Industry Committee on June 13th, 2013

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Johnston and Mr. Stewart.

And by the way, Mr. Regan never looks bored here at the committee.

Now on to Madam Gallant, for five minutes.

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

Thank you, Mr. Chairman.

To our witness, you mentioned that you provide services to the aerospace industry, and perhaps the defence industry. What types of services do you provide to that sector?

[Michael Johnston]

We provide mostly media and software development. We tend to work for the larger primes who have defence contracts and have IRB offset obligations to fulfill, and we'll help do 3D graphics development or e-learning courseware development, those kinds of things, including Unity 3D, mobile development for a simulation that needs to run on a mobile device. Those are the sorts of projects we do. The services are very similar to what we provide to media clients, but in this case to aerospace and defence primes.

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

What is an Xpage?

[Michael Johnston]

Xpage is actually a Java-based framework that IBM has built. It allows for a sort of Java script front-end ability to build a more structured webpage to communicate with others.

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

Provide the service in utilizing that Xpage.…

[Michael Johnston]

I'm sorry. Could you repeat that? The beginning was cut off.

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

I was just looking up your company and it has different references to using the Xpages. Do you provide the service of using that framework for your clients?

[Michael Johnston]

That's right, yes. For example, the Xpages framework from IBM is something that if a client invests in back-end server infrastructure, we'll build the custom applications for that client on top of that technology, such as a learning management system, a corporate collaboration tool, a workflow system, using those building blocks.

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

You had mentioned that for digital media and gaming, there are some provincial programs that support your industry.

Would you please describe those?

[Michael Johnston]

Here in Nova Scotia, there is a digital media tax credit administered by the Nova Scotia Department of Finance. It's called a digital media credit, but really it's a video game development credit. It's a labour-based credit that allows us to claim labour expenses, providing an overhead uplift, and some marketing expenses for a qualifying project that is really a stand-alone video game. It needs to meet certain criteria of interactivity and adaptability. There's a book of guidelines we need to comply with. If it qualifies, if it's approved by the department, we can attract labour-based tax credits at a certain percentage.

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

With the cloud-based programs that some companies are using, there seems to be more of a lag time getting from one page to the next, or one section of the application to the next.

In gaming, one would expect you to be using as close to real time applications as possible. How has your company seemed to overcome that lag that exists in many other cloud-based applications?

[Michael Johnston]

Right. A lot of the games we build tend to have local client installs that only use services in the cloud for things that aren't sensitive to the time response. We'll build games that run on your mobile device, but only then push your top score to the cloud, or allow you to post something to Facebook, the kind of service where it doesn't matter if it takes an extra half-second of lag time. I fully agree that there are a lot of online gaming tools through some of the consoles, such as Xbox Live, where a millisecond of lag time means the difference between getting a flag or not. We build fewer of those kinds of games.

On that side, we're more concerned about building video delivery engines. We build a lot of video players for media clients who are very much concerned about the lag time on delivering streaming video for a music video, a live event, an awards show. We do a lot of development work where we build out tools that can adapt to the available bandwidth and break down packets and only send every other image down the wire—things that help the client overcome that sort of limitation of bandwidth at different client locations.

[The Chair, Conservative, David Sweet]

Thank you very much, Madam Gallant and Mr. Johnston.

Now on to Mr. Harris, for five minutes.

[Dan Harris, NDP, Scarborough Southwest, ON]

Thank you.

I'm getting a chance to follow up on my previous line of questioning, since we didn't get it finished.

I notice you've been writing down some of the questions.

Do you still have the one I was asking about gaming and what could be done at the federal level? We weren't able to get to that part in your answer.

[Michael Johnston]

Right. That's true. You mentioned some of the announcements at E3, I suppose, hadn't you?

[Dan Harris, NDP, Scarborough Southwest, ON]

Yes. Canadian game developers seem to be doing quite well and succeeding. How do we keep that going and continue growing it? I ask because, of course, we do have the gaming hubs in Toronto, Montreal, and Vancouver, and we have hubs growing in Edmonton and Winnipeg. With a company like yours in Halifax, how do we keep that going?

[Michael Johnston]

I think we've touched on a couple. We spearheaded some of the announcements at E3 by the Entertainment Software Association of Canada. We know that group well and we're part of that survey process, so some of those results reflect some of our information as well.

