One of North America’s largest Salesforce consulting and app development firm is betting big on rural Canada, a move its chief executive officer thinks other small enterprises should mimic to help Canada accelerate its overdue transition to a knowledge economy.
Nelson, B.C. native Greg Malpass founded Traction on Demand (ToD) in 2007, and since hiring his first employee in 2010, ToD has ballooned to a headcount of nearly 1,000. Along the way, Malpass managed to open a branch office in his hometown, saving the financially-struggling local Royal Canadian Legion branch in the process by purchasing the building. ToD and the Legion are sharing the space. As Nelson’s ToD team gradually grew, recruiters began favouring a strong enthusiasm and willingness to learn just as much as a technical background.
“We searched for people that had some sort of technology background, maybe working remotely and yearning for a bit of an office experience. But on the other side, we just said we’ll go find smart people that haven’t had an opportunity to work in technology yet and train them,” Malpass explained in an interview.
ToD discovered local forestry, construction, and mining industries were brimming with multi-talented individuals who quickly picked up the required skills need to develop, analyze, and market the firm’s solutions. The Salesforce platform is immense and used by many kinds of customers. ToD helps enhance the platform experience by packaging its software into SaaS applications, making them accessible at a standard price for a broader audience.
Salesforce Q2 2021 earnings still paint a picture of an immovable object in the customer relationship management space. Subscription and support revenues for the quarter were US$4.84 billion, an increase of 29 per cent year-over-year. In Canada, every business regardless of the sector is investing in new software services to become more intelligent, oftentimes attainable only through a giant software vendor.
For some businesses, these investments were uncharted territory and sudden pivots from the local data centres and internally developed tools that dominated IT administrators’ attention. With remote work as the new normal for businesses globally, IT teams have been given a seat at the decision-making table, says Andrew Caprara, president of managed services provider Softchoice. “They have the ears of the executive team like never before,” he said during a recent virtual roundtable event hosted by Cisco.
ToD has been riding the software wave for years and is fast approaching some important milestones.
“We’ve moved into a new chapter of growth. In the next 18 months, we plan to bring 800+ new hires into the fold. We’ve already had 41 new starts in the last few weeks, and another 20 starting in the next two weeks. We are also actively exploring new locations,” Malpass told us in a follow-up email recently.
According to the municipality’s director of economic development and tourism, Gary Schatz, Princeton, B.C. was one of those locations.
“There would be phenomenal interest locally,” Schatz told IT World Canada, referring to the prospect of a ToD branch opening up in Princeton. But before it can take serious steps towards partnering with ToD, Princeton has a serious housing crisis to address first, Schatz explained.
Malpass is aware of this problem too, and it’s certainly not isolated to Princeton. It’s one of the factors the firm and its employees – most of whom are based in Canada – have been taking into consideration while scoping out possible future satellite offices. The plan is to build offices closer to where people live and consolidate existing office infrastructure where possible. Malpass has noticed more of the team moving out of the city, especially over the past eight months.
The majority of Nelson’s talent comes from what he calls “talent conversion,” essentially the organic growth of the team thanks to the talent well from industries and educational institutions nearby. But scaling up organically instead of selling out is not something many organizations in Canada are in a position to do, he says.
Getting the same incentives as Amazon and Microsoft
Canada hasn’t been able to produce a unicorn company (businesses with a valuation that’s $1 billion or greater) since the messaging company Kik – which recently got slapped with a $5 million penalty from the United States’ Securities Exchange Commission – earned its horn in 2015. Also, Canada ranks 22nd in the Bloomberg 2020 innovation index. Not exactly top tier.
“To scale a business, you need access to stable growing customers, strong investment in creating talent, and ensuring new arrivals to our nation are set up to pursue valuable work,” Malpass wrote in an email, adding an emphasis on STEM education is a plus. “It also helps to have an economic system that allows for maximum retention capital for reinvestment into growth, appropriate incentives for investors and policy and programs that invest in innovation with similar constructs to that of venture markets.”
A recent report from KPMG and B.C. Tech suggests B.C.’s technology sector continues to contribute more to the provincial economy than traditional sectors, such as forestry and oil and gas, but it’s still dominated by small firms and has “significant room to grow when compared to US jurisdictions.” While the province’s tech ecosystem continues to thrive overall, its third consecutive B grade stems from a scale-up gap. “Because BC tech companies have long tended to stay small or sell too early, they haven’t grown into the large companies that anchor a tech ecosystem.”
Tech CEOs have become increasingly frustrated about the scale-up gap. Malpass was recently one of 133 tech CEOs who signed an open letter to Justin Trudeau, demanding the federal government implement new ideas and ecosystems that help Canadian scaleups become global powerhouses and commercialize home-grown IP.
The federal government recently signalled its intention to tax big tech during its throne speech, a promise critics have scoffed at since the last time it was made in 2019, New Democrat MP Charlie Angus told Yahoo! Finance.
“The digital giants have not been paying anywhere close to a reasonable rate of tax in Canada, and that’s a problem. We’re seeing the Liberals now acknowledge that, but they’ve acknowledged that many times and have done nothing on it. I think they’re deeply in awe of the power of Silicon Valley to the detriment of Canada,” he told the publication, adding tax policies would be used to reinvest in local companies.
“Beyond specific policies though, you also need CEOs, founders and leaders to believe in the stability and longevity of these programs, so they will take the ultimate risk to scale-up vs sell-out,” Malpass wrote. “We are asking our government to believe the same. We want their procurement policies to reinforce this and ensure long-standing programs remain in place. We want them to reinvest in success as opposed to focusing on those who ‘need’ it. We want them to provide Canadian-controlled organizations with the same incentives they offer Amazon, Microsoft, etc.”
