Capital tech's catalysts: laying the groundwork for an enduring recovery
After two decades of retrenchment triggered by the collapse of Nortel, a series of catalysts is lifting the region's tech sector.
James Bagnall, Ottawa Citizen
Publishing date: Jul 22, 2021 • 2 hours ago • 5 minute read
For the better part of 16 months, Martin Vandewouw has been presiding over a ghost town. That’s about to change.
Vandewouw is the president of KRP Properties, the real estate firm that manages more than 30 office towers in the heart of Kanata North, the epicentre of Ottawa’s volatile tech industry. KRP’s tenants range from Ericsson — the wireless infrastructure colossus — to tiny software startups no one has yet heard of.
“The fall of 2019 was crazy,” Vandewouw says. “We had multiple tenants competing for the same office space. But, when the pandemic hit, nearly everyone put their plans on hold because of the uncertainty.”
With vaccinations reaching flood tide in the capital region, KRP’s office towers this fall will gradually start to fill with people again. Companies large and small have already been sounding out Vandewouw about new space requirements. None of this will change the economics for KRP much — 90 per cent of its 3 million square feet of office space is still leased, and tenants have been paying their rent during the pandemic.
What will be different is the energy level, because the re-opening will coincide with a strong recovery in the region’s telecommunications technology core.
After two decades of retrenchment triggered by the collapse of Nortel, a series of catalysts is finally lifting the region’s tech sector — in particular the cluster of hundreds of firms that make Kanata their home.
The biggest spark has been provided by the accelerating rollout of fifth generation wireless technology, which will speed up mobile communications and encourage the development of new services by linking smartphones with vehicles, home appliances and doctors’ offices in unique ways.
Start with the region’s high-tech anchors: Nokia, Ericsson and Ciena. Each of these multinationals, which collectively employ about 5,000 locally, specializes in the heavy-duty infrastructure that underpins global communications networks. All operate significant research and development centres here that serve giant telecommunications carriers such as Verizon, Bell and Telus. The carriers are expected to invest billions of dollars annually in 5G networks over the next decade.
The presence of 5G infrastructure companies should give entrepreneurs based here an initial advantage in developing services based on the new technology. The big unknown is whether they will make good on the opportunity because so much has to go right. They need talent, mentors and money. A combination of players, co-ordinated by the Kanata North Business Association, has been pulling all the pieces together.
For instance, there’s L-Spark, a technology incubator that takes an equity stake in startups in exchange for providing advice and helping to raise money. L-Spark to date has helped more than 70 startups raise nearly $100 million in investment capital. The incubator has also formed partnerships with BlackBerry QNX and Telus with the goal of encouraging entrepreneurs to build applications for self-driving vehicles and telemedicine.
QNX, founded 41 years ago by Dan Dodge and Gordon Bell and acquired in 2010 by BlackBerry, adds a lot of credibility to the region’s tech ambitions. Dodge and Bell developed a rock-solid operating system that now guides the software and sensors on nearly 200 million vehicles worldwide. These can be connected with 5G. The Kanata tech park in the coming year is to serve as a test-bed for self-driving vehicles.
The Kanata North Business Association, which advocates on behalf of 500-plus businesses, is assisting in this effort. It is also encouraging Telus to co-develop 5G applications with entrepreneurs and to test them in a local Innovation Zone.
In late October, the association expects to unveil Hub350, a kind of gateway to corporate, academic and financial resources, named after its location at 350 Legget Dr., one of KRP’s buildings. The idea, as with all tech hubs, is to create a self-reinforcing mass of creativity.
The financial component was the last to be added. The association last week revealed that RBC — the country’s largest bank — would help sponsor the hub and provide financial services tailored for tech firms.
“There’s been so much room for improvement when it comes to financing the tech sector,” says Victoria McGlone, the association’s chief operating officer.
Indeed, tech entrepreneurs in Toronto, Vancouver and Montreal have had two immense advantages over Ottawa-Gatineau in recent years — a much deeper pool of technical talent, and financial heft.
Amazon, Microsoft, Google and Apple have all set up shop disproportionately in Canada’s biggest cities.
Amazon, for instance, designated Vancouver and Toronto as “tech hubs” and announced plans to expand these by 5,000 and 2,000, respectively, by 2023. Meanwhile, less than five per cent of Amazon’s 23,000 Canadian employees work in the capital region, mostly in fulfillment centres.
Even locally-headquartered e-commerce enabler Shopify has been hiring aggressively elsewhere — most notably in Toronto which now supports more employees than Ottawa.
The presence of serious pools of capital in Toronto and Vancouver has allowed entrepreneurs to aggressively expand software companies focused on personal investing, e-commerce and real estate.
It’s why the number of high-tech jobs in the capital region has consistently lagged that of other large cities for years. Despite the best efforts of software stars such as Kinaxis and Assent Compliance, employment here averaged 45,000 during the first half of this year, according to estimates by Statistics Canada, and has been roughly flat for the past five years.
Given the sheer scale of the Nortel-led meltdown, that is actually not a bad result. The tech sector now accounts for roughly six per cent of the capital region’s workforce — the same as Kitchener-Waterloo and better than Montreal. The tech industry in Ottawa alone makes up nearly seven per cent of the labour force — the same as Vancouver and just behind Toronto’s 7.7 per cent.
Statcan counts all employees in firms it classifies as high-tech. The other way to look at tech employment is to tabulate employees in high-tech occupations, even if they are in government or health care. CBRE, a real estate consulting group, estimated that Ottawa alone employed 76,000 tech workers last spring — or 11.6 per cent of the workforce. That was the highest concentration among 50 North American cities surveyed, and that includes California’s Silicon Valley.
In short, the capital region has plenty to build on. “Kanata is now on the verge of something big,” McGlone says.
We’ve been here before. The difference between now and the 1990s is a tech sector with a more solid core and much greater diversity surrounding it. With any luck, 5G will be the technology that finally allows the capital region to lay to rest the ghosts of Nortel.
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