Features

Special Report: Powering Up Saskatoon’s Tech Sector

Photo courtesy Solido Design Automation

Technology is one of the most rapidly progressing aspects of our modern world. As a result, the technology industry is booming and predicted to experience continued growth into the future. This evolving industry presents an opportunity for communities like Saskatoon to expand their economic concentration and develop a larger and more diverse technology sector. Based on estimates from the Brookfield Institute, it would appear that Saskatoon’s technology sector consists of over 65 businesses.

Photo courtesy Solido Design Automation

Bolstering Saskatoon’s technology sector would benefit our local economy through industry diversification, sustainable sector growth, and job creation, while also benefitting our community by attracting talented professionals and the knowledge they possess. The local technology sector is beginning to take shape, but impediments to establishing a successful technology firm persist. As a result, improvements need to be made in Saskatoon’s talent acquisition, capital funding infrastructure, and business scale up support.

It may surprise people to know that in 2015 Canada’s technology industry was directly responsible for $117B, or 7.1% of Canada’s real GDP.[1]  Despite often flying under the radar, the tech industry is a large contributor to the Canadian economy. Comprised of 71,000 companies, it represents 6.1% of all Canadian businesses.  These companies in turn employ 864,000 Canadians, which represents 5.6% of the workforce.1

In Saskatchewan, where the natural resources sector has defined the economy, the tech sector could be brighter. The technology industry in the province, while growing, has yet to fully blossom. We estimate it accounts for about 2.5% of all Saskatchewan businesses, and 1.3% of provincial employment.  The tech sector presents an opportunity to diversify the economy and mitigate risk by expanding the range of economic outputs produced, reducing reliance on any one sector.

Like Saskatchewan, Saskatoon could also benefit from growing its technology industry in the city. There are just over 8,000 tech professionals currently employed, across approximately 65 businesses. While these figures provide a baseline estimate, they also highlight some of the difficulties in trying to define what constitutes a ‘technology’ sector business. Because there is no “technology sector” North American Industry Classification System (NAICS) code, quantifying the technology sector can be a challenge due to a lack of unifying definition. The figures cited thus far are based on an article1 that used a three step process: technology occupations were identified using Employment and Social Development Canada’s occupation descriptions, the proportion of tech occupations were then cross-referenced against each industry, and then those industries with a proportion of tech employment that exceeded 15% (or three time the national average) where considered members of the tech sector.[2]

Some local firms that fit within our definition, such as Solido, Vendasta, and 7Shifts, have had considerable success in recent years. Solido, an electronic design automation company that provides unique software to chip manufacturers, has added Apple to its impressive client base. Vendasta, an online platform that provides digital solutions, is on track to reach $300M in revenue by the end of 2017.  7Shifts, a software company, has created a scheduling app that is used by over 3,500 restaurants worldwide.

Talent: Because this isn’t amateur hour

Photo courtesy Solido Design Automation

Increasing technology talent in Saskatoon’s workforce can be accomplished by emphasizing technology in our education system and importing existing talent. Our workforce can be equipped for a technology focused future through the alignment of technology-based education and employment requirements. During the K-12 years, digital education and the promotion of tech-based clubs and community organizations can encourage technology-focused learning and engagement among young people. The development of more technology-based co-op programs and apprenticeships can help students gain vital, hands-on skills and establish the technology sector as a viable alternative to more ‘traditional’ employment routes.

In addition to career learning opportunities, marketing the Saskatoon region as a successful location to establish a career in technology will help attract existing talent from other areas. Other Canadian provinces have higher concentrations of technology sector employment, with Ontario currently employing roughly 6.4% of its workforce in the technology sector.[3] These locations also have more skilled and diverse workforces that Saskatchewan firms could benefit from. The corresponding talent from these areas can be harnessed by promoting the Saskatoon region as a potential supercluster for technology employment. Efforts need to be focused on people aged 25-45 years, who make up over 79% of the existing national technology workforce3, as well as on women, who have long been under-represented in technology sector employment and represent an area of un-tapped potential.[4]

Capital Funding: Because the smart money’s on tech

Photo courtesy 7Shifts

Developing capital funding programs is another way to help nurture the technology sector within Saskatchewan. By expanding funding programs and access to financial support, Saskatoon can become a leading region for the establishment of technology-based startups. Technology sector companies spend the largest amount on investment in ‘business enterprise research and development’, meaning that any capital funding would be recouped through technology-related investment within the city and province.[5]

Many technology start-ups rely on “angel investors” to fund their technology firms in early stages of development. Currently, Saskatchewan is one of the few Canadian jurisdictions that does not offer an angel investor tax credit. The development of such a tax credit program would encourage investing in local technology startups and help to provide technology firms with the capital they need.  The creation of stronger venture capital networks can also help growing technology firms obtain the equity required when their business is small and more risk sensitive. Connecting local technology firms with external capital networks could also be beneficial by allowing the tech firms to acquire more funding and business development mentorship. Additionally, government procurement requirements focused on sourcing technology from Saskatchewan-based firms can help provide the enabling environment to grow startup technology companies into established businesses.

Scale-up: Because size matters

Scaling up operations presents another challenge for technology sector companies, and requires improvement in order to develop local startups into stable firms in the long run. While over 84% of technology sector companies are profitable, the majority of technology companies in Canada employ less than 4 people.[6] Canada is essentially tied with the USA for per capita production of startup companies, but many Canadian companies lack adequate support to grow and achieve global competitiveness.[7] By scaling up technology sector firms, benefits such as higher paying positions, increased stability, more investment, and greater ‘mass’ to support research, can be realized.

Saskatoon and the province can assist technology companies in scaling up by implementing training programs for technology sector upper-management and executives. Technology sector employers cite an absence of learning programs for technology business management as an impediment to operations scale up. Training can take place in universities or through more informal settings in conferences and workshops. These avenues for management development can help to foster communication networks among technology sector leaders, and provide knowledge support within the technology community. The discourse created through tech-based learning networks can result in knowledge spill-over, fueling more rapid innovation and technological development.7

About Saskatoon Regional Economic Development Authority (SREDA)

As a non-profit economic development organization, SREDA’s mandate is to help grow the local economy. A corollary to this mandate is to support the diversification of the Saskatoon region by promoting the technology industry and the corresponding economic benefits provided. Through the support and informational services provided by SREDA and Square One, we hope to see the local technology sector prosper and develop into a key pillar of our local economy.

References:

[1] Brookfield Institute: The State of Canada’s Tech Sector, 2016.

[2] Includes all industries in Statistics Canada’s custom aggregation of the ICT sector, plus other industries that play a critical role in Canada’s tech sector, including aerospace manufacturing, scientific research and development (R&D) and pharmaceutical and chemical manufacturing.

[3] Brookfield Institute: The State of Canada’s Tech Sector, 2016.

[4] U.S. Equal Employment Opportunity Commission: Diversity in High Tech.

[5] Brookfield Institute: The State of Canada’s Tech Sector, 2016.

[6] Brookfield Institute: The State of Canada’s Tech Sector, 2016.

[7] Mentor Works: Technology Industry is Canada’s Fastest Growing Economic Sector.