Big tech incentives come in various shapes and sizes. In December 2018, Ontario’s auditor Bonnie Lysyk issued a report saying Sidewalk Labs — owned, along with Google, by Alphabet Inc. — had a leg up on other firms competing on a request for proposals (RFP) to be Waterfront Toronto’s innovation and funding partner and help build the city’s first 12-acre “smart neighbourhood” in Toronto’s Quayside region. Sidewalk Labs received more information from Waterfront Toronto prior to the RFP than other parties that would be responding to the RFP, indicated the report. Shortly after, Ann Cavoukian, executive director of the Global Privacy and Security by Design Centre, resigned from her position as a privacy advisor for Sidewalk Labs after the project did not guarantee anonymity with a provision to let people remove their identity from a publicly viewable database called the Civic Data Trust.
Sidewalk Labs has since pulled the plug on the project, leaving the land open for business, although there is no current timeline in place for when a new request for proposals will be tendered for Quayside, according to The Star.
Emil Sylvester Ramos, co-founder of Iris R&D Group, an AI-camera tech firm from Ontario, has had some recent success with public sector RFPs. The firm teamed up with Orangeville earlier this year to detect potholes in the road and alert officials to clusters of people with smart cameras. It has a similar working relationship with The City of Guelph. However, companies like theirs can still get caught in the same vicious cycle of getting “swallowed” by big tech somewhere in the growth process, Ramos revealed.
“Canadian IPs get developed by SMEs here and are funded by the federal or provincial government. Then after that whole R&D phase, you have Google coming in and buying the Canadian IP,” he explained.
Canada’s efforts to inject some life into Canada’s knowledge economy, such as Ottawa’s Innovation Superclusters Initiative, have been steps in the right direction, but that’s just it – they’re only steps, says Benjamin Bergen, executive director for the Council of Canadian Innovators.
“When you actually want to build an ecosystem that ultimately commercializes IP and data, you need to have the proper policy frameworks in place. We’ve poured money into the superclusters, but yet we don’t have the proper apparatus or tools to actually really reap the benefits of the IP and the data that’s being generated,” Bergen said. “I think that Canada has fantastic innovators, and I think the challenge that we face is a public policy framework that doesn’t have government and industry working together to create an ecosystem where these companies can be successful. If we look at countries like Israel, Sweden, South Korea, Germany or the U.S., you have a government working with industry on a whole host of public policy issues that allow the intangible economy to succeed. In some countries, you have IT collectives and data policies that support data domestic innovators.
“And we just haven’t seen that in Canada, not just from this government, but obviously the previous government as well. And the thing is that it’s now really catching up with us, and it’s only going to be exacerbated by the COVID-19 crisis.”
A recently released survey from Microsoft Canada appears to back up Bergen’s claims. Nearly half (46 per cent) of business leaders are not confident that their company will be able to adapt to whatever the upcoming year might hold. Only half (51 per cent) are confident their business could survive the second wave or spike in coronavirus infections, and only four in ten (38 per cent) business decision-makers have changed their employee training or are specifically training their staff in the new tools and platforms their organization is now using.
“‘When I looked at the results, as a Canadian, I was pleased and then in a way concerned at the same time,” Microsoft Canada president Kevin Peesker indicated in an interview, pointing to the lack of action around employee training.
“There is an immediate need to cultivate a skilled talent pipeline to drive innovation in Canada and fuel economic recovery. Whether it’s students preparing for the future, those in the workforce keeping pace with the latest skills to drive innovation or those seeking new skills so they can pursue meaningful employment opportunities, we must ensure Canadians have access to the training they need to succeed in the digital economy.”
This summer, Microsoft announced a new global skills initiative aimed at bringing more digital skills to 25 million people worldwide by the end of this year. This was followed by an announcement in September whereby 12 post-secondary institutions joined Microsoft Canada for the “Canada Skills Program,” enabling more than 4,500 students in diploma, degree and continuing education programs to graduate with in-demand data analytics, AI and cloud certifications in the first phase of the program.
While Peesker didn’t comment directly on the open letter or Canada’s scale-up challenges, he did say companies making investments in platform services, such as the ones available through Azure, and moving beyond basic workload migration to the cloud are cracking the code to growth.
“The most foundational impact is the move around platform services,” he said. “When we talk about this compression of two years worth of digital transformation in two months, it’s been because of that understanding of the business and getting to the core of data and getting it to work for you.”
Thanks to its mastery of the Salesforce platform, ToD has also launched four freestanding and independent software companies. Malpass says stepping out of big tech’s shadow isn’t easy. On top of smart partnerships and investments in software, the key ingredient to solving Canada’s scaleup problem may not require a dominating presence in the middle of a big city anymore. Talk to local municipalities and business owners, Malpass urges others. Nelson recently opened the Nelson Innovation Centre, a hub for entrepreneurs and technology enthusiasts to collaborate. Nelson Innovation Centre manager Karen Kornelsen said the centre will be a place for tech and tech-enabled entrepreneurs and businesses to connect with one another and get the support they need through programming and referral services to “take their businesses to a new level,” according to reporting by The Nelson Daily.
“What I’ve found in all the small towns that we’ve spoken to is there’s usually a few anchor businesses and people – Rotary clubs, for example – who are a little bit more engaged in the science and technology associations,” he said. And in many cases, they have a strong desire to drive local employment.”