Carl Rodrigues recalls being thrilled in August 2017 to have a sitting prime minister visit him at a Toronto hotel to discuss the future of his burgeoning company.
Just one detail was different than what he was hoping for. The visiting prime minister was not Justin Trudeau, but Ireland’s Leo Varadkar, who made a point of making SOTI Inc. one of the few private-sector companies he visited during a summer trip to Canada.
SOTI had written to Trudeau seven months earlier, inviting him to attend the unveiling of its future headquarters in Mississauga, Ont., which will eventually support some 1,100 jobs focused on mobility and the Internet of Things technologies.
But Trudeau declined to visit the potentially important research facility, though he did find the time, in January 2018, to visit several foreign tech juggernauts in Silicon Valley, including Amazon.com Inc. chief executive Jeff Bezos.
Canadian executives roundly consider such mild snubs from the Trudeau government to be a familiar occurrence, saying it points to Ottawa’s ready embrace of foreign tech companies at the expense of domestic firms, making it hard for scrappy young tech firms to find the attention and affordable workers they need to grow to commercial scale.
Rodrigues, the founder and chief executive of SOTI, is broadly supportive of Ottawa’s efforts to spur innovation, but said there is an instinctual, and often contradictory, support of Canadian companies’ multinational rivals that could have real consequences for the country’s broader economy.
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“While this government has been bending over backward to bring multinational companies to Canada, Canadian companies have been expanding internationally,” Rodrigues said.
Varadkar’s visit certainly appears to have yielded fruit for both SOTI and Ireland. In August 2018, SOTI announced it would spend roughly $30 million to build a branch office in Galway that would employ 150 people. The company is mulling further expansions in the country as it grows.
But industry insiders warn that the growth of multinational tech giants in Canada and the influence they wield over government policy, if left unchecked, could suffocate domestic firms on their home turf.
“It’s really these (Canadian) companies that are going to be the centre of the economy,” said Benjamin Bergen, executive director of the Council for Canadian Innovators (CCI). “If we don’t have big, successful tech companies, we’re going to find it hard to pay for the social programs that we as Canadians care about.”
CCI was co-founded in 2015 by Jim Balsillie, the former co-CEO of Research in Motion Ltd., which built BlackBerry into one of Canada’s few homegrown success stories. The council lobbies Ottawa to introduce policies it believes will allow the Canadian tech space to flourish, along with the roughly 100 executives it represents.
Much of CCI’s concern revolves around intellectual property rights.
In an increasingly digital economy, where data points are like the new oil barrels, IP rights are the lifeblood of any tech company. But because of the borderless nature of IP, companies such as Amazon or Google LLC can develop software ideas at branch plants all over the world, then sell the resulting products from those ideas through their central headquarters — typically in the U.S.
That process has led to criticism of such branch plants in Canada, which allow U.S. companies to develop IP while providing Canada little in the way of tax benefits or local job creation.
“My opinion is that government doesn’t know how to properly attribute the value of intellectual property developed by Canadians, as opposed to foreign branch plants,” said Craig McLellan, founder of ThinkOn, a data management company.
CCI has also decried the recent opening of human resources companies such as MobSquad in Calgary and Terminal Inc. in Waterloo, Ont., saying they provide little long-term value to the domestic economy because they channel much-needed Canadian workers into roles at non-Canadian firms.
The grand opening in October of MobSquad, which hires local engineers and developers on behalf of clients based in Silicon Valley, was attended by Minster of Innovation, Science and Economic Development Navdeep Bains, who has been central to Ottawa’s innovation efforts since 2015.
Bains appears to have aspirations to help build the next billion-dollar tech company in Canada. According to documents obtained by The Logic, an online news outlet, Ottawa believes it can create 10 technology companies worth more than $1 billion over the next 10 years, assuming the right policies are introduced.
McLellan and other executives appreciate the government’s newfound focus on technology under Bains and Trudeau, but say they have yet to see the necessary attention paid toward local companies.
