1 About half of all ICT outputs in Canada originate in Ontario MEDT’s Approach: ICT is a priority sector Support for research, researchers and research infrastructure Commercialization - COE’s Innovation Infrastructure Cluster Networks Facilitation and Partnerships

2 ICT Industries Employ: 56% (over 36,000) of R&D scientists and engineers (i.e. professionals) in Canadian business. 60% of all Masters’ degrees (over 4,800) among R&D scientists and engineers. 32% of all Ph.D.s (over 1,300) among R&D scientists and engineers. Source: Industry Canada, 2002 Ministry Priority = Better Workers for Better Jobs in an Innovative Economy

3 Martin Task Force – Innovation contingent upon increased BERD Majority of Canada’s largest and most innovative ICT companies are in Ontario

4 Collectively ICT companies are the most R&D intensive Even without Nortel’s dominating presence in R&D, ICT is the largest investor in innovation.

5 80% of output and employment now coming from software & services. However, ICT manufacturing still plays an important role in creating new knowledge.

6 ICT is doing more with less - output increases despite slower growth in employment Growth in ICT mostly in the services sector. However, output growing faster than employment. Consolidation Threat? How does this impact Cognos, Open Text and other leading Ontario- based global software leaders?

7 Global Reality: low end of innovation spectrum Most routine, low skill manufacturing and services. Majority that don’t require proximity to markets and have been outsourced. Characterized by emergence of new competitors able to offer same level of service at lower cost –Tech support, application development, back office operations and routine assembly can be outsourced and moved offshore. –China, India, Philippines, Russia and others emerging as key competitors for jobs and investment in IT services and manufacturing. Outsourcing and new global environment can present benefits for Ontario’s ICT companies –Improve productivity. –Ontario ICT companies have been exploiting global growth markets through “offshore” partnerships. –Ontario can be an offshoring recipient.

8 Manufacturing and services are more complex but competition is quickly growing. Some niche markets exist in convergence areas such as medical devices but market share is quickly eroding as emerging markets become more sophisticated. Overseas markets are not only competing on cost but are increasingly competing on quality. –According to PWC, many of India’s top outsourcing firms have attained software quality standards ahead of North American competitors. –According to a Deloitte Survey 19 per cent of companies identified improved quality as their main driver for offshoring. Global Reality: centre of innovation spectrum

9 Complex, emerging and convergence technologies in niche market areas, which requires highly skilled & specialