TRENDS, COMPANIES AND MARKETS TO WATCH
Earlier this year, Invest Ottawa — a city-funded group that helps promote economic development — appointed business development managers to oversee growth in various clusters of the local high-tech sector.
Ottawa Technology recently spoke to these managers, as well as a cloud expert, to get their insights into these key areas.
Everybody always thinks of Ottawa as a government town, or they think of it as Silicon Valley North. Labouring away behind all of this has been the cleantech sector. It’s not that this is all just happening in Ottawa, it’s that the cleantech sector globally is starting to take off. During the period of 2006-10, while all other sectors were flatlining or going down, clean tech was actually going up by about 30 per cent a year, which is enormous growth. It’s actually projected that this growth will continue on into 2020, 2030.
There are areas of the Ottawa cleantech sector that have been established for years, energy management being one of them. They’re seeing a significant market share going their way – Energate is a perfect example, Blue Line Innovation is another example. The other thing that’s happening is there are certain sectors that Ottawa has always been strong in, (such as) energy management, green building – which is connected to smart grid – all of the biowaste-, solid waste- and agriwaste-to-energy. Water (treatment and reclamation) is another huge area.
Another part of it is that we have a great deal of innovation that takes place in Ottawa. A lot of clean technologies have been developed or started here.
COMPANIES TO WATCH
In the area of wastewater, obviously BluMetric is doing extremely well. Another in the area of water reclamation is Clearford. In solid wasteto-energy, obviously Plasco is one of the leaders. They have one of the leading technologies in the world.
Ensyn is big in the area of biomass-to-fuel, and is considering going public. Agrisoma is big in the area of agriwaste-to-jet fuel. They’re the first company to actually be able to fly a jet plane on purely biofuel. That’s pretty astounding. Then, of course, there’s green building. We’re home to
Windmill Development Group, the greenest developers in North America. There are very few developments they do that aren’t LEED platinum, which is extremely rare. Minto is very big on promoting environmentally friendly applications, clean technologies. Then we’ve got all the engineering firms that are involved in that area –
Stantec, ICF Marbek, Golder and Associates. These are all companies that are extremely wellknown in North America and internationally for the work they do and the expertise they bring to projects. Energate received smart-grid funding (from the province) to continue their work.
Why clean tech is going to continue to grow so rapidly is that connection between the high-tech industry and the cleantech industry. Now we’re at the point where a lot of what’s going to go on in advancements of clean tech have to do with software development and an understanding of semiconductor development – how you manage big data, how you manage integrated networks like a smart grid. That’s one of the reasons that I can see why Ottawa’s really going to take off when these people start really coming together.
The other part is we have the federal labs here. It’s the ability of companies here to be able to work with the scientists, researchers, engineers in the federal labs as well as in the universities.
There’s a lot more involved in setting up cleantech companies than there is for, say, high-tech companies. Also, there’s more of the requirement for real-world demonstration. When you realworld demonstrate something in the cleantech sector, that’s usually connected to buildings or infrastructure, which then makes everybody every nervous – what if something happens (to the infrastructure)? That also makes investors very nervous. They like to be able to have a fairly quick return on investment, or they’re used to that more secure environment of other sectors. We can find investors from outside of Canada – there are all kinds of them. But we don’t have a lot of local investors. They’re willing to go when the product is at the commercialization stage, but cleantech is a relatively new sector. The other (issue) is finding demonstration sites.
TRENDS TO WATCH
The biggest areas of growth are going to be smart grid, energy storage, water, transportation and anything that is in waste-to-energy. These are all going to be huge areas. Energy storage, to become optimized, needs to be able to go from zero to full charge quickly, it needs to be consistent in that you have (power) when you need it. This is kind of like the holy grail for smart grid.
The other area is what can done be in relation to infrastructure – how you make sure infrastructure is going to be safe (during natural disasters such as flooding).
The cleantech sector has the capability of becoming what the high-tech sector was for Ottawa back in the ’80s and ’90s. I think people are just starting to see that.
