IN DEPTH
Ottawa's technology sector
Is Ottawa still Silicon Valley North?
As Nortel crumbles, analysts consider the fate of high-tech sector in capital
Last Updated: Monday, June 29, 2009 | 5:25 PM ET
CBC News
Related
IN DEPTH: Nortel
Features
- Canada's technology shining star becomes financial black hole
- Is Ottawa still Silicon Valley North?
- Nortel struggles a 'big blow' to research in Canada (Jan. 14 2009)
- HISTORY: Nortel's Icarus-like stock
- The wild ride of Canada's most-watched stock
- TIMELINE: The rise and fall of Canada's tech sweetheart
- Interactive: Key dates for Nortel in the past decade
- Bankruptcy protection
- When a company seeks court protection while it re-organizes
YOUR VIEW
From CBC News
- Former Nortel workers could get paid earlier than other creditors: court
- (Monday, June 29, 2009)
- End of an era as Nortel shares delisted from TSX
- (Saturday, June 27, 2009)
- Nokia deal launches Nortel's liquidation sale
- (Monday, June 22, 2009)
- Nortel selling wireless business to Nokia Siemens for $650M US
- (Friday, June 19, 2009)
- Would-be Nortel buyers seek $1B loan from government
- (Tuesday, June 9, 2009)
- Nortel seeking bonuses for top execs
- (Friday, March 20, 2009)
- Nortel loses $2.13B US in Q4
- (Monday, March 2, 2009)
- Nortel cutting another 3,200 jobs (Feb. 25, 2009)
- Nortel Networks files for bankruptcy protection (Jan. 14, 2009)
- VIDEO: Nortel Networks files for bankruptcy protection (Runs: 3:20)
- AUDIO: CBC's Julie Ireton discusses Nortel's future on Ottawa Morning (Jan. 12, 2009)
- VIDEO: Interview with Duncan Stewart, financial analyst for DSAM Consulting (Jan. 14, 2009)
- VIDEO: Lawrence Surtees, telecom analyst with IDC Canada, on Nortel's outlook (Jan. 14, 2009)
- VIDEO: Havard Gould reports: The rise and ultimate fall of Nortel Networks (Jan. 14, 2009)
- Nortel's future up in the air as it faces major payments (Jan. 12, 2009)
- Nortel may lose NYSE listing (Dec. 11, 2008)
- Nortel could cut up to 5,000 jobs next week: analysts (Nov. 5, 2008)
- Nortel hits record low amid plans for cutbacks, asset sales (Sept. 17, 2008)
- Nortel to close Calgary operations (May 27, 2008)
- Nortel stock hits all-time low (Mar. 7, 2008)
- Nortel cutting another 2,100 jobs (Feb. 27, 2008)
- SEC charges 4 more former Nortel execs with fraud (Sept. 12, 2007)
- Nortel to pay $1M in OSC settlement (May 22, 2007)
- Regulators file charges against Dunn, other former Nortel execs (Mar. 12, 2007)
- Nortel Networks cutting another 2,900 jobs (Feb. 7, 2007)
- Nortel shares fall 10%, reports Q3 loss (Nov. 7, 2006)
In 2000, Nortel was a telecommunications technology giant with 90,000 employees worldwide, including 17,000 in Ottawa, its main research and development centre. (Rebecca Zandbergen/CBC)Canada's capital once had a nickname likening it to the sunny California home of companies like Apple and Google.
It was the large concentration of high-tech companies around San Jose, Calif., that led the area to be dubbed Silicon Valley. An abundance of those companies much further north earned Ottawa the nickname of Silicon Valley North.
In June, executives at Nortel Networks Corp., Ottawa's former high-tech star, began selling the company off, piece by piece, after seeking bankruptcy protection five months earlier. Under the circumstances, some people were no doubt questioning if the city still deserves its nickname.
Denzil Doyle, chairman of Doyletech Corp., which does business planning for high-tech companies, says Ottawa's technology industry is in rough shape these days.
"To put it harshly, it's not just in decline, but it's in decay," he says.
Claude Haw, president of the Ottawa Centre for Research and Innovation, an economic development agency that promotes high-tech businesses, sees things differently.
"I think we've got a great technology base here," he explains. "We've continued to see the number of companies grow year over year for the last several years."
