Industry Committee on April 25th, 2013

[Alain Beaudoin]

Thank you for the question.

Just to go back and compare 2007 and 2011, my colleague here just emphasized that the definition of web presence is having websites. So they were looking at websites per se. I hope that answers your question.

With regard to your question about mobile technology, as we mentioned in our previous testimony, on March 7 the government announced additional measures that it's taking to increase competition in the wireless sector. We emphasized that the government is reviewing the policy on spectrum licence transfer requests with the objective of promoting a competitive environment, as well as expanding and extending the requirement for companies to provide roaming to competitors, and strengthening cell tower-sharing rules to further reduce proliferation and to deliver better services. Also, the minister emphasized a measure to ensure that at least four providers in every region can acquire spectrum in the upcoming 700 megahertz spectrum auction.

[Geoff Regan, Liberal, Halifax West, NS]

We heard some of that here. Thank you.

Let me ask you another one. A representative of the Canadian Chamber of Commerce was before the committee and made the following comment:

A recent study of G-20 countries by The Boston Consulting Group indicates that Canada is behind in the adoption of technology by business and in the size of our Internet economy. The study concludes that this gap will widen over the coming years, meaning that Canada will lag behind its global competitors even more. The $4.2-trillion opportunity represented by the Internet will pass Canada by. This gap exists across the economy, across sectors, regardless of the size of the entity.

That's based on a study by the Boston Consulting Group. Why is Canada missing out on a $4.2-trillion opportunity, and what's the government doing to change that?

[Alain Beaudoin]

I would have to go back and familiarize myself with the study you referred to, but I would say that a number of ICT companies in Canada are seizing these opportunities. There's a lot of growth out there. You referred to BlackBerry as one example. There are many Canadian ICT companies that are quite successful.

As a matter of fact, if you look at the ICT sector, there are more than 31,000 firms in Canada, small and large, and we have also the presence of a number of foreign companies with significant footprint and presence in Canada. Companies like Ericsson or IBM use Canada as an R and D centre of excellence. They see Canada as a location of choice for their investments, and they see Canada as having access to the type of talent they require in order to compete globally.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Beaudoin.

Thank you, Mr. Regan.

We're now going on to our five-minute rounds.

Mr. Braid, please go ahead for five minutes.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you very much, Mr. Chair.

Thank you to our officials for being here today.

Moving through your presentation, I have a couple of questions. Starting on page 6, there are statistics moving forward from 2007 to 2011, with 41% versus 70% having a web presence, and 8% versus 18% being online, between those two years.

Could you elaborate what's underneath these increased numbers? What's driving these increased numbers? I think we have all noted and agreed that they're still not good enough, but at least they're moving upward. Could you elaborate on what you think is underneath the move upward?

[Alain Beaudoin]

Thank you. That's a very good question.

I think a simple answer would be to say that increasingly firms see the importance of having, for example, a web presence. I referred earlier to tourism operators. Increasingly individuals are doing their bookings online. A large majority of bookings, as a matter of fact, are taking place online.

Obviously firms and SMEs will see the benefits of having a sophisticated presence online to, first, make sure they can be found, and second, to make sure that people can do the booking in and of itself. A lot of people might decide not to go to a particular location if they can't do the booking online. If there's a phone number to call, they might decide otherwise, depending on where they are and the type of customers they are.

With regard to selling online, I referred to companies like Beyond the Rack, and there are other examples. I think there's a firm not too far from your own riding, Well.ca, which is growing exponentially as well. It's a very successful firm. They see that there are some opportunities there. People are increasingly interested in buying products and services online. It's increasing.

This doesn't talk about increasing revenue as well, which is likely bigger in terms of growth as a whole.These are figures that capture just a certain number of firms. We talked earlier about how not all firms necessarily need to have a web presence, nor do they need to sell online. Some of them don't sell online, but they still need to have a web presence or to use digital technologies, for example, to manage their own supply chain.

