Feds sound tech alarm

An assertion by Industry Minister John Manley that some Canadian firms are relying on the low loonie to compete and are not, in turn, investing as much as they should be in technology, could be pointing to a dark secret within the world of Canadian IT.

Manley’s argument, made last month, says that many Canadian firms are actually benefiting from a dollar that has hovered around the US$0.62 mark for most of this year. These companies’ products often appear to be a bargain for U.S. buyers, thus creating healthy sales figures. One problem with that picture, Manley opined, is that such firms are not deeming it necessary to invest in cutting-edge technology. Why bother, if business is good in a low-loonie climate? Such firms would actually like to see the dollar stay low, so as to maintain their competitive advantage.

Are Manley’s comments on the mark? And if they are, what do they say about Canada’s future as a networked nation?

Network technology vendors and industry observers say Manley has revealed a sad truth about the nation’s economy. According to Michael O’Neil, IDC Canada Ltd.’s country manager in Toronto, “if you depend on a soft dollar for your competitiveness, rather than investment in leading-edge processes and equipment, a hard dollar would have a really negative consequence.”

The question is, does corporate Canada understand the concern? Are companies making the requisite investments, particularly in network technology, to ensure a competitive stance? Network industry observers say Canadian businesses are less likely than their U.S. counterparts to invest in productivity improvements, and not only because the loonie is low, but also because of a traditional reluctance to take a chance. Indeed, the situation bodes ill for network vendors operating here, suggesting to some that Canada is not as bullish on technology as we like to think.

“Canadians are way behind in their implementations of technology,” said Chris Ellsay, president of Workshift Systems Corp., a network consultant firm in Ottawa. “There’s just no comparison to the American situation.”

Ellsay, whose company offers IT services and network consulting, said potential Canadian customers need severe arm-twisting to invest in technology.

Regard the case of a Workshift clients. A staff member of this customer described to Ellsay how poor tech planning destroys deadlines.

The staffer had a project to complete and “‘it should have taken three or four days, but my damned computer kept crashing,'” Ellsay recalled the worker saying. “‘I couldn’t print to the network, the server was always full, it wouldn’t save…’ I’m thinking, for a $1,000 investment (in technology), the company could have solved that problem. But they would rather pay somebody’s $40,000-a-year salary instead. It makes no sense at all.”

Although he said U.S. companies seem to be less reticent about technology upgrades and improvements, Ellsay is unconvinced that the low dollar is solely to blame for Canadian lethargy.

“We’re…taxed substantially differently. That, from my experience as a small business owner, probably has more impact. We pay more corporate taxes and we’re not rewarded with tax breaks when purchasing technology, for investing in our companies. So is it the culture of Canada, or have we been forced into it?”

Faye West, an Edmonton-based past president of the Canadian Information Processing Society (CIPS) and current director of information systems at the Alberta Research Council (ARC), voted squarely for culture.

“I think that Canada is traditionally slower than the United States to adopt technology, and to take the risk that’s associated with new things…It means we’re not investing as much, or as fast, as we could.”

However, the loonie does play a part, West added. “Because of the low dollar, anything we need to import becomes very expensive. That, presumably, would slow people down, even in the amount of money available to invest.”

So how do network vendors and service providers go about turning the tide? That’s another question all together, Ellsay said.

“I haven’t got that formula yet. Once I do, I’ll be a rich man. And perhaps we’ll have more productive businesses out there, but I don’t know how to get to that point. We lay out the cost-benefit and once a company uses our service, they can’t believe they did it any other way….We can do it that way, but boy, that’s a slow road.”

IDC Canada’s O’Neil offered no quick fixes, saying Canada should take a cue from its southern neighbour, where productivity has improved immensely. Yes, Canada’s productivity has also improved, but it’s not apace with the U.S.

He added that if certain Canadian firms continue to ignore technology upgrades and the accompanying productivity improvements, the market will punish them – with disdain. He paraphrased Lester Thurow, noted professor of economics and management at the Massachusetts Institute of Technology (MIT) in Cambridge. “You know, there’s a common misunderstanding about globalization: that it runs over weak players in the global economy,” O’Neil said. “It doesn’t. It ignores you…and you get left on the sidelines.”

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Jim Love, Chief Content Officer, IT World Canada

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