Industry Committee on June 6th, 2013

[John Cousens]

Yes, and on that, cloud computing is a trust revolution. It's not dissimilar to what banking became. We kept our money under our mattresses and then we gave it to the banks and we had to trust them to keep it secure and not have anyone access it. Then we had to trust them with credit cards and being able to manage that. Cloud computing is also a trust model.

For any kind of detail on how Canada looks at security and privacy in the cloud, I'll defer to Martin Kratz, our chairman of the board. Martin is a lawyer by trade and he knows this particular category cold. It's one of the main reasons I've asked him to participate today. It's a question that is best answered by a legal mind.

Martin.

[The Chair, Conservative, David Sweet]

Go ahead, Mr. Kratz.

[Martin Kratz, Chairman of the Board, Canadian Cloud Council]

Thank you very much for the opportunity.

In Canada we have a robust legal framework that provides through our private sector privacy laws for the customers who use cloud services to undertake certain privacy and security obligations for the individuals whose personal information they collect.

Through the Canadian Cloud Council we have been providing educational programs across Canada that have been benefiting SMEs on their compliance obligations so they can be aware of best practices around addressing the security obligations that the customers have and as a result, what the large and small vendors of cloud services have.

I'll be happy to answer any further questions you may have.

[The Chair, Conservative, David Sweet]

All right, we'll see what happens with the next questioner.

Thank you, Madam Gallant.

[The Chair, Conservative, David Sweet]

Now on to Madame LeBlanc.

You have five minutes.

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

Thank you very much.

I'm very happy to have learned a new French word. I really appreciate the fact that you translated your notes, although I will ask my questions in English.

Mr. Cousens and Mr. Kratz, have the government's failure to articulate a cohesive digital economic strategy had an effect on the adoption of cloud technology in Canada for government and SMEs?

[John Cousens]

I would say it's one of their roles. We've seen in other jurisdictions that this kind of leadership spurred economic development and got some innovation out of it, so I believe there is a role.

You've talked about some of the other barriers in Canada. There are many other barriers. We do have risk aversion to a lot of things, and it's new. I would liken it to 1995 and the adoption of online banking. There was a lot of skepticism.

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

Yes.

You have pointed out other examples where it seems that when government takes leadership, all the planets align. Do you see that? Am I correct in saying that businesses, SMEs, especially the ones that face barriers, seem to be aligned in adopting the technology because they see the government using it and they sort of embark on that?

[John Cousens]

Government can be everyone's largest customer. The federal government is massive. For a small and medium enterprise to say the federal Government of Canada is a customer of theirs, that opens doors for them everywhere else in the world.

I believe that was some of the vision that some of the other countries saw, that they were able to monetize intellectual property of a cloud provider in their backyard to go out and compete on a global basis. It is important from a first customer standpoint, and it sets that leadership. It also addresses the risk aversion. If government can adopt this and use this in a safe and secure manner, why can't the rest of Canadians?

I met someone last week, the CEO of a large Canadian organization, who said she was afraid to put her credit card in the parking meters in Ottawa. I told her that I would be more afraid handing her my credit card at dinner afterwards, because I didn't know where that card was going.

That's an example of the level of skepticism around digital technology: someone won't use a credit card for a parking meter. It's pervasive.

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

Yes.

You know, the spectrum auction is in the air. Actually, I had proposed a study on that, on spectrum licences and stuff like that.

In terms of the recent announcement of the postponement yet again of the spectrum auction to January 2014, what consequences do you see with regard to cloud computing or digital adoption by SMEs? We're talking about the 700 megahertz, which people call the “beachfront property” of spectrum.

[John Cousens]

I think it's one of the barriers. If you look in other jurisdictions around the world, access to this is cheap. I could use my enterprise resource planning software on this device, but I'd probably be less likely to do it if my staff came to me and said, “You're going to get a $500-a-month bill for doing it. Let's do it the old-fashioned way: wait until you get home, log into your computer, and do the promotion at that point in time.”

It is an absolute barrier to entry to have limited access to price competitive ability. A limiting factor on one element of cloud computing is the high cost of that, because there is somewhat limited competition. I would agree that this would be an element of it.

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

We keep pushing back the date of that auction. What are the consequences of the adoption, and actually of raising the bar? You showed some stark statistics on the place of Canada and how far behind we are getting. Do you see it getting worse or better?

People are moving fast in other countries in the SME adoption of technology. Do you see consequences to that postponement of the spectrum auction?