As an example, McLellan points to a procurement bid opened in August 2018 by the federal IT agency Shared Services Canada (SSC), which was looking for private companies to consolidate a number of public data centres across the country.
As part of the bid, however, Ottawa stipulated that the firms had to have completed at least five prior data transfer jobs worth $10 million or more, ruling out virtually every Canadian tech firm, favouring multinationals such as IBM Corp. and Microsoft Corp.
A spokesperson for Bains pointed to a number of government programs and grants that Ottawa has introduced to help local businesses access Canadian talent.
“There is a focus on ensuring that at every stage, it is Canadians and Canada’s economy that benefits,” Hans Parmar said in an emailed statement.
Finding enough talent is another issue Canadian companies say they have, though foreign tech giants have strained the labour pool across the globe, not just in Toronto and Vancouver, said David Ticoll, fellow at the University of Toronto’s Munk School of Global Affairs and Public Policy.
“If you go to Silicon Valley, you’ll hear mid-size companies complaining about exactly the same issue, which is that the mega players are hiring all the best talent in these advanced fields,” he said.
Ticoll, like others, stresses that the problem is not new, but it’s difficult for Canadian policymakers to solve: neglecting to embrace multinational firms would make Ottawa seem closed to foreign investment, while letting them in threatens to put a damper on local industry.
CCI said Canada could begin to address the problem by barring foreign tech companies from accessing the Scientific Research and Experimental Development (SR&ED) Program, a tax credit that allows companies to write off R&D expenses. Currently Ottawa dishes out roughly $3 billion a year to cover such writeoffs.
In Ottawa, opposition MPs have a darker theory. Some say the problem is at least partly a result of the Trudeau government’s cozy relationship with lobbyists who represent foreign tech firms, which has benefited firms such as Facebook Inc. and Google.
For example, John Brodhead, a former chief of staff to Liberal ministers Amarjeet Sohi and Jane Philpott, left the party in April 2018 for a senior position at Sidewalk Labs, Google’s ambitious plan to build a digitally-connected urban space on Toronto’s waterfront.
The federal government, through an arms-length government agency, is a primary owner of the site where the project will be built. Brodhead played a key role in crafting Liberal infrastructure policy when Sohi was overseeing the file, which includes expanding digital infrastructure in Canada.
Similarly, Leslie Church, now chief of staff to Minister of Women and Gender Equality Maryam Monsef, came from a senior position at Google Canada in 2015. Before her role at Google, she had worked as an adviser to Liberal leader Michael Ignatieff. And Kevin Chan, formerly a policy director for Ignatieff, is now a senior executive at Facebook Canada.
“They have been so embedded with this Liberal government that decisions have been made that I don’t think are in the interests of Canadians, but are very much to the advantage of the data-opolies,” NDP MP Charlie Angus said.
“I think with this government, it was a belief that by being seen hanging with Google, hanging with Facebook, with Amazon, it would give them cachet. That might have been true in 2008, but I think it’s really out of place in 2018.”
On the other hand, policymakers around the world, not just Canada, are increasingly willing to attract companies any way they can.
For example, the Irish prime minister’s visit to SOTI’s facilities was part of a larger years-long effort to attract foreign tech firms to the country, often through a series of tailored government supports, consultancy services and tax breaks.
Tech companies have taken notice. Ireland has lured a number of sizeable players in recent years, including Facebook, which recently announced it would be expanding its Dublin headquarters and doubling current staff to around 8,000.
Rodrigues said that even a small gesture by government can have an outsized impact on a medium-sized firm such as SOTI, particularly as governments from Israel to Chile are aggressively picking off the most promising young startups.
“It’s an incredible honour to have the head of a country visit your operations, show an interest in your company, and talk to you one-on-one about the kinds of policies and supports he can offer you,” he said. “I don’t want to leave Canada, this is where I want to grow my company. But it’s hard when all these countries are throwing incentives in your face.”
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