We have a lot of different cloud players, right from some of the major telcos and systems integrators to some of the smaller companies that actually have a specific focus such as security and encryption. In Ottawa, a lot of the companies that are involved with cloud are very much involved in the international space, because that’s where the markets are. As well, until we get some sort of specific government direction, the Ottawa market is going to be more focused on the international sectors rather than on Canadian consumers. It’s kind of interesting right now – everything’s accelerating really fast. Basically, all of the major telcos now are involved to some extent with the cloud. They actually have a lot of infrastructure that’s been set up because they all offer Internet services. They’ve actually had to add a lot of capacity just in case you have the next (royal) wedding ... that gets a million hits. They have a lot of infrastructure in place that they want to see better utilized. The other thing the telcos have is the network. In cloud computing, if your network is unstable, the odds are pretty good that your customer experience in the cloud is also going to suffer.
One of the challenges in Canada is that we still don’t have very good direction from a government point of view. The U.S. has a cloudfirst initiative, so that has helped accelerate some of its cloud activities in terms of trying to figure out how to make it work. In the U.K., they have a cloud strategy, and cloud computing strategies have been developed in New Zealand and Australia and even in China. In Canada, we’re traditionally a pretty cautious lot, so I’m not surprised that we are somewhat last to the cloud table. Our culture is very resistant to risk-taking, and the perception right now by a lot of people is that there are higher risks in the cloud. Some of that’s true, some of it’s not. Ninety-nine per cent of the time, your cloud provider is actually going to have more robust security and privacy and policies in place than your own company does ... but it’s the idea of releasing control.
(Another challenge is) the pricing models are all over the map. It’s basically almost impossible to compare one service (to another) on a consistent basis. No two companies really use the same costing model.
In the Ottawa market, we’re lucky to have a lot of good-quality carriers. One challenging part is our carriers are typically more expensive than some of the other networking carriers, for example, south of the border. That’s a reality, just because of the fact we’re a large country without a lot of people. We don’t have the population to realistically sustain low rates for communication. For small or medium-sized businesses wanting to become cloud providers, one of the basic recommendations is ... you really are going to need to have some type of a relationship with your network/carrier. At the end of the day, the odds are pretty good that if you don’t establish some type of relationship, the customer experience is going to suffer and you’re going to lose business.
The fact that we do have cheap power for data centres is a considerable advantage. We also have a strong pool, being Silicon Valley North, of software engineers who are capable of generating the business software systems that are going to be operating more and more in a cloud environment. In cloud terminology, those are called software-as-aservice products. We also have some platformas-a-service capabilities because of companies ... such as Mitel and Cisco. This applies to the capability to develop software and test software and reusable components. Infrastructure-as-a-service deals with storage, computing and networking within a firewall environment. In Ottawa, again, we have these types of capabilities. We have a lot of companies in Ottawa that are satisfying different needs.
TRENDS TO WATCH
I think we’re going to see an explosion in terms of having additional network capacity being built to have better network connectivity throughout Canada. There are going to be major networking infrastructure projects to ( build) a “fibre superhighway” of sorts. On the networking side, we have some capacity, but the issue is as more consumers sign up for the cloud and as more organizations realize what you can do in the cloud, demand for the bandwidth is only going to go up. The network is the critical thing. Basically, no network, no cloud.
Some of the satellite capabilities around network connectivity are also going to explode, probably in the next five years, because you need to put more satellites up there. For some geographic locations, it’s just not going to make sense to run fibre there. You’re going to need to think about using some sort of satellite communication systems.
Ottawa has 85 companies specializing in film and TV, doing work in every field from animation and film and video production to casting and support services. The city focuses on modest productions with budgets of between $3 million and $7 million that usually employ 50-100 local workers.
Local firm Exocortex has developed software tools for (computer-generated imagery) professionals on major Hollywood productions such as Iron Man 3, while another company, XYZ RGB, does 3D scanning for Hollywood films. The city is always working on finding innovative ways of making the production process easier, said Megan Martin, who works in Invest Ottawa’s film, TV and digital media department. She points to the city’s new online film permitting system, which was launched in January and saves production companies the hassle of filling out paperwork and the associated red tape that is still necessary in larger centres such as Toronto and Montreal.
“We’re really proud of this,” says Ms. Martin. “The online system streamlines it and makes it a lot easier for location managers here.”
Animation is a particularly important part of the industry in Ottawa, with more than 40 companies in the areas of visual effects, traditional 2D digital and 3D animation. Big Jump Productions recently helped do the animation for CMT’s first animated series, Bounty Hunters, featuring comedian Jeff Foxworthy. “We’ve always been strong in animation in Ottawa,” says Ms. Martin.
