The 2001 Alberta Technology Report, released late last month found that the province faces ongoing problems relating to skill shortages and is in desperate need of an influx of venture capital dollars.
The report is based on a survey of 191 technology companies in Alberta that was conducted in November and December 2001 by Ernst & Young LLP, Donahue LLP and Ipsos-Reid. The purpose of the study, now in its third year, is to identify trends and challenges that face the IT industry in Alberta.
According to the report, skill shortage and a retention of the labour force in IT continues to pose a problem for the province, a common epidemic faced by the industry at large for decades.
Ian Robinson, the Calgary-based leader of technology, communications and entertainment for Ernst & Young, said three areas need addressing in order to correct the current trend: provide jobs that will foster personal growth and advancement, plus better salaries and equity ownership or incentives.
Robinson said one of the biggest obstacles the province currently faces is attracting customers from outside of the province. While Alberta-based customers made up 54 per cent of the respondents’ total market, Internet-based revenues only represented 23 per cent of total annual sales, a problem that is directly attributed to the meagre amount of venture capital Alberta received last year. For 2001, of the 21 companies funded in the province, the average investment was $5.6 million, compared to Ontario’s $47.6 million, Quebec’s $18.7 million and B.C.’s $17.1 million.
In all, Alberta garnered two per cent of all investment capital made in Canada for last year, while representing 14 per cent of the nation’s GDP, according to the report. “Obtaining the capital they need to build their companies is probably a factor in being able to afford and market their companies on a worldwide basis,” Robinson said. As a result, this has forced companies into mergers or alliances to raise capital, he added.
At least one expert questions the validity of how much IT business is being generated outside of the province.
“That was a number (23 per cent) that surprised me. Companies tell me that they do 80 to 90 per cent of the business outside of Alberta,” said Charles Reichert, director of InfoPort for Calgary Technologies Inc, an organization that deals with economic development for the high-tech sector in Alberta.
He affirmed that Alberta has long suffered from an absence of venture capital dollars, but has itself partly to blame in that the technology sector has modelled itself after the oil industry, which has traditionally found financing through private resources.
“We have a problem with respect to venture capital. We don’t have labour sponsored venture capital organizations to stimulate the formation and the accumulation of dollars for venture capital companies,” Reichert said.
Several venture capital companies listed on the Canadian Venture Capital Association’s Web site for Alberta were contacted for an interview – none returned the phone calls.