2005 compared to the 1,927 per cent growth exhibited by U.S. businesses, according to John Ruffolo, national leader for Deloitte’s technology, media and telecommunications practices.
This is the first time, since the program started nine years ago, that Canada had five companies among the top 10.
Furthermore, this year, 56 Canadian companies made it to the top 500 list compared to only 53 in 2005.
“The Canadian companies blew away the competition,” Ruffolo said.
Ruffolo noted the feat was amazing as Canadian businesses had to work with much less venture capital than U.S. firms. “It is testimony to Canadian business success in commercializing their technologies, and their great management teams.”
A key advantage to Canada, Ruffolo pointed out, was lower labour cost. “It’s cheaper to hire in Canada and the labour force is loyal. People don’t jump from one company to another.”
He also cited skilled labour force, attractive tax incentives and healthy research and development environment as reasons for Canada’s lead.
This sentiment was shared by Peter Allen, president and CEO of DragonWave Inc., an Ottawa-based broadband wireless network innovator that ranked seven in the survey.
“In Ottawa, we have an excellent pool of high-tech talent to choose from,” Allen said. “This cluster of skilled people is a definite advantage.”
AIso, investment capital in the U.S. worked for Canadian firms, Ruffolo said. For instance, instead of investing in their own R&D, larger U.S. companies preferred to buy shares in Canadian firms.
“Rather than invest in emerging technology, American firms find it more economical to look to Canadian companies that already have R&D going,” said Ruffolo.
The Deloitte Fast 500 results appeared to run against an earlier assessmentby technology vendors who called on Canadian companies to be more competitive.
American company Occam Networks Inc., a Santa Barbara, Calif.-based broadband product firm topped Deloitte’s Fast 500. Its revenues grew from US$80,000 in 2001 to US$39,238,000 in 2005.
Westport Innovations Inc., a Vancouver-based alternative fuel power technologies firm, came second. It reported revenues of US$34,436,000 in 2005, up by 42,645 per cent from US$80,000 in 2001.
Montreal-headquartered Airborne Entertainment Inc, which develops and packages mobile content, was number four with earnings of US$35,768,000 in 2005, up by 33,328 per cent from 2001 revenues of US$ 107,000.
The two other Canadian firms in the top five were, Angiotech Pharmaceuticals Inc., of Vancouver, B.C., and Imaging Dynamics Company Ltd. of Calgary, Alberta.
Canadian companies, according to Delloite & Touche, have enjoyed a steady increase in average growth from 1,597 per cent in 2004 to 2,195 per cent in 2005 to 3,876 per cent this year.
Telecom firms also topped the ranks of this year’s survey. Four of the top 10 firms were in the telecommunications, communications and networking fields.
Software companies, however, dominated the list as a whole with 36 per cent or 179 companies in the Fast 500.
To corner a market niche, Allen says, a company has to identify a particular problem or issue and provide a solution different from the competition.
For instance, he said DragonWave designs microwave wireless equipment that supports WiFi networks. The company allows clients to sidestep the expensive monthly fees of leased lines by enabling them to a cheap but carrier grade network, ideal for campuses, business parks, hospitals and public safety emergency agencies.
He also suggested that companies with limited funds seek strong strategic partnerships. “You can’t do it alone, you need to find partners that are strong in areas where you need help.”
In the case of DragonWave, the company’s strength was technology development but it needed to outsource the distribution of its product, said Allen.