The capital also has more than 150 firms in the field of digital media, producing everything from original independent productions in mobile software and games to interactive content such as museum exhibits and online worlds. The leading companies include bitHeads, one of the largest mobile applications and enterprise software development companies in North America; Magmic, a world leader in mobile casino and sports games; Mercury Filmworks and its recently launched mobile gaming arm Mercury Active; and Fuel Industries, which has worked with major clients including LucasFilm and NBC Universal on live-action television, gaming and digital formats.
Ottawa’s position as a high-tech hub has provided a massive boost for the digital media sector, Ms. Martin says.
“There’s always going to be this natural inclination for certain people to be able to start their own business, but they still have their network and their expertise,” she says. “I think coming from the background of software and engineering, it’s just natural that people will want to see what’s coming up and what’s new and they’ll want to be at that vanguard. Because we have this pool of people, it’s just natural that they’ll want to branch out and do other things” such as the fast-growing field of mobile gaming.
The second annual Ottawa International Gaming Conference attracted approximately 500 people last May to the Ottawa Convention Centre, and Magmic has set up a $4-million gaming fund to help startups find their footing.
“It’s a good time in the digital media sector, particularly because a lot of the key companies are growing over the next few months,” Ms. Martin says.
The biggest hurdle, both in the film and television and digital media spheres, is finding talent.
“Because we’re still in somewhat early stages, for TV in particular, you need productions to grow, but you also need the talent to grow,” says Ms. Martin. “It’s just being able to balance those. We still have a smaller pool of talent than other cities. That’s the biggest challenge is being able to grow it bit by bit so that you gradually build the talent base.”
TRENDS TO WATCH
“I think the business models are changing,” says Ms. Martin. “Traditionally for film and television, a lot of the broadcasters or the distributors were traditional kind of gatekeepers, but now, I think that the companies who are able to find their own audiences and connect with the audiences directly and really take that into their own hands for marketing and things like that are going to be the ones that help to propel (the industry) forward. In gaming as well as digital media, the audiences are all out there, it’s just being able to connect with them and know what’s happening.”
Stephanie Davy, co-ordinator of Invest Ottawa’s film, TV and digital media department, says new Internet crowdfunding platforms such as Kickstarter, which is launching in Canada in September, are making the industry accessible to a whole new group of potential content creators.
“Instead of relying on a broadcaster, you can just raise the money yourself, release (a production) yourself,” Ms. Davy says. “Hopefully, people will take advantage of it.”
More than half of our life sciences companies are actually from the medical subsector. A lot are using technologies from traditional sectors like photonics and telecom and wireless and then applying those to the health-care industry.
Annidis uses optical-sensor technology to make eye examination devices. It’s the only device that can see through all 10 layers of your eye and detect potential eye diseases before they become serious. We have a lot of companies doing DNA analysis, such as DNA Genotek.
We have a big national medical devices institution. Tofy Mussivand (chair and director of the cardiovascular devices program at the University of Ottawa Heart Institute) is probably the No. 1 person in the medical devices software (field). He’s still doing a lot of cool things in his national medical devices institute. They are producing a lot of innovative technologies.
The second area we are stressing is health IT. The Ottawa Hospital was one of the first hospitals that introduced iPads to nurses and doctors ... so they can check patients’ records wherever they go and they can exchange records wherever they go. It’s greatly transformed the way health care is delivered to patients. A lot of national research institutes, such as the National Research Council, Ottawa Hospital Research Institute and the Ottawa Heart Institute, are here and we have a huge talent pool coming from them. In medical devices, the big players are Abbott Point of Care and Nordion. They probably employ more than one-third of employees in the medical devices industry. Best Theratronics are doing great in the advanced manufacturing area for medical devices. For health IT, we have big players such as IBM and Telus here. Both of them have their major solution-builders here. Patientway is a smaller company that deals with security of patient records. In the biopharmaceutical research area, Pfizer has a big R&D operation.
Canada’s largest cardiovascular health centre is here, the University of Ottawa Heart Institute. OHRI is the third-largest hospital research institute in Canada and we have two national centres of excellence here – the Canadian Stroke Network and the Canadian Stem Cells Network. With those here, it ( helps) attract talent to do more research in these areas and to encourage more commercialization coming out of those areas. And the medical devices institute is headquartered here.
