Industry Committee on June 6th, 2013

[John Cousens]

That's interesting. I hadn't looked at the divergence between the two numbers.

Canadians are innovative. There's a lot of great things that have come out of this country in the technology space. The challenge is that first customer. Having been there and taken my IRAP funding, we spent that not on responding to an 800-page government RFP, but we directly worked with another country, New Zealand. That was our first customer and we did it over the phone. The barrier to entry was low. That was a big thing for us at that time.

The other piece of that is small and medium enterprises need credibility. Credibility comes with a large brand name. There was a company in Canada that was acquired a couple of years ago. Their first customer was Facebook. That really helped them. A big customer gives credibility to small and medium enterprises. Government opportunity represents that for this. What that does is it gives somebody the chance to say that the Government of Canada, which has hundreds of thousands of employees, is their customer. It validates them. I think you heard that in the Jenkins report. I think you've heard that from other speakers who have come here before. They can then go to other jurisdictions around the world and say that they have passed that test. That is a big barrier and it is one of the themes of what we've presented to you today.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

It's interesting because we've heard from the Jenkins report and before that procurement is a big thing that other countries have cottoned on to and really pursued with a lot of vigour. But again, it troubles me that we seem to have more than ample opportunity and we're not doing it here. It's part of not having perhaps an overall strategy on how to deal with this. Maybe we don't notice these things until they come to committee. I hope we would notice it beforehand but it is good to make the point.

The other thing I was looking at is the availability of scientists and engineers. It looks like we're sixth in the world, too. There would seem to be an ample supply of talent and an ample supply of suppliers. Yet this seems to be one of the missing links, that is, the government perhaps is not procuring the way it should.

You've given us the 2012 rankings. Do you know if it's increasing or decreasing? Are we getting better at this or worse at this?

[John Cousens]

I haven't seen anything more recent than that, except for the e-government report that came out in March of this year. Those are the two reference points that I saw.

I would respond in a couple of different ways.

The overall climate that we described among Canadian enterprises and individuals is risk aversion and for the government it is the same. From an adoption aspect, it's very easy to avoid risk because they don't want to end up on the news or the front page of the Globe and Mail if they did something risky. There is a co-dependent relationship between our private sector enterprises and government. We're both fairly risk averse about adopting new things because of what if it fails. There's very much a fail fast mentality in some of these other nations; that is, fail fast, I'm not going to get punished so I can move on and be successful. It is the new model on how people are developing their technology ideas. They are encouraged to fail very fast and come out with the next one and make it better. It's a cultural change not just in government but in industry to do that. It's fail fast, learn from it, and then rapidly accelerate and come back out again doing something else. It's risk aversion in both parties.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

It's interesting how in the U.K. they have a national audit office that basically establishes measures and targets for various departments and the way they insulate themselves using this. They say, “Here is something we're adopting; we're going to measure it a year out, and if we don't hit it we'll take it out.” It's quite public and transparent. It's not all secretive. It removes the public risk for politicians if they go in stating goals and objectives and they are not reached. Actually, it's kind of boring. There's less to talk about in the House of Commons when you say, “Here's the target; we didn't meet it, so we're trying something else.” I always thought that was impressive.

I wanted to move to a different question about the value of basic or scientific research. We have been talking a lot about the far end of the chain with commercialization, but what about the front end of the chain? What are your thoughts about the value and perhaps how we should be supporting that? Perhaps that's a question that can be open to all members of the panel.

[The Chair, Conservative, David Sweet]

No, we can take just one brief comment and then if somebody wants to respond to it later, they can.

[Bogdan Ciobanu]

I have a general comment.

Of course there is value in both basic research and the application of this research to commercialization. There is a continuum.

I think this is the most important thing for our economy, for our innovation economy—to instill this innovation mentality along the whole chain of the innovation process from the basic research to the commercial utilization of this research for commercial applications.

[The Chair, Conservative, David Sweet]

Thank you very much.

Madam Gallant, go ahead, please, for five minutes.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Thank you.

I'm going to go back to cloud computing. For government everything is about security. In terms of backup and redundancies, what sort of pieces are put into place to protect against either the system going down, or a part of it going down, or even the electricity going off?

[John Cousens]

I'll respond in a couple of ways, and I'll ask Martin to chime in as well.

Most modern providers of cloud computing are no different from traditional providers of outsourcing. They have to have a service level agreement that has to meet a certain uptime and they build out their capacity to meet that. Those are terms and conditions that are always negotiable with any of these providers out there, whether they be Canadian, European, or American. That is built in. Security is usually built in.

I would analyze that by saying that the brightest minds in the world in information technology are developing this. When we went to online banking, smart minds made it secure, so secure that I'll transfer money from chequing to savings on my iPhone. That problem can be solved. Innovation will come from these challenges.

I'll ask Martin to address the second piece.

There are already Canadian innovators in Canada solving the security problem for the cloud. Out of the MaRS program, funded by the Government of Ontario, there is a Canadian company that is specifically addressing making the cloud more secure. It's happening in our backyard. They looked at the global trends and they invested in it. The Ontario government invested in it and they're becoming the leader. Those challenges actually create the opportunity for innovation.

