Does Canada Even Need a Technology Sector?

In my mailbox this week arrived the latest issue of Canadian Business, one of my favourite magazines. Instantly I was struck by the cover: it was uncharacteristically stark and jet black, like the rare special issues newspapers sometimes run when an exceptionally salient member of society has passed away.

Only no one died. The 8-by-11-inch glossy tombstone was for Research In Motion.

Gravely titled “It Didn’t Have to Come to This” on the cover and “The End of RIM” on the inside, Canadian Business thoroughly documents the rise—and, more emphatically, the fall—of what was for several years Canada’s largest, most profitable, and most formidable tech company.

Now, it’s worth noting that the magazine has long been a cheerleader for RIM, so for them to pen this feature article, it speaks loudly to the state of perception of the Waterloo company. But we often talk about RIM on isolated terms: RIM cuts 5,000 jobs, RIM’s growth has slowed, RIM may have to split into two and sell. And that’s not an appropriate lens with which to observe the firm’s downfall.

What is more appropriate is to discuss the entire country’s tech sector at large, of which RIM remains a very significant chunk of. Those 5,000 jobs? It’s not just bad news for RIM, it’s bad news for Waterloo. It’s bad news for all of Canada, because many of them will fan out across the United States.

We’re also at risk of losing the country’s biggest research and development spender (by far; $1.4 billion in 2010). This would have substantial implications nationwide, severely afflicting the home-grown creation and commercialization of high technology across Canada.

Sure, some of those 5,000 stick around, and a few will even try to launch their own tech startups. But as Canadian Business pointed out, the same thought followed Nortel’s collapse—and that hope quickly faded after a startup-fuelled recovery failed to materialize. And business talent is “very impatient,” industry veteran Adam Chowaniec explains. “They won’t all stay here.”

Canadian tech entrepreneurs and others involved in the scene consider our country’s startup ecosystem to be faring well and expanding in most respects. However, everyone knows the usual cycle: a company gets big enough and a foreigner acquires it, extracting valuable talent and assets in the process. And when they don’t, Nortel—or, now possibly RIM—happens. That is, an excruciatingly slow and agonizing disintegration.

All of which begs a question: if our rare giants are doomed to fall and our startups are fated to exit outside of Canada, what sort of tech sector do we really have? More important, do we even need a tech sector?

It’s not something anyone reading this would naturally consider. But it’s a surprisingly legitimate question.

Canadian Business is quick to highlight the fact that we as citizens have tremendously high standards of living and that is largely as a result of multiple other sectors—namely mining, foresty, and oil and gas. So who really cares whether or not our tech sector grows or event exists? Perhaps it is not necessary to the success of our nation. And perhaps it is, especially after studying our history, conceivably impossible to maintain one anyway.

Our population is but a fraction of America’s, which places us at an instant, permanent, and steep disadvantage. Further, our tech firms are often valued lower than their US counterparts, which makes coming north for acquisitions an enticing opportunity for American companies with cash in their pockets. Indeed, Byron Capital Markets found that mid-sized tech firms in Canada are valued at a discount up to 34% compared with their US peers.

Maybe that’s why American titans like Salesforce keep coming back again and again, sucking the blood right out of us. Should we be bothered by the post-bite itch?