Being the national capital region, one advantage we have is all the regulating bodies and all the decision-makers are here. Health Canada is here, the Public Health Agency
of Canada is also here. This all makes it very convenient for companies to get approvals from Health Canada and also to get further funding to do commercialization and research in the life sciences area. We do have all the key components for success – from industry, from the government, from the academic and hospital research side.
For life sciences, the overall R&D cycle to conduct biopharmaceutical research is long. People need to be patient. We need to keep contributing to those areas.
We need to align these three sectors – the government, researchers and industry – so we can continue to encourage more commercialization out of those research areas. Sometimes it’s a challenge to have the research people meet with the businesspeople so that things can happen. That’s something we really need to improve. For medical devices, we have so many cool technologies, but people need to work with the hospitals to understand their needs. Industry needs to talk with the doctors. They need to understand what the patients and the doctors need.
The third thing is the capital side. When it comes to life sciences, we see less and less focus and expertise from investor teams. We need to encourage more investment into this sector, to encourage more research and commercialization.
TRENDS TO WATCH
Medical devices and health IT, as well as technologies enabled by these new devices and new solutions, are going to be big in the life sciences industry. They will have a huge impact in how health care is going to be delivered, from the devices side, the applications side and the solutions side. In the future, you won’t really need to see the doctor face to face (to get medical results). Everything will be delivered to your own device (such as an iPhone or iPad) and you’ll be able to check your test results from different health-care providers.
This is going to be the next trend in the health sciences industry and it’s going to be huge.
Ottawa’s still a centre of innovation, and that also applies to the defence and security sector. There is quite a lot of crossover – a lot of the companies have expertise in both areas.
The main players in the industry, that hasn’t changed too much. We’ve still got Lockheed
Martin and General Dynamics. Because we are spending money on defence here now in Canada, Ottawa’s the natural centre. You’re close to DND headquarters and also the Coast Guard for the national shipbuilding procurement project. That’s $33 billion over 30 years – it’s going to be a long-term opportunity, it’s going to create jobs. And that’s just the actual funding from the government, and that’s estimated. Over time, that will probably increase. Even though we’re in the centre (of the country) and as far as you can get from the sea, we do have a lot of companies in Ottawa with expertise in command-and-control systems and other things that could be put on those ships. We’re supporting companies here, we’re partnering with them, but then we’re also trying to attract large international players here to Ottawa to help grow jobs as well here.
One of the selling points for Ottawa is we’ve got the broad range of companies. You think of any aspect of defence and security, any of the subsectors, you can pretty much guarantee we’ve got at least one company here doing that, everything from unmanned vehicle systems to airport security. Searidge Technologies, for example, has got this really cool application. You could be in Montreal and you could see what’s happening at the Ottawa airport and you could direct traffic. Even generally when a company’s main presence is elsewhere in Canada, such as
Marshall Aerospace and Defence, they’ve at least got a representational office here in Ottawa because they need to be close to ( government clients).
We’re one of the few western economies that’s actually increasing our defence spending at a time when everyone else is cutting costs. We have to acquire certain equipment ... so there are opportunities.
Even though budgets are being cut in the U.S., there are still huge opportunities. If you look at graphs of the world’s spending in defence and security technologies, the U.S. is up there and then you’ve got Russia, China and then it goes down. The U.S. is by far and away the largest market for our companies. Having said that, they are making some cuts, so we are trying to encourage our companies to look further afield and not put all their eggs in one basket. It’s got to be markets that we actually can get an export licence to, so we are somewhat restricted. Latin America, obviously Australia, Brazil, there’s opportunities there, some parts of Asia.
In my experience, it’s not unusual for smaller companies to be able to export before they can sell into the Department of National Defence here in Canada. There’s more money and opportunity for them in the U.S. Panacis (which designs and manufactures lithium power pack systems for the defence and aerospace industry), we’re working with them and helping them expand internationally.
We’re very fortunate here in Ottawa with the federal government procurement programs. I suppose the challenge might be that historically, they get pushed back and delayed.
My advice to all companies is to diversify and look at other markets. If you sat around waiting for a Canadian defence procurement opportunity, you’d starve to death. Canadian companies have been heavily reliant on the U.S. market historically, and there is still opportunity there. This is a good time now to start ( looking at international markets).
