Report says Toronto is shared service hub

Canadian or even multinational enterprises that want to centralize their IT operations are likely to choose Toronto as their central hub, according to a study released Monday to support the city’s weeklong promotion of the technology sector.

The Toronto Region Research Alliance (TRRA) said it contracted IBM’s global locations strategy team to compare Bangalore, Boston, Frankfurt, Manchester, San Jose and Washington, DC with Canada’s largest city in terms of investment attraction and place to live. Toronto ranked as the most ideal location in two of the four sub-sectors, professional shared services and digital media. Toronto received top grades for quality and came second only to Bangalore for low operating costs, TRRA said.

Mike Williams, the TRRA’s senior vice-president of investment attraction, said professional shared services refers primarily to back-office operations whereby a large company has all its financial processing, for example, handled in Toronto.

“Toronto is a great centre for that because we have a lot of financial institutions, a lot of capability with the labour force,” he said. “State Street came to Toronto for that very reason.”

Besides financial processes, companies use Toronto’s fibre-optic networks to deal with HR and accounting services, Williams said. While Toronto, like other locations in Canada, has emerged as a good “nearshore” option for third-party back-office providers, Williams said much of the professional shared services are being handled in-house.

“A lot of the insurance companies do their own processing,” he said.

In digital media, Toronto received high marks for its strong base of creative industries, its large pool of computer programmers and creative media talent and its attractiveness as a place to live for international recruits, the TTRA said. A panel discussion at Toronto Technology Week on Monday featured Kim Davidson, CEO of Side Effects whose Houdini software has been used in Spider-Man 3, among other films.

“The customers are here – CBC, Global,” said Davidson, noting that Side Effects has also opened a U.S. subsidiary in Santa Monica, Calif.

“I’m proudly Canadian. I have the U.S. operation more for convenience. We want to be close with some of our skills, but we go back and forth with the team out of Toronto. There’s not a Canadian flag on the U.S. office.”

IBM said Toronto was competitive but not a leader in the other two sub-sectors, next-generation electronics and specialist software development.

“We lost a little bit of ground in to North American and European competitors and didn’t score as well in the way we leverage university resources,” Williams said. “San Jose and Silicon Valley are well known for leveraging Stanford and Berkeley. We need to do a better job here of setting up those kind of relationships.”

Toronto’s local industry is wise to try and figure out where its strengths are, Davidson added, in the same way that Research In Motion’s Jim Balsillie has made Waterloo a wireless hotbed and Terry Matthews has made Ottawa a leader in network technologies. There’s only so much government and IT associations can do, however.

“You can’t really manufacture a Balsillie,” Davidson said.

Toronto Technology Week continues until Friday.


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