Industry Committee on Oct. 19th, 2011

[Michael Deturbide]

I think the issue is not necessarily whether one jurisdiction's way of approaching security is better than another's. Bill C-12, which is on the horizon and I hope will be passed, is certainly going to require businesses to turn their minds to security and security issues. But particularly with respect to small and medium size businesses, that's going to be a problem, I think.

I guess I would follow up with what several people here have said, including Mr. Bergeron, for example, that smaller firms need help in investing in ICT. Part of that would be security. First of all, there has to be an awareness and, secondly, they have to have the infrastructure in place. And that means dollars.

All of the studies I've seen seem to indicate that small and medium size businesses, at least at this stage, are not turning their minds adequately to the security issue. That's going to be to their detriment. Frankly, Canada is a little bit behind the ball here. We do have Bill C-12 on the horizon. Other jurisdictions have passed legislation that, for example, requires businesses to have certain security measures in place and, if they don't, to report security breaches. That is something, I think, that is going to come.

It begs the question, though, what small and medium size businesses can do about that. First of all is the awareness issue, and second of all is the financing to put things in place so that they are able to meet the requirements of the legislation.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you very much for that.

I'd like to move on to Mr. Beatty.

I first met you when you were a dynamic young MP in southern Ontario.

[Perrin Beatty]

That's a very long time ago, Mr. Julian.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

It's nice to see you have the same energy today.

I have two questions. First, you raised the fact that Canada is being outpaced. You mentioned other jurisdictions, including Denmark, South Korea, Australia, and the United States. The question of resources has come up, and I want to ask you what you think the federal government should be doing.

Secondly, on R and D, we've consistently seen, including with the Jenkins report, that Canada ranks last in OECD countries in terms of direct investment in R and D.

Those are problems, and so I would like you to address the issue of resources. What are these countries doing that Canada isn't doing, and what should Canada be doing?

If you could do that in a minute or so, if you wouldn't mind....

[Voices]

Oh, oh!

[Perrin Beatty]

Again, I'll turn to my friend Morgan to comment on other countries.

The key is that in Canada, the federal and the provincial governments must be facilitators. You must look for ways, first of all, of taking impediments out of the way of business investment and, secondly, providing incentives for business to roll out the various elements of infrastructure programs that need to be in place.

As it relates to R and D, if I can wear my hat from the Canadian Chamber and also from the UOIT. We do a good job in Canada in terms of public sector R and D. We don't do a good enough job in terms of commercializing public sector research in Canada. We do a poor job of that. We underinvest in terms of private sector investment in R and D. I think part of what the Jenkins report was trying to do was to ask how we can leverage more investment by the private sector and make sure that it comes to market.

We haven't had a chance to study the Jenkins report fully at this point. A number of the recommendations he makes look attractive to us, and others raise some concerns with us. But in terms of the general direction he wants to go in--encouraging better investment in R and D, better commercialization, and more innovation--it's the right direction to go in.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you very much.

For that final question, because I think I have another minute, Mr. Gupta, you mentioned the issue around education and training. Again, tragically, Canada is last in the OECD in production of doctorates, Ph.D.s, so this is clearly another area where Canada's falling short. Is that something that's having an impact in the fact that we're lagging behind on e-commerce, in the fact that we are last in the OECD for the production of doctorates?

[Karna Gupta]

Thank you for the question.

The big part of this is that it has to start at a very early stage, down to the high school level at grade 10, because there is not enough awareness and training that kids can go into ICT as a career. So when you look at the ICT community today, it is a fairly small community and there are a significant number of job gaps. Most of the kids are still not properly trained in this area.

Several initiatives are under way. The Canadian Coalition for Tomorrow's ICT Skills is looking at some of the new programs for universities and high schools to promote that notion. So there has been some development. If you ever get a chance to look at CareerMash as a website, it talks about why young kids should go into ICT as a career choice. So we need to start there. If you don't have that and you don't have sufficient ICT-trained professionals, all the downstream technology development, usage, and adoption will suffer.

We feel that the training part is a critical component in terms of building the overall knowledge base.

[The Chair, Conservative, David Sweet]

Thanks, Mr. Gupta, and Mr. Julian.

Now let's go on to Mr. McColeman for seven minutes.

[Phil McColeman, Conservative, Brant, ON]

Thank you, Chair.

I, too, want to thank all of the panellists for coming in today. It's a very important area that we move forward on.

As you know, and I'll direct this question to Mr. Beatty, it's important for us to pass the copyright law, as you had referred to in your comments, because of the impediments to businesses and consumers.

Do you believe that if it gets delayed for any length of time, we will just continue with the situation we're in today?

[Perrin Beatty]

I can perhaps give you some personal experience. When I was Minister of Communications 20 years ago, I attempted an initiative on copyright. Successive governments have tried to modernize the copyright regime for Canada without actually being able to bring it to fruition. It is important that we act now and modernize the regime.

I should stress, though, that the government said, when it reintroduced the bill in the same form it was in during the previous Parliament, that it will consider making amendments at committee. There are serious technical amendments that we have to propose to improve the bill and to make sure that, in fact, the clauses in the bill deliver on the expressed intent of the government.

So, yes, it should be an expeditious process. There's a great deal of material on the public record as a result of the work that was done in the previous Parliament, but amendments need to be made to the bill as well.

[Phil McColeman, Conservative, Brant, ON]

Thank you for that.

I want to direct my next question to Mr. Bergeron, in terms of the rollout that he had talked about.

My background is that I have owned a company of 20 employees all my working life. So I was right in that small category prior to getting into politics.