TRENDS TO WATCH
The sector moves pretty slowly. Defence programs run over a long period of time. I think there’s a lot of potential for companies in the sector. There are opportunities there, and they are long term.
Everyone’s familiar, for example, with cybersecurity being a huge area of opportunity. We’re already working with companies in that area. In-service support (is another area to watch) ... because once we do get around to acquiring this new equipment, that (field) will be quite lucrative. We haven’t got a shipbuilding industry here right now, and I hope that’s one of the trends. We’re going to help grow that back, and there’s going to be opportunities for Ottawa companies to be a part of that. There’s a real danger that we could be overlooked because all the focus is on the east and the west coast. It’s a national shipbuilding procurement strategy, so there should be equal opportunities for us here.
When we did our research project last year, we discovered that 74 per cent of the companies owning optical networking in the world have R&D centres here. Alcatel-Lucent has 2,400 people, Ciena is growing and Cisco is growing. Infinera is another player and a lot of people don’t even know they’re here. BTI Systems and Optelian are two Ottawa homegrown companies that are taking market share. These guys are here and they’re just quietly growing, for the most part.
BlackBerry, they always talk about Waterloo, but they need to talk about Ottawa more. They’re here, they’re doing all of their nextgeneration software here with QNX. Huawei’s here, too. IBM, they do all of their analytics stuff out of Ottawa with their acquisition of Cognos. We have everything from the components experts right through to the people doing applications. We’ve got the satellite firms, which includes companies such as CCom, EMS Satcom (which is now part of Honeywell) and Telesat, all of which are doing some great stuff. And then there are the backhaul companies, the DragonWaves of the world, the network management, the Bridgewaters (now a division of Amdocs). We’ve got kind of all of the pieces of that whole entire ecosystem, right from JDS on through. JDS is still here. If you go on their website, they’ve got lot of job recs out, they have over 400 people, they’re here and they’re doing great stuff.
The Canadian Photonics Fabrication Centre (an engineering and manufacturing foundry service) is the only one of its kind in all of North America. It attracts companies from all around the world. They’re like, ‘Oh, we’ve got this piece of infrastructure. Wow, look at the competency in Ottawa.’ These guys, they’re booming, they’re going 24/7 now, they’re looking to expand. It’s really quite a success story.
Ninety per cent of Canada’s telecom R&D is conducted in Ottawa. I’d argue there’s no other city in the world that has everything from the components right through to the applications. People really understand networks here in Ottawa. That comes from our legacy with Nortel and BNR before them.
A lot of the new companies that are coming into the sector are on the software side. The hardware is never going to go away, but to start a hardware company these days is really difficult. It’s usually a bit of a longer-term turnaround on investment, it’s a much more expensive play, you’ve got to prototype, you’ve got to do all these other things. So just losing some of that venture capital on the hardware side is something I hope changes for the sector. Two of the stars in my sector are (Kanata-based optical networking equipment vendors) Optelian and BTI Systems. I bet if we talked to them, they would probably say, ‘I don’t know if we could start this company today.’ It would be hard to get the capital to do that. And yet they’re two of our fastest-growing companies.
In terms of things we could do better, one of them is raising (the city’s) profile. I would argue we’re still the leader in telecom in Canada. The jumping-off point from that is all these applications and things that run on that network, and we’re certainly seeing a lot of new companies playing in that space, especially with having BlackBerry here doing all of their software stuff. It’s OK to be a telecom city. We need to be positive. We’ve got the competency to compete with other players in the world.
TRENDS TO WATCH
What I’m seeing in trends in telecom is this whole shift to programmable networks. A lot of the carriers, they’ve built the network and now they’re trying to get more out of the network. Terms like software-defined networking are really hot in the sector now. And that’s great, but if you don’t really understand the network and how it works, how do you write that software? We’re starting to see some new companies pop up. Network function virtualization is another term you’re going to see. That’s again ... trying to get more out of that hardware using software. How do you get more bandwidth? How do you speed it up? The Internet is everywhere, so how are we going to deal with this data overload? That’s probably the biggest trend I’m seeing in the sector ... and I’d say Ottawa is super wellpositioned for that. We’ve got that legacy – that core competency on the hardware side.
This test bed that we’re looking at building (to allow smaller developers to test out software on hardware from various companies), it will be able to test these new applications – so areas like health care, mining and energy are huge. Smart grid and energy projects, defence and security, particularly IT security, that’s super hot.