Tom Sweeney

It's a coming of age tale….

2009: A year of flux in Ottawa tech

Posted by sweens on December 18, 2009


Published on December 15th, 2009

Jim Donnelly
Ottawa Business Journal

Heady startup activity counteracted by liquidation of various headquarters

It’s been a year of soul-searching, self-help and growing foreign influence for Ottawa technology industry, say observers, but they add that doesn’t mean it’s been a bad 2009 – quite the opposite, in fact, depending on with whom you speak.

But what were the main trends we saw this year, according to those in the trenches? Most obvious, says Pat DiPietro of VG Partners, was the conspicuous absence of venture-backed, early-stage companies hatched in the nation’s capital this year. “The lack of capital has created a gap in the sequence of planting crops and then husbanding them along,” he says.

That’s led to a diversification amongst the Ottawa tech scene from traditional telecom and other technology infrastructure markets, into more lithe, media-style software and social media companies not requiring heavy injections of initial capital.

“(OCRI) likes to continue the mantra that we’ve got a lot of companies starting these days, but they’re all two- or three-person operations,” he adds. “And they’re being bootstrapped.”

OCRI chief executive Claude Haw agrees that 2009 was a year of diversification for local firms. He says this past year was a “coming-out” period for digital media in the city, adding that his organization is now tracking around 200 local companies in the space.

“And the other trend was the retooling that’s gone on in the region,” he says, adding that programs such as Lead to Win are indicative of a series of initiatives recently launched to assist budding entrepreneurs.

But 2009 also saw its fair share of formerly Ottawa-headquartered companies bought and sold by foreign interests. The Nortel saga – which by December had seen the company sell off chunks of its former businesses to companies such as Nokia-Siemens, Ericsson and most likely Ciena, as well – needs little explanation. In June, local success story Tundra Semiconductor was bought by Silicon Valley-based IDT, trumping a bid by rival Gennum Corp. In September, it was revealed that Philadelphia-based Versa Capital would take local defence products maker Allen-Vanguard private. And in late November, Corel Holdings announced that Vector Capital’s all-cash offer for all outstanding Corel Corp. shares had been successfully completed.

Mr. DiPietro says the influx of foreign ownership isn’t a good sign for Ottawa, since it means the dissolution of executive office training grounds for nascent management teams.

“One of the problems with foreign owneship is that the decisions aren’t made here, and so we’ve allowed ourselves to fall into a bad situation,” he says. “We’re in the situation where we’re becoming a branch plant again. We were somewhat out of that for a while (in the late 1990s and 2000s).

“It’s really disturbing, because the problem we’ve always had in Ottawa will be reinforced – we’ve never had lots of management teams here who could create world-class companies. And as those functions get centralized, our people won’t be trained to be great managers.”

Mr. Haw takes a somewhat different angle to the foreign ownership question. He says most consolidation has happened in mature sectors, where there’s always been a constant push to become bigger and more market-dominant. “It’s all about the big, broad market opportunities with these sectors,” he says. “And unfortunately Nortel didn’t make it as a consolidator – they became consolidated.

“But if you look at Alcatel compared to Newbridge Networks, that consolidation has worked in our favour. We’ve had more high-paying jobs locate here after that merger, than if Newbridge hadn’t consolidated.”

And as for the effect of the Nortel consolidation, Mr. Haw says locals shouldn’t think of it as a loss of one, large anchor tenant – indeed, he says it’s almost a misnomer to think of Nortel as an Ottawa company, since they haven’t been headquartered here for years. Instead, thanks to the increased presence of world-class firms such as Ericsson and Nokia, Mr. Haw says we should look at the situation as the gaining of three or four new anchor tenants.

“When a company like Nortel is acquired by Ericsson it brings stability,” he says. “Look at Cognos. They’re now bigger and better than they ever were (before being acquired by IBM).”

http://www.obj.ca/Technology/2009-12-15/article-281645/2009%3A-A-year-of-flux-in-Ottawa-tech/1

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One Response to “2009: A year of flux in Ottawa tech”

  1. Ann said

    Second time here, very sharp mind and brilliant writing. very good post. looking forward for more posts like this. Thanks Ann

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