[John Cousens]

It just pervades the status quo. We've become used to it. We all examine our cellular phone bills, our various types of access to Internet on a monthly basis, and we sit there and try to rationalize how we can do that.

I think Canadians have just become used to it.

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

Canada is a very large country with big cities but also a lot of sparsely populated regions. How could cloud computing help the small to medium-sized businesses that are located in faraway regions?

[John Cousens]

As long as you have access to Internet, which....

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

Yes, and that's the thing, too.

[John Cousens]

Perhaps there's a national broadband strategy to come at the next session.

Look at the example of Angry Birds. That was created by a 14-year-old in his basement because he had access to the Internet and he had an idea.

That is the opportunity that cloud represents. It's not exclusive to a university grad. It's not exclusive to an organization that has billions of dollars to spend on IT development. It democratizes information technology and the ability to develop and create ideas for businesses like that.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Cousens and Madame LeBlanc.

Now we'll go to Mr. Warawa for five minutes.

[Mark Warawa, Conservative, Langley, BC]

I was just going to launch the new game called Angry Politicians.

[Voices]

Oh, oh!

[Geoff Regan, Liberal, Halifax West, NS]

That happened last night.

[Mark Warawa, Conservative, Langley, BC]

I want to focus my questioning on business and the limited level of participation in Canada from SMEs compared to the United States, for example, and on the changing business models.

You highlighted Netflix. Who would have thought five or six years ago that your local video rental places would virtually be gone? It changed very quickly. Yet in the vast majority of Canadian businesses, we see a resistance to be involved in this changing model of business. What are those barriers?

I want to focus on the report, Mr. Ciobanu. You've said in your report that 731 firms have been participating in the DTAPP. Over 500 of them have received funding, so that's most of the 731, about two-thirds. As of today, 118 have completed the digital adoption projects, so they've received some of their funding. Is there additional funding to come as they complete that adoption? Also, because of the DTAPP, you say that 87% of these firms are more likely to undertake another step in advancing.

My focus is on expanding their market. They have an old model that they're using, and now they have something that could be marketed throughout the world using digital technology. What are those barriers? You've highlighted the lack of experience with this technology, because it takes a risk to move on to this whole new way of doing business. Where is that experience?

You're providing some of that experience due to your programs, but where is the experience we need so that business gets buy-in? Is it through the Chamber of Commerce? Is it through the National Research Council programs? How do we get buy-in from SMEs?

[Bogdan Ciobanu]

Actually, if you allow me a clarification, we have reached in excess of 2,500 companies so far through different channels, through our partners: the colleges, the Canadian Manufacturers & Exporters association, and the other partners that we have. Through different sessions, workshops, information sessions, and exchanges of best practices, many more companies are aware of digital technologies, of the benefits for them, and of the way they can assess their needs and acquire technology.

For the 730-plus companies, we have started working on specific, concrete projects. Out of those, about 511, I think, have received funding and have started a project, and 20% of them, or 118, have finalized and implemented the technologies and are benefiting from the implementation.

I think the best way a company learns is from examples from their clients, their competitors, and their neighbours across the street who own a similar business. When there is a success, they can learn, and this is part of this DTAPP pilot project: the learning. First it was the awareness. We have invested a lot of time, resources, and expertise in making as many companies as possible aware of this. Now, when the results start to come, we will increase the learning and the sharing of the best experiences and the best practices that are learned through those processes. This is a separate part of the DTAPP, and it's a very important one, because this will help us improve it, or renew it, or provide different services to firms.

My personal experience is that they learn from each other. What IRAP can do is bring them companies that have succeeded and bring them experts—consultants, engineers, scientists—as close as possible to their operations.

[The Chair, Conservative, David Sweet]

Thank you very much.

We'll move on to the next questioner now.

Mr. Stewart for five minutes.

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

Thank you, Mr. Chair.

I want to move over to Mr. Cousens. In the World Economic Forum data that you gave us, to follow on Madam LeBlanc's questions, you highlight that in government procurement of advanced technology products we're ranked 47th in the world. Just below that I see “Local supplier quality”, where we're ninth in the world.

I'll let you get to the slide with the heading “Canada's Imperative”. We have 47th in terms of procurement and then ninth in terms of supply quality. So other countries are supposed to be higher than us but actually have a lower quality of things to buy.

Do you have any thoughts about why that might be occurring?