Canadian Tech is On Its Knees

The tech sector in Canada is shrinking fast. Our once-largest publicly-traded high technology company (by value) was Research In Motion (RIM), makers of the Blackberry. That company is on the rocks and struggling to stay relevant and afloat. Canada’s new largest tech company is SXC Health Solutions, which employes only 35 Canadians, the rest of its business operations (including hundreds of tech-based jobs) being overseas – most of SXC’s business is actually done in the U.S.

There are few Canadian tech companies outside of those two and the whole technology sector makes up only about 1.5% of Canada’s TSX composite. A decade ago, it was over 40%, showing a cliff-like dropoff in only ten years.

What happened?

The Death of Nortel Networks and Selling of the Sector

Do you remember Nortel Networks Corp (aka Northern Telecom Limited)? That one company used to make up a third of the TSX and is now gone completely. That’s just one, though it is the largest. When they went bankrupt in 2009, the final straw in Canadian tech was laid on the proverbial camel’s back and our days of large tech-based corporations died.

Nortel was just the largest, though. Many of the smaller tech firms in Canada are being sold to foreign investors at breakneck rates. 45 of them were bought out last year, 32 the year before, and so on. For most of the past decade, in fact, firms have been selling at an ever-growing rate until soon, we won’t have any tech companies to be sold.

Research, Education, and Incentives to Stay Home

As the sector shrinks, so does investment in the research and development that often forefronts technology and takes Canadian-born ideas and makes them developed products for the world market. As the sector shrinks, so do the number of kids entering college to graduate into technology-based jobs – something that has been on the decline for the past few years already.

Both of which amounts to a lack of reasons for technology companies in Canada to stay Canadian. If the money and talent are elsewhere, then that’s where the companies will migrate. Nostalgia and nationalism are not, generally, good business practices in today’s global economy. Increasingly, national boundaries (in terms of business dealings) are blurring and there is little stigma in moving operations to foreign locales if that’s where the resources are.

So on all three fronts, Canada is becoming a barren tech wasteland. To reverse that, we have to give what remains of our tech sector reasons to stay here. We need to foster talent in the available and emerging workforce, encourage entrepreneurs and those with big ideas to pursue them by offering investment, and finally give tech companies the tools they need to keep it all Canadian.

Until we do that, the tech sector in Canada will continue it’s top-down crumbling.

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