Less than a decade ago, there was no question. The western outskirts of Ottawa were weighed down with shiny, sprawling glass buildings on breezy campuses. Inside, tens of thousands of well-educated employees were researching and developing new technologies for companies with international clout. Surrounding them were smaller companies they nourished through the services they purchased and the educated workers they attracted to the region.
Now, the former JDS Uniphase campus is owned by local real estate company Minto Developments, which has leased it to the RCMP to be used for new headquarters. Nortel's Skyline campus at Baseline and Merivale roads was sold to the federal government in 2003 (the government put it up for sale again in 2007), while its 11-building Carling Avenue campus sits largely empty.
'Anchor' company
Jeffrey Crelinsten, president of the Impact group, a company that offers science, technology and innovation consulting services, admits a large "anchor" company like Nortel really benefits a city like Ottawa.
"It spawns new companies, it spawns experienced managers, it creates an environment that understands the global scene … and it supports universities," he says.
It acts as a customer for smaller companies. It also provides huge opportunities for the development of staff in the many areas of its organization, giving them the skills to start and head up new companies, Crelinsten says.
Doyle describes Nortel as an "incredible incubator."
"I think people completely underestimate the incredible impact that Nortel has had on the high-tech community in Ottawa," he says, crediting it with helping companies like Mitel Networks Corp., Newbridge Networks Corp. (bought by Alcatel in 2000), Mosaid Technologies Inc. and Tundra Semiconductor Corp. get their start.
Startup struggles
Technology consultant Denzil Doyle said Canada's tax system doesn't offer the same incentives to invest in venture capital as it does to invest in oil or mining exploration. (Canadian Press)Nowadays, Doyle says, many people in Ottawa have great ideas for a technology company, but are having trouble moving beyond the research and development stage.
"We're not getting the startups that we used to get, as our existing companies either get amalgamated or go out of business," he says. "Or many of them, of course, are getting bought out by foreign buyers and they tend to move them out of the country, primarily to the United States."
He says part of the problem is Canada's tax system doesn't offer the same incentives to invest in venture capital as it does to invest in oil or mining exploration.
Haw believes Ottawa is becoming less dependent on "large, large players."
"We've really seen a broadening of sectors, a significant number of smaller companies," he says. "The information and communications technology background that many people in the region have is very applicable looking at clean technology, at IT and health care … so we're not so dependent on a single industry any longer."
According to the Ottawa Centre for Research and Innovation, there are currently 1,800 high tech companies in the region with 79,000 employees, the same number as there were in 2000.
However, that figure includes lawyers who specialize in high-tech and support staff. Statistics Canada, which doesn't include such employees, reported 54,000 employees in Ottawa's technology sector last year, down by almost 5,000 from the year before.
'It's more fragmented, it's smaller'
Some companies such as BlackBerry-maker Research in Motion Inc. are headquartered in Waterloo, Ont., but have smaller offices in Ottawa. (Canadian Press)Crelinsten says there's no doubt the technology landscape in Ottawa has changed.
"It's more fragmented, it's smaller," he says.
But he thinks the destruction of Nortel has had an upside, as it has allowed smaller companies to pick up talented, experienced employees.
"The destruction of Nortel although it's short-term pain, it may be long-term gain."
He says that while Nortel may have pumped a lot of money into research and development, it didn't have a good business culture and wasn't spending the money in the right places.
"They weren't solving customers' problems," Crelinsten says.
Waterloo rising
As Ottawa residents contemplate what went wrong, Doyle notes that there is another Canadian city which seems to be doing a better job of nurturing its technology sector.
"The whole Waterloo [Ont.] area, there's something about it that they seem to have local angels there now that will take companies to a size," he says.
Doyle even suggests Waterloo might now be in a position to overtake Ottawa and claim its former title.
"They're still smaller than Ottawa, but they're moving at such a clip. Ottawa's becoming a branch-plant for Canadian companies," says Doyle.
He notes that BlackBerry smartphone-maker Research In Motion Inc. and business software development company Open Text Corp. both have headquarters in Waterloo, but smaller offices in Ottawa.
Crelinsten admits Waterloo is growing, but says Ottawa should be able to hang on to its technology title.
"Absolutely … there's still a large critical mass of high-tech companies."
Even though the industry may be smaller now, he says that doesn't necessarily mean it's dying.
"It may become better," Crelinsten says.
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