The head of one of Canada’s most important technology companies said the country is at a crossroads: we have the talent required to be a leader in the digital economy, but a mix of complacency and poor policy means we could easily end up in the remainder bin.
“I’ve seen Canada over the last decade, sadly, turn into a little bit of a low-cost jurisdiction,” said Mark Barrenechea, chief executive of Waterloo, Ont.-based Open Text Corp. “A lot of companies today think of Canada as a lower-cost (country) for entry-level talent; first job or second job is a better way to say it.”
Put another way, we’ve become a development league, “competing more with Southeast Asia than the United States,” Barrenechea said. Open Text used to be able to hire four Indian software engineers for the cost of one worker in Waterloo. That ratio is now two to one. Canada is competitive, but maybe not in the way many of us might have thought.
Followers of Jim Balsillie, the former co-chief executive of the company that created the BlackBerry smartphone,
will be familiar with the argument
that Canada has unwittingly become a staging ground for young coders who eventually take their talents to the real tech centres in the U.S., China and Europe.
But it feels like a good time to stir the fire that Balsillie started. The prospectors of the digital gold rush ignited by the COVID-19 crisis are moving at rapid speed. The big fish will be gorging on the little fish. The winners and losers are being sorted now, not years from now.
Many of Canada’s homegrown technology companies were already upset over the tendency of governments to get excited by the arrival of famous tech behemoths such as Amazon.com Inc. and Google’s parent company Alphabet Inc., which tend to monopolize the best talent before patenting their ideas, thus locking up the wealth for themselves and their home countries.
: emerging Canadian companies are proving to be attractive targets for larger firms that want to accelerate their adoption of cutting-edge technology.
The ownership of St. John’s, Nfld.-based Verafin Inc. (cybersecurity), Montreal’s Element AI (artificial intelligence) and Calgary’s Benevity Inc. (software) all shifted abroad last year. They were local heroes and now they are branch plants. The jobs are still here, and more may come, so it’s not a dire situation. But it’s objectively the second-best outcome, because control rests elsewhere. It also puts a ceiling on what Canada can achieve since the highest performers at those companies will eventually be called up to corporate headquarters.
“Canada has really got to think through that,” Barrenechea said.
We have some time to think it through. Foreign-direct investment isn’t a one-way street and some Canadian companies are doing their share of the raiding.
For instance, Lightspeed POS Inc., a Montreal-based developer of software that restaurants and smaller retailers use to process sales and manage inventory, on March 11
announced
its intention to buy Vend Ltd., a New Zealand-based rival backed by PayPal Holdings Inc. co-founder Peter Thiel. The US$350-million acquisition would be Lightspeed’s third big purchase since November, a US$1.2-billion shopping spree.
That’s the kind of action it takes to play in what Barrenechea describes as the first tier. You take risks. You raise capital. You deploy that capital, gathering valuable intellectual property, talent and customers. You favour investment over dividends and share buybacks. You go farther afield than the U.S. The Vend acquisition would strengthen Lightspeed’s toehold in Asia, complementing its core operations in Canada, the U.S. and Europe.
Lightspeed, which Dax Dasilva founded in 2005 and took public on the Toronto Stock Exchange in 2019, is one of a few dozen Canadian
technology hotshots
that have been given long leashes by shareholders who are less sensitive about profitability than they used to be. Some will fail or disappoint, which shouldn’t bother anyone. That’s how innovation works.
Open Text, meanwhile, is a survivor, so it probably warrants more attention than it tends to receive. The company is nearing its 30th anniversary and generating cash isn’t an issue. The company
earned
a record US$855 million in its most recent quarter, an 11 per cent increase from the previous year. Its stock price is up about 25 per cent over the past year, pushing its market capitalization to about $12 billion.
Back in 1991, its original mission was to commercialize technology that the University of Waterloo developed to digitize the Oxford English Dictionary. Now, Open Text finds itself in an ideal situation to exploit the shift to cloud computing. Barrenechea this week
unveiled
a streamlined range of software products that will allow companies to gather and protect information generated from employees working from home, manage supply chains and interface with cloud-storage servers, including Open Text’s own private cloud.
The opportunity is huge. Barrenechea predicted the information-management market will grow eight per cent to US$84 billion by 2024. Open Text is already the market’s leader, and its CEO predicts organic growth of two per cent to four per cent in three years, an ambitious jump from the current rate of one per to two per cent. If he pulls it off, he might force people to reassess Open Text’s reputation as a company that is only able to achieve growth through acquisitions, even though it intends to keep buying whenever it spots a good value.
“It is a seminal moment for us,” Barrenechea said, adding that he plans to invest 14 per cent of revenue into research and development, compared with 10 per cent currently. “We’re going to invest
into
modern work and we’re going to invest into our growth rates.”
Open Text is here to stay, but we can’t take for granted that others have the same ambition to stay in the top division or climb their way there.
“IP and engineering is very mobile,” said Barrenechea, who took over as CEO in 2012 after a couple of decades in Silicon Valley. “You can optimize the economics by leaving Canada, but, for us, we haven’t led with that. We’ve led with talent and culture.”
The challenge for policy-makers, then, is working on the economics. We need to make it less optimal for those who don’t care about culture to leave.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