Martin, do you have anything to add to that?

[Martin Kratz]

Yes. Typically, cloud service providers seek to meet international standards of security and privacy compliance that apply to the legal regime in which they operate. Those would address issues such as in-transit encryption of communications to and from the data centre and the encryption of data while at rest or while stored. As an initial safeguard and for transparency and trust building, there are regular audits to verify that the cloud service provider is meeting the applicable requirements.

There are best practices being used. Our association is helping to describe and communicate those, and those are available to governments or the private sector in order to manage the risks and utilize the benefits available for cloud computing.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Are there benefits to cloud computing in terms of it being more secure against hacking?

[John Cousens]

We can provide some studies which state that they now believe the cloud can be more secure than the status quo.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

What about tracing leaks? If somebody leaks a document, is there a way to trace what station or which user leaked a document that was still embargoed?

[The Chair, Conservative, David Sweet]

Go ahead, Mr. Kratz.

[Martin Kratz]

Thank you.

I was just going to add a comment that for SMEs particularly, they usually don't have a lot of IT infrastructure or IT security staff. They have a very lean small team. The advantage for them in using cloud service providers is that they get the benefits of huge scale in terms of compliance with national and international standards for security. As a result, for those organizations there can be a dramatic improvement in security in terms of their IT performance.

[John Cousens]

To add to that, there is a point to note that we can provide to the committee afterwards.

About two months ago the CIA announced that they were awarding a contract to Amazon Web Services for $600 million to build their cloud. Even that organization which has the incredible resources and numbers of scientists that it has at hand, the CIA were looking to the commercial sector to figure out how to build something secure for them. That was a dramatic shift. That was a game changer as far as validating the industry and the business model are concerned.

There is stuff like that happening out there. That's part of what we want to encourage the committee to drive further investigation into, because there are opportunities.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Okay.

I have a question on the U.K. government app store. You mentioned that an SME could sell an app to the government and that the government would then charge departments a portion of the fee. Or would they charge the different departments the full fee for the app? I'm trying to figure out where the savings would come from for the government in terms of it holding the app.

[John Cousens]

From a U.K. perspective, any kind of modernization.... If they had a business requirement from a department, and that business requirement was to manage a grants program for a term of one year, they would look at that app store and see five providers, let's say, and one with the functionality that is most aligned with their need, in that it's mobile and it works on a mobile device—because this is in the regions—and they would then....

The app store is merely a brokerage for procurement purposes with the private sector firm, which would then provide that software as a service, in that particular case, to that agency for that term. The agency would put their business requirements in there. They would use it for that term. They would pay per user per month for operating costs and would have no capital expenditures.

That's where the savings came in. That was the fast, rapid ability to deploy that they were looking at. That's where they got those savings in efficiencies, but also the time to market and the predictability in IT expenditures.

[The Chair, Conservative, David Sweet]

Thank you very much.

We'll now go on to Madam LeBlanc for five minutes.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

I will just continue with cloud computing, because when I finished earlier, you were mentioning what it needs. It needs the Internet. Do you need special high-speed Internet access? Are we looking at three things, those being access, affordability, and reliability? What type of Internet are we looking at when we are doing cloud computing or if we want to do business with cloud computing?

[John Cousens]

Most businesses can't live without Internet of some sort. Most businesses in Canada have that access. With Internet access can come access to those cloud-based solutions, so if you have that, you are doing quite well.

The other challenge is in certain regions. If you go out into northern regions, the challenge is in the ability to access that bandwidth. In certain regions in Canada, we just don't have that yet, so that is a barrier. As well, it is very, very expensive in some of the northern regions of the country.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Okay. You were mentioning access to the Internet wherever you are in Canada. Does it have an effect or is there a consequence of Canada's lagging as far as innovation goes? You were mentioning how access to the Internet and the cloud computing business drives innovation. Does it have an effect?

[John Cousens]

Yes, absolutely.

Look at Australia. They have a national broadband strategy. It's not cheap, but neither was the moon shot. They're doing it because they want to enable all those diverse communities. They have a very broad country as well, and if you get that into the hands of the person who will be the next 14-year-old who creates Angry Birds....

It is an opportunity to have that access, because it does democratize the ability to create ideas and put them out in that space.

That is what we call cloud computing.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Right.

The fact, too, is that we want all regions of Canada to participate in the digital economy. I'm coming back to the spectrum auction. Have you followed the different rules? Do you feel the rules that are in place right now for the spectrum auction, the 700 megahertz, will help to build it up, roll it out, and give access to the different regions of Canada? Do you feel that there's provision in the rules for making sure that all regions of Canada can benefit from access to the Internet and affordability and reliability?

[John Cousens]

Competition is good. Competition is very good. As I said earlier, if you have an employee who wants to use a cloud-based solution but the cost per month on his mobile device is well over $1,000 because of the usage costs, I'm going to tell that employee that he's not using it, and to use it through a different channel. That is a barrier. That prevents adoption, and that prevents innovation, so it is one of those things. Competition would eventually drive down some of those costs.