Evidence of meeting #14 for Government Operations and Estimates in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was osme.
A recording is available from Parliament.
Conservative
Ron Cannan Conservative Kelowna—Lake Country, BC
The aspect of working with the status quo is not good enough. We want to move forward. What is your first suggestion as far as trying to help OSME to get the message out more effectively than we're doing is concerned?
From what you have here, it says: “Where OSME could use some help is to protect the existing base in the next few years.... So, in our view, we believe OSME requires new policy support.”
That's from the Treasury Board?
Conservative
President, Canadian Information Technology Providers Association
If you look at it from a business point of view, we often talk about let's protect the existing customers first. If you're losing customers, that is not a very good thing. So in OSME's case, the customer is the SME clients. If you're losing those clients, that's not a very good thing. But so far we've seen that they're expending lots of effort on going after new clients and new opportunities. I don't think that is time or money best spent. They should look at it from a more balanced approach by protecting some of the existing markets and then grow from there and build a foundation on that.
But the policy from the Treasury Board never really states how the government is going to deal with the SME people or the SME suppliers. It never had a policy for that. I searched around, and I cannot find it, unless you guys can point me to the right direction. They have the industrial regional program, which is not the same.
It's not idea-specific. I'm really talking about the SME segment. In political elections, many politicians talk about how important SMEs are. I did a study twenty-some years ago when I worked in the government. We used data to prove that SMEs are important to the GDP growth of Canada and it does not really have a solid policy on that. OSME is operating without such a policy. It has lots of difficulties getting other client departments to listen to them. It's too late when they go to OSME or go to PWGSC. The government or the client department has already decided that is the solution they want. You can't go back to change that.
Conservative
President and Chief Executive Officer, GrowthWorks Atlantic, Canada's Venture Capital and Private Equity Association
I certainly understand where he is coming from. I haven't had direct involvement in that kind of a situation with one of the companies we're involved in, but I can appreciate clearly what he is recommending and supporting, for sure.
Conservative
Ron Cannan Conservative Kelowna—Lake Country, BC
Mr. Gillham, I too want to congratulate your entrepreneurial spirit. I represent a riding in the central Okanagan, Kelowna. Actually, the CFIB just awarded them the number one place to do business in British Columbia. And similar to Springboard West, we have Accelerate Okanagan working with the B.C. Innovation Council and the variety of entrepreneurs in the community.
I'm just wondering, from your perspective, were you involved in an incubator program? How did you get your concept to commercialization?
Director of Operations, 2G Robotics Inc.
We weren't involved in an incubator program to start out. The concept really developed out of a combination of co-op terms as a student in this industry. I've always been interested in working in this industry. Then we moved toward development of the technology as a master's thesis at the University of Waterloo.
NDP
The Chair NDP Pat Martin
Ron, that concludes your five minutes. Thank you.
Now we again have, for the Liberal Party, Kirsty Duncan.
November 1st, 2011 / 4:50 p.m.
Liberal
Kirsty Duncan Liberal Etobicoke North, ON
Mr. Chair, thank you.
Mr. Yeh, I'm going to ask you a similar question to what I asked Mr. Gillham before. I meant to say congratulations, so I will now.
Mr. Yeh, could you tell about us five things that are working well in OSME and then give us five things that would be on your wish list, please?
President, Canadian Information Technology Providers Association
When OSME started, it was formed as a very small section within PWGSC. It opened regional offices. It hosted seminars. That worked well, especially for people who didn't understand how to deal with the government. They pointed out the MERX website, and they started using the website and things like that. After that it was able to find some funding to do a website and it did it very creatively. It is outside the Canadian government framework. If you look at its website, you'll see it doesn't look like a government website at all. It is using some new technology to be able to do searching and things like that; that helps a lot. Its office is always open. If you call them up, they always call back. We have good experience on that. If you have some procurement issue or contracting issue, they try to help resolve it. We understand what they're doing. I think those are the five good things I can talk about without specifically saying one, two, three, four, five.