There are different ways; this is not, in and of itself.... We will never reach 100%, just because of the industrial structure and because of the business structure of those firms, but it at least shows that there is positive growth. There is progress. The 2013 StatsCan survey results, which will be released in June, will give us a better understanding of how much progress we've made since 2007 or 2011.

Hopefully that answered your question.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Yes. Thank you.

Throughout your presentation, you mentioned two areas of business and business opportunity that I think are critically important—I think they're growing here in Canada, and as a result providing opportunities for further job creation—and those areas are cloud computing and the development of mobile apps.

Could you speak to what the government has done to help create a solid foundation and a good environment for the growth of business in those two areas? And what can we continue to do to make sure the growth in those two areas continues?

[Alain Beaudoin]

Thank you.

First and foremost, you have to make sure that you have good economic fundamentals. That is critical for firms. Canada fares really well on that front. It's something that firms will always look for.

They also want access to the type of talent they need in order to undertake the R and D they require in order to be innovative and productive. That's one key thing. Canada is recognized as providing the type of talent they require.

There's also a need to make sure that those companies can have access to the type of capital they require in order to grow. On that front, government has invested a significant amount of money in the last few years. In the last initiative announced in the budget, for example, $100 million will be provided by the BDC for companies that will graduate from business incubators to accelerators. A lot of these firms, for example, are in the ICT world.

You talked about computing and mobile. Well, one thing that's important is making sure there's an ecosystem and environment that will be conducive for those firms to grow. For example, in Toronto last year, IBM announced that they'd struck a $250-million partnership with seven universities to look at the issue of data analytics, which a lot of people refer to as “big data”.

[The Chair, Conservative, David Sweet]

Merci, Monsieur Beaudoin.

That's all the time you have, Mr. Braid. Thank you.

Mr. Lapointe, over to you for five minutes.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Having only five minutes to spend on such a technical and important topic is torture.

Mr. Beaudoin, I will try to present the four issues I am concerned about.

I do not like the fact that deputy ministers are appearing. I like meeting with you, given your knowledge, but you have a mandate. I will be very critical, but I know that this is your mandate and that things are not always up to you.

Here is the first issue I am extremely worried about.

You develop an equation and say that it will be possible to determine the increase, since the best statistics will soon be available. Yet you yourself admitted that you did not have adequate statistics in 2007. If good data is available on one side and bad data is available on the other side, the improvement cannot be assessed. The statistics should have been adequate from the beginning to make it possible to measure the increase. I do not understand that.

Will you make sure to cover different categories this time? By that I mean computers, communications equipment, the use of software, presence on social networks—which are like another world—domestic and international online transactions. Those factors have a huge influence on tourism. As Ms. Peters must know, the SME sector is big. Are the manufacturing sector and the goods and services industry looked at separately? Both sectors consist of companies of fewer than 500 employees, but they are still very different. Are you planning to cover all those aspects when, in principle, the data will have been improved?

As for the connection between Canada Job Grant and SMEs, I would like you to check something. The manufacturers association has many chambers of commerce in the regions. However, their opinions on that initiative with regard to SMEs are very negative. If a program requires 15 electricians, companies like Bombardier will be successful, but SMEs are extremely critical of this program. A small company that needs an electrician will not always have the required $15,000. This information is not coming from me, but from most SMEs. They find the program to be ill-suited to their needs. So before we say that this is a wonderful solution, these issues need to be looked into. That's pretty important.

My third point has to do with how our results stack up against those achieved in the United States. You may say that our results are extremely good, but the U.S. is our neighbour and main competitor. Our figures in terms of communications equipment are at 28.6%. Do you have any idea why? Is access to tools in francophone sectors slowing things down so much? Why are we so behind? We can't even produce a third of what they do.

Some of the aspects—such as having a computer—are not so bad. We are at 80%. However, we are at 28% when it comes to communications equipment. Something is seriously wrong. Do we know what is at the root of this? I think it would be very important to find out.

I am getting to my last point, concerning the whole e-commerce field. We have to position ourselves much better in that area. The U.S. administration is considering overtaxing e-commerce. The logic behind that is to level the playing field, since real retailers have to pay taxes.