I like to think that sectors like video gaming are in some ways a bit of a bellwether for the future of the entertainment and IT sectors in this country. I find that the talent we use to build video games is the same talent we need to use to build websites, health care applications, HR tools, corporate learning applications, and defence simulations. The technology landscape is blended. I use the same type of person, sometimes the same person by name, to do all those different types of projects because the technology is very transportable.

I worry that if we can't keep that talent in this country, a lot of other sectors beyond video gaming are going to suffer. It's an attractive sector. People understand it. Some tax credits are geared to try to grow that sector. I think if we use that as a bellwether and allow ourselves to attract and retain some of that talent and grow that sector, there will be a lot of ripple effects that we as an economy will feel because of that. Whether that's provincially administered the way it is now—and I would argue not as well as it could be—or if there's room for more of a federal role, I'd certainly love to talk more about that.

I think some of the other issues we deal with at a national level, such as talent in general and immigration, have been more difficult. I've gone from hiring a couple of people—two, three, or four a year—from outside of Canada to not having hired anyone outside of Canada within the last two years because the process is just too slow and costly. There's also lack of understanding of and a lot of change in the copyright regulations and trademark understandings, and the process and cost of registering that. As we build more original games ourselves, the cost and process for registering those marks and protecting that IP across the world is confusing, expensive, and a bit daunting. So some help there would certainly be welcome as well.

[Dan Harris, NDP, Scarborough Southwest, ON]

It's ironic that you bring up copyright and trademark and intellectual property because our previous study was on intellectual property, and the next thing this committee will be dealing with is the bill on copyright and trademark that just passed second reading very late last night. So we'll be coming back to that hopefully on Tuesday.

I had brought up the digital economy strategy before, and we didn't really get a chance to go into that. Do you find Canada to be lacking a vision and strategy for the digital economy, and that we should be pushing that forward so we have a vision of where we want to go and how and what we want to do with that?

[Michael Johnston]

Not to put too fine a point on it, I think the digital economy touches every sector of our national economy. Point to any company now that doesn't have a billing system, an e-mail system in the cloud, and laptops, tablets, and smart phones, they need people who can understand how to get value out of them. I think if we don't have a national strategy to drive that forward, to structure, to make it cost-effective and understandable to businesses not just like mine.... I speak technology, and we do this all day. I hire people who tear apart Xboxes at home under their bed, but there are a lot of companies out there for whom technology is daunting, but they really need to invest in this area to grow forward. Yes, if there's room to help every sector of our economy to understand how to apply ICT in a more creative and cost-effective way, I think we'll all be the better for it.

[Dan Harris, NDP, Scarborough Southwest, ON]

Thank you, and yes, I'm out of time.

Coming from an ICT background myself, I share your challenges.

[The Chair, Conservative, David Sweet]

Thank you.

Mr. Carmichael, you have five minutes.

[John Carmichael, Conservative, Don Valley West, ON]

Thank you, Chair.

Thank you, Mr. Johnston, for your testimony today.

I'd like to go back to a part of your opening remarks. I'm familiar with a company that is in the technology world and originated in Calgary and has moved much of its operation to Newfoundland. It found that, outside of the lifestyle—and you've addressed that as a cost of doing business—people were more readily available and more competitive. The opportunities presented to it made it worthwhile for it to take advantage of some of the provincial opportunities.

When you talk to my colleague's previous comment about the various digital hubs across the country, the various digital environments in so many of the major centres across Canada, can you tell us how you compete one for one with those in your industry when you look at Toronto, Montreal, Winnipeg, Edmonton, etc? That is the first part.

The second part of that would be to get a better understanding of this. It seems to me you're dealing on a global basis, certainly a North America-wide basis, with very specific skill sets. You're highly specialized. You bring a product to the market that is unique, from what I understand from your testimony. I'm not sure if that's fair or accurate, but could you speak for a minute about competitiveness across Canada, for starters, with those thoughts in mind?

[Michael Johnston]

I honestly think in some ways I've tried to avoid that by selling to non-Canadian clients. We do competitively bid on projects to our American and European clients with other Canadian firms. We've lost a couple of jobs to some great companies.

Sorry?

[John Carmichael, Conservative, Don Valley West, ON]

That's more what I'm relating to, other Canadian companies that might play in the same space as you do.