Study reaffirms Canada as tech hub

While Canada’s weather cools down, the country’s tech industry seems to be heating up – 68 Canadian technology companies ranked in Deloitte & Touche LLP’s Fast 500 list of the quickest growing high-tech businesses on the continent, making Canada the second largest technology hub in North America. The U.S. ranks first.

Only the state of California had more companies on the list than Canada at 126, while the New York Tri-State area – which includes New York, New Jersey and Connecticut – contributeD 54 companies. This marks the first time Canada beat the New York Tri-State area since joining the Fast 500 list six years ago, Deloitte & Touche said.

Other “technology hubs” include Virginia and Maryland, which combined came in third with 40 companies on the list, followed by Massachusetts with 35 companies. Washington and Oregon combined to contribute 30 businesses, while the remaining 180 firms came from the other 41 states.

Garry Foster, national director, media and telecommunications for Deloitte & Touche in Toronto, said the big news isn’t that Canada placed second, but that the number of Canadian firms on the list increased by 10 percent over the past year.

He said there have usually been 50 to 55 Canadian companies on the Fast 500, and this is the first year Canada has exceeded this mark.

“It is showing that Canada is maybe pulling out of the tech bust a little faster than the U.S.,” he said.

Western Canadian companies are also gaining more prominence. While 22 companies came from Ontario, 16 from Quebec and one from New Brunswick, 21 came from British Columbia and eight from Alberta.

As for why Canada was partially insulated against the effects of the dot-bomb that hit in the early 1990s, Foster explained that Canadian businesses tend to be more conservative than U.S. businesses and as a result, there were less dot-com startups to bust.

One Vancouver-based company, which ranked in at 64 on the list, agreed.

Blast Radius Inc. provides services such as customer relationship management, analytics and channel management. It saw 7,065 per cent growth over the past five years, and the company credits its caution about jumping on the dot-com bandwagon for its success.

Brett Turner, executive vice-president of client development of Blast Radius in Toronto, said his company’s success has not been indicative of the climate in the Canadian IT market, but indicated he is noticing a turnaround in the economy.

“I think we’ve bucked the trend quite a bit,” he said. “But I think it’s a sign of things to come.”

He noted that over the last three years it has been extremely tough with the burst of the dot-com bubble, as well as an economic slowdown across the country bus also with Canadian-specific events earlier this year, such as Severe Acute Respiratory Syndrome (SARS) and mad cow disease.

“Fortunately, we were able to stay the course,” he said.

Deloitte & Touche’s Foster said Canadian companies also tend to build fewer products for the domestic market and more for the international market, contrary to U.S. firms. Foster said on average 70 percent of revenue achieved by Canadian tech companies derives from exportation of their products.

Software companies comprise a bulk of the Fast 500 list, but Foster said that figure is shrinking as companies merge. In 2003, software companies claimed 39 percent of the Fast 500, down from 48 percent in 2002.

Internet companies represented 18 percent of the list, up from 10 percent in 2002 while communications and networking companies represented 16 percent up from 15 percent in 2002. Companies delving into the computer and peripheral device market accounted for four percent, with semiconductors and electronics making up four percent, down from seven percent in 2002.

A big increase came in the life sciences market where 19 percent of Fast 500 companies play in that ring – up from 16 percent in 2002.

Only two Canadian companies consistently place on the Fast 500 since the list started including Canadian firms in 1997 – Research in Motion Ltd. in Waterloo Ont. and BCE Emergis in Toronto.

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Jim Love, Chief Content Officer, IT World Canada

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