Entrepreneurs in this category—and my area was construction—often lack any resources and skill sets within their operations to even begin to look at tackling this issue. They may dabble a bit, but in a lot of ways they rely on their peers and what other people are doing within their own industries, associations, and what not. What are some of the strategies that the BDC has been using to reach out to the people who provide 80% of the employment within this country?

[Michel Bergeron]

I'll start at a high level and then ask my colleague to complete it.

Fundamentally, what we're trying to do is based on three pillars. The first one is about how we can increase awareness around the benefits of ICT for the competitiveness of a business. This here, for instance, is an IT guide on how to leverage IT for basic issues of your business. It's a free guide of 30-some pages. The interesting thing is that it's all based on real-life stories of other entrepreneurs and how they've leveraged ICT for marketing purposes, how they've leveraged ICT in terms of customer relationship management and for productivity enhancement. We try to connect the dots between what ICT can do and how we can help boost the top and bottom lines.

There are other initiatives, and we're working on the various content campaigns right now. Through conferences and workshops we're talking to our employees. As an example, we're training all of our account managers on the benefits of ICT, so they can have a structured discussion with their customers when they meet with them locally. There are various tools that we're trying to leverage just to increase a tiny bit the understanding around the benefits of ICT. If they are starting to be interested and they say that because of competitive pressures, etc, they understand that they need to do something, we've also developed some tools around improving consideration of ICT. For instance, we have a free online assessment where they can test their website. They'll get a free assessment of how their website ranks within minutes, of 10 to 15 pages, depending on the complexity of the website. That's an example. It also identifies for free some of the strategies they can put forward to make improvements.

If they say they need to go further on this, we've developed a group program at a reasonable cost that allows them to go through the basics of IT management to get a clear action plan for their own business. It's a mix of training and private consulting. These are examples. If they say they need to implement the plan, this is where the financing and consulting programs come in.

Pam, do you want to add anything?

[Pamela Darragh, Assistant Vice-President, Information and Communications Technology Solutions, Business Development Bank of Canada]

Sure.

Mr. Bergeron summarized it very well, but there are some additional pieces I'd like to add.

BDC has a small consulting group and we leverage a large pool of external consultants who bring their expertise to the table in addition to our own internal expertise. We currently have 500 consultants on what we call our network of consultants, who bring their expertise to the table. It's a matter of leveraging our own internal expertise and leveraging a pool of external consultants who can bring their expertise to the entrepreneurs and function as their trusted advisers to help them through the process. It's a combination of the online tools that are available, the financing products, and the consulting operations that can help walk them through that.

[Phil McColeman, Conservative, Brant, ON]

That's excellent.

Over the years I've been familiar with some of those programs. These seem daunting for some entrepreneurs. If we could ever break some of those barriers down and figure out ways to do so.... I don't have the answers to give you or to give you my thoughts on that, but we can continue to break those barriers down.

As I sit on another committee, the human resources and skills development committee, I know that we've allocated $60 million in funding for the next three years to promote enrolment in the key disciplines related to the digital economy, such as science, technology, engineering, and mathematics. This blends well with what you're talking about here today in terms of trying to develop the expertise that can move into small companies in the beginning stages. Perhaps these can be entry level people who do know the technical side of it to help entrepreneurs move forward.

I have one last question, Mr. Chair.

Mr. Beatty, you talked about foreign investment and how important it is to get investment. As we all know, the Canadian investment environment is very risk averse in comparison to a lot of other countries.

Are there ways that the chamber can see of changing that culture in our country, or is there a way that governments can be involved in assisting and helping to change what a lot of people have commented on is a much lower risk tolerance by venture capital in Canada?

[Perrin Beatty]

I don't know that we're unique in Canada. There's a problem, particularly with small firms growing in Canada to a larger size. The studies that I've seen indicate that Canadians are as entrepreneurial as any other country, but the real difficulty has been.... For example, the folks from RIM forgot the Canadian playbook—not that PlayBook, but the usual one.

[Voices]

Oh, oh!

[Perrin Beatty]

The Canadian playbook is that you start your company, then build it up to a certain size and sell it to somebody else. RIM demonstrated that you can stay in Canada and build a world-class company right here in Canada. BDC is a part of that, and other government programs are a part as well.

We need to provide the financing at critical stages, particularly pre-commercialization of new developments, which is an area of importance. We need to give greater incentive for investors to be able to put their money into start-ups. We need to give better assistance in terms of the education of entrepreneurs and so on. There is a range of things we can do to help Canadian companies grow to size.

[The Chair, Conservative, David Sweet]

Mr. Beatty, I'm sorry to interrupt you. I gave you some grace there, but I need to be honourable to all members and give equal time.

[Perrin Beatty]

I was only getting warmed up, Mr. Chair.

[The Chair, Conservative, David Sweet]

I noticed.

[Perrin Beatty]

Apparently, when I'm around politicians, it has this effect on me.

[The Chair, Conservative, David Sweet]

It's one of the things that's going to demotivate me for the rest of the day, seeing that I stopped all that momentum.

Mr. Hsu, for seven minutes.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Thank you, Mr. Chair.

My first question is directed to Mr. McLean. But if anyone else wants to jump in, it's a specific question related to a recommendation of the Jenkins panel.

You talked about the SR and ED tax credits. One of the recommendations of the panel was to focus the SR and ED tax credit on labour costs only, and to remove the tax credit for materials and capital equipment costs. How will that affect the adoption of ICT by small and medium size enterprises?

[Ian McLean]

I must confess I'm not an expert on all of the details of SR and ED, but I guess the theme among the recommendations that makes sense to us is to make it easier to understand. There are a lot of small businesses in our chamber that may not be tax specific, but they can utilize a program like that to adopt e-commerce opportunities.