The B.C. tech sector is getting fat in the middle – and that’s a good thing.
It’s a bit tough to make predictions, what with the Mayan calendar predicting the end of the world, but I’m optimistic about the technology sector in 2012. The reason is that our technology industry, reaching middle age, is getting a little fat in the middle. And that’s a good thing.
According to BCStats, in 2010 the technology industry accounted for six per cent of the province’s GDP, creating just under $10 billion of annual output from its 85,000 employees. The vast majority of those employees work for either huge companies (local giants such as Telus Corp., MacDonald Dettwiler and Associates Ltd., PMC-Sierra Inc. or subsidiaries of multinationals such as HP, IBM or Microsoft), or for tiny companies with one to 10 employees, which number in the thousands.
If you were to map employee distribution and company size, you’d have something like an hourglass: big at the bottom, big at the top and not much in the middle. It’s great to have large companies to attract talent and startups to fuel the future, but the middle is where you get a healthy and sustainable indigenous industry.
Way back in 2002, I wrote a column that argued that our technology sector was too skinny in the middle, saying it worried me because we wouldn’t have the next generation of large companies to anchor our industry. Lo and behold, no large companies have emerged in the past 10 years, with the exception of Crystal Decisions which sold to Business Objects which sold to SAP and still employs nearly 1,000 people locally.
The small- to mid-sized, rapidly growing companies (50 to 500 employees) are the thickening middle. These are the firms that have made it past $5 million in revenue and accelerated their growth. The products or services of these companies have found global markets or become niche market leaders. Some have grown organically, while others have sought capital to fuel growth. Many have been in business for a decade or more, while a few have emerged in the past five years. These emerging leaders are why we are getting fat in the middle.
I predict that one or two of these will emerge as the next big technology company here, anchoring themselves here for a long run as market leaders, employing many hundreds of local knowledge workers. I also predict that a few of these emerging companies will sell in 2012 for no other scientific reason than we are due for a few bigger transactions, and the sales and profit of some of these companies will support it.
The new leaders of technology in B.C. will more than likely come from three distinct sectors: Internet media, enterprise software and clean technology. We have successful technology companies in many other sectors (Avigilon, Teradici and various life sciences companies), but we seem to be hitting critical mass of talent in these sectors.
In Internet media, which I define as companies making or distributing content or goods for consumers, we have some companies poised to make large advances in 2012 in BroadbandTV, A Thinking Ape, Fotki, BuildDirect, ParetoLogic and Plentyoffish.
In enterprise software, which has become more and more web delivered as businesses adopt applications delivered from the cloud or over mobile, the exciting mid-sized companies making outsized gains in global corporations in 2012 include Vision Critical, Clevest, HootSuite, Elastic Path, Make Technologies, Vivonet, Strangeloop and iQmetrix.
Clean technology is still emerging as an industry, but some companies locally have hit their stride and are selling real goods into global markets including Delta-Q, Nexterra, Endurance Wind Power and Tantalus.
While I might not be excited about being middle-aged and having a middle growing thicker, B.C.’s technology industry should be celebrating its maturity and girth. If my predictions come true, technology could be on its way to becoming top heavy a few years down the road.