You ask what is missing or what could be done better. I know they are putting some resources into doing a study on the future impact of Shared Services Canada or bundled contracts or large contracts. They're working on it. We've been talking to some of the other contractors and the internal staff. I wish they had some more power to actually go beyond that, not just say “I have a large contract; how am I going to do subcontracting?” I don't believe SMEs are looking for subcontracting. SMEs are looking for opportunities to actually compete in those cases, and that is one of the important factors. For a smaller contract, a multinational or large company can bid also. It doesn't mean...that does not exclude the large company from bidding. But when you have a hundreds-of-million-dollar contract, SMEs cannot bid. Period. It's the scale itself.
The question is.... We've been talking to OSME. I asked how we are going to handle these bundled contracts. It has no solution because there's no policy guiding it into what it should do or what it is able to do.
President, Canadian Information Technology Providers Association
In the policy we're looking for, we are not looking for a set-aside for SME or things like that. I think we're looking for what Pat was talking about a little bit earlier. On the U.S. side they are enforcing—at the department level, not PWGSC level—the break-down of contracts to a certain size, so the SME can actually compete in those cases. It's really at the client level, not the PW level. If you go to the procurement side and say “If you want to buy this, break it down”, the client department won't be happy. Not every single contract is buying an airplane or a tank or something like that.
Liberal
President and Chief Executive Officer, GrowthWorks Atlantic, Canada's Venture Capital and Private Equity Association
I won't give you five reasons. I'll give you one comment, and it was based on the comments of the CEO of the firm that took advantage of this program when he attempted to explain to me that if the purchase by a government agency is based on the specifications that company provides, then that company is excluded from future sales to that department or perhaps other government departments. I don't understand that. There's possibly somebody who can explain the rationale for that, but it didn't make any sense to me. That was one of the things he raised as an issue that would be a negative about the program.
Liberal
Kirsty Duncan Liberal Etobicoke North, ON
Thank you.
Mr. Yeh, do you believe that OSME reduces competition barriers and simplifies the contracting process in an effective manner? Provide details, please.
President, Canadian Information Technology Providers Association
In the last five years we have not seen a lot of evidence that they are able to do that. Reducing barriers, I know they did try that term, but they don't want to cross the line into influencing the clients as to how they want to buy stuff. If they're saying “I will make sure they post it on the MERX website or people can download it”, that's not removing barriers. That's just raising awareness. I think they on their part have a hard time convincing clients. That's why recently Ms. Miller was assigned to client engagement, as a director general also, because they saw that as a deficiency. They are not able to do it, so they got an additional role so they can talk to the client department and try to remove that barrier.
NDP
The Chair NDP Pat Martin
Thank you, Mr. Yeh.
And thank you, Kirsty. That concludes your time.
The last in this round is Bernard Trottier.
Conservative
Bernard Trottier Conservative Etobicoke—Lakeshore, ON
Thank you, Mr. Chairman.
Thank you, witnesses, for coming in today.
I really appreciate your comments about small and medium enterprises. Really, when you think about these companies and the entrepreneurs who start them in this country, it's really the foundation of the whole economy. When they're successful, they often become larger companies. Sometimes they break up into a bunch of smaller companies, but it's that culture of entrepreneurship that really drives our economy to create great things, create jobs, and create all kinds of economic activity for people.
My own riding of Etobicoke--Lakeshore has a very diverse economic background: food processing, light manufacturing, chemical manufacturing, creative industries like film and television and software companies. These are all, for the most part, small and medium enterprises. I just want to ask certain things in the spirit of how we can foster and nurture an environment where these companies can really move forward. OSME is one part of that. It's not the whole solution, obviously.
When it comes to OSME, and how we seem to be directing things through Public Works and Government Services Canada, I think there are some good news stories. In your presentation, Mr. Yeh, you mentioned $11 billion in contracts and about $4.73 billion, or 43%, went to SMEs, and that's everything that Public Works Canada awards. In your area specifically, IT hardware, there was $452 million in contracts; of that, $335 million, or about 75%, was awarded to SMEs. So I think SMEs are doing quite well.