Are we ready to deal with that? What is Canada's position? What would be the impact of Canadian e-commerce? Should we follow the American lead?

[The Chair, Conservative, David Sweet]

Mr. Beaudoin, you'll have to prioritize your answers. You have a minute and a half.

[Alain Beaudoin]

Allow me to begin with your second point, regarding the categories.

The questionnaire for the Statistics Canada survey is online. We will send it to the committee clerk. That way, you will be able to see that many of the elements you mentioned are included in the survey.

You also said that the programs are ill-suited to SMEs' needs. However, I cannot comment on some of the programs you talked about.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Can't this equation be applied to the Canada Job Grant?

[Alain Beaudoin]

I want to point out that IRAP helps companies adopt and use ICTs. It helps them hire experts to apply ICT solutions.

In addition, you talked about the differences between Canada and the U.S. Earlier, I mentioned the study conducted by the Centre for the Study of Living Standards. We are trying to gain a better understanding of what is causing the differences between Canada and the United States, and specifically why Canadian companies are investing less in programs than in computers. In terms of ratio, we are talking about 120% compared with the U.S.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Beaudoin.

Monsieur Lapointe, time is over now.

We'll move to Mr. Lake for five minutes.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Thank you, Mr. Chair.

Thank you to the witnesses. This is really interesting and you've highlighted one of the challenges we had as we were discussing the study in the first place. You'll notice that even the way it's worded, it's a very broad study, because it's tough to zero in on the areas and even to know where to zero in to start with.

I want to just go really basic here to start. When we're looking at definitions, there was a lot of talk about this chart on ICT investment per worker. When you say ICT, what is ICT when you're calculating those numbers and what is it not? Maybe having definitions of ICT would be helpful as we're moving through.

[Alain Beaudoin]

It's an excellent question. What we're using as a definition includes computers, communication equipment, and software.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Okay. So you're not saying labour per se, someone who works in ICT in an organization and supports people as they use their technology? That person wouldn't be considered to be divided among the rest of the company in terms of investment?

[Alain Beaudoin]

For those specific measures, no. The labour is not captured as part of those measures. Those are mainly capital investments.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Okay. Actually I was interested in the examples you gave. You gave Tim Hortons and a couple more examples when you were speaking. You just touched on them really quickly in terms of what they're doing. Maybe you could elaborate a little bit more on what they're doing that's successful. Why did you bring those companies up?

[Alain Beaudoin]

That's an excellent question.

There are many examples there. If the committee is interested, we can send more examples of what we see as success stories. I would encourage the committee, when you have the BDC and IRAP here to testify in the next few weeks, to ask them to tell you more about some of the key companies they think are great success stories.

The reason, Mr. Chair, I raised those three was to give a snapshot as to the fact that there are success stories out there. Some firms are optimizing and maximizing the opportunities that they have in front of them. There are great success stories. We think emphasizing those success stories raises awareness amongst various firms and various sectors of the benefits of, for example, having a more sophisticated presence on the web or being more aggressive when it comes to e-commerce or thinking about the possibilities that those technologies give them.

Very often when you look at what's going on in the ICT world, the initial intent of some technologies goes beyond what you think of it in terms of the applications. For example, if you go back to when the iPhone was launched in 2007, nobody imagined how important the application ecosystem would become and how these tools would be used, for example, to measure productivity by various firms in doing their day-to-day business.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

There's been a lot of focus on the stats, and I do get concerned when I read some of them, because I don't know whether they capture the full picture. I look at the 8% sold online versus 18% sold online. Even the phrase “sold online” nowadays is something that I'm curious to get my head around what it means. If I reload a Tim Hortons card or a Starbucks card online, I still go to the Starbucks or the Tim Hortons and use the card. Is that considered to be an online sale?

[Alain Beaudoin]

That's an excellent question.

It tends to capture goods and services.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

It's goods and services, but again, if I use my credit card to put $100 on a Tim Hortons card....

[Alain Beaudoin]

That would not be captured as part of that. It would not be an electronic....