B.C.’s tech sector underachieving

BC’s technology sector now employs more people than the province’s forestry, mining and oil and gas sectors combined and has doubled exports to $4.1 billion in 2009 from $2.1 billion in 2001.

Sounds like good news, doesn’t it? It is, and it isn’t, according to a new KPMG report, which concludes that B.C.’s high-tech sector is underperforming, compared with the U.S. and some other provinces, notably Ontario and Quebec.

Commissioned by the BC Technology Industry Association (BCTIA), DigiBC, Wavefront and the BC Cleantech CEO Alliance, the British Columbia Technology Report Card 2012 concludes that the industry and government have much work to do if B.C. wants to develop a high-tech middle class.

“My read of the report is that we’re still behind but not nearly as much as we once were,” said BCTIA CEO Bill Tam.

“We’ve really come from behind, from a historical standpoint, not having the industrial base.”

B.C.’s high-tech sector employs about 84,000 people and is the third-largest contributor to GDP in the province. It performs well when it comes to attracting investment capital, but compared with other provinces and states, it underperforms in employment creation, GDP and education.

The B.C. technology sector accounts for 5.9% of the province’s GDP, according to the KPMG report – 21% lower than the Canadian average.

Compared with other provinces and states, the number of technology graduate degrees per capita granted in B.C. ranks near the bottom, and the province produces fewer patents than Alberta, Ontario and Quebec.

And despite B.C.’s geographic advantage, exports of technology to Asia have remained static for a decade. Ontario and Quebec have distinct advantages over B.C. in that they both have significant manufacturing bases and large companies like Research In Motion (TSX:RIM)and Bombardier Inc. (TSX:BBD), while B.C.’s economy remains anchored in resource extraction.

“That’s the challenge with the tech sector (in B.C) – the critical mass and the anchor companies that we see in Ontario and Quebec, we don’t have a lot of those,” said Tony Lindsay, KPMG’s Vancouver market leader for technology, media and telecommunications.

Information and communications technology is the biggest employer in B.C.’s high-tech sector, with 40,000 jobs and $7.9 billion in revenue.

Telus Corp. (TSX:T), Rogers Communications (TSX:RCI) and Shaw Communications (TSX:S) account for about 13,700 of those jobs, according to Business in Vancouver’s annual Book of Lists.

Jobs and revenue provided from other tech subsectors in B.C.:

•wireless, 10,200 jobs, $3 billion revenue;

•clean-tech, 6,400, $1.7 billion;

•digital media, 14,000, $1.2 billion;

•life sciences, 10,200, $800 million.

B.C. has talent pools that have helped increase the size of subsectors like video game development and animation, and that provides good soil for incubating startups.

But as Tam points out, B.C. has no high-tech “middle class” to speak of.

Building startups into mid-sized and large companies is the key challenge if B.C. wants to compete in the $6.6 trillion global technology market.

“We need to have more than 3% of our companies being in that mid-sized bucket,” Tam said.

Tam said his association wants to see greater focus on four key areas:

• improving access to customers, especially domestic customers;

• increasing access to risk capital, especially for companies that are expanding;

• deepening the local talent pool; and

• fostering more mid-sized company growth. •