Could you describe the value.... I think “reseller” doesn't really capture it. Maybe for the benefit of the committee, you're not just reselling; there's a lot of value that you're adding as a reseller in your industry. Could you describe the services when it comes to hardware that the Government of Canada uses?
President, Canadian Information Technology Providers Association
Actually, at the small and medium enterprise level of selling, it's totally different from buying from Best Buy or Future Shop--two different ways. At the SME level, it requires a lot of integration work, and a lot of introduction to technology. We bring them manufacturers, we bring them technology, we actually help them with installation, we help them to do testing, we help them to experiment with different technologies to move forward, and with proof of concept. We do a lot of these different types of activities. SMEs actually have certain specific skill sets that different.... We often use the term “value-added reseller”. Each value-added reseller has a different set of skill sets, so when you combine that with all those different value-added resellers, you form a very large knowledge base, and I think that is what they are looking for.
Conservative
Bernard Trottier Conservative Etobicoke—Lakeshore, ON
How is it you're able to outcompete your larger competitors, though? If 75% is going to SMEs within your industry, versus only 25% of the value of the contracts are going to larger enterprises, what is it about the agility or...? Maybe you can describe how you're able to outcompete them.
President, Canadian Information Technology Providers Association
If you're talking about large organizations.... For example, if you're using some large telco company, they're not at the same touch level. They might have the skill set level, but they do not attack the business the same way. They don't go to the engineering level or the management level or the working level to demonstrate how this technology works. They intended to go for a larger contract, and once taken over, they can introduce their own style. It doesn't mean they do a bad job; it's just a different approach. In the government, traditionally they buy it in the big-time format, called the task base format. They often are doing that.
Conservative
Bernard Trottier Conservative Etobicoke—Lakeshore, ON
Okay.
I have just a question for Mr. Hayes. Maybe it's a higher level than OSME, but you mentioned that among your members there wasn't a high level of awareness or utilization of OSME. Maybe you could just describe the state of entrepreneurship as you see it in Canada, and also the state of entrepreneurship in risk capital. Many observers have said that Canada kind of lags when it comes to entrepreneurship and risk capital. You're obviously in this industry, so can you describe how you see it, and maybe what things we need to take action on to improve it?
President and Chief Executive Officer, GrowthWorks Atlantic, Canada's Venture Capital and Private Equity Association
We certainly don't lag in entrepreneurship and the desire to grow successful entrepreneurs. This is not just a Canadian challenge. I was at a conference last week in Quebec City, where we update annually what's going on in the world of venture capital. Where we are having significant challenges is with the lack of venture capital, particularly in developed countries. And that's been a real challenge. It's a cyclical industry. Returns have not been great over the last ten years, and many of the traditional sources of venture capital have dried up.
What we're seeing internationally is government getting back and becoming involved in initiatives that encourage the formation, creation, and increase in the supply of venture capital. And in my view, that's the way to attack the whole issue of innovation, entrepreneurship, and commercialization of technology.
I had occasion to listen to the founder of VC in Silicon Valley, a guy by the name of Bill Draper. When they started out it was an industry in its infancy in Silicon Valley. And some of the companies we know of today--Google, Facebook, Twitter, Starbucks, and FedEx--were all small companies started by entrepreneurs who were funded by venture capitalists. You can have a tremendous economic impact on local and national economies if you have a supply of capital and people who are prepared to take risks and develop technologies that consumers want, as opposed to technology for the sake of technology.
I think the issue of addressing the dearth of VC is something governments should take seriously and become active in. We have lots of ideas on how we could solve those problems.
Conservative
Bernard Trottier Conservative Etobicoke—Lakeshore, ON
Can you share two or three of those good ideas? We'd all like to provide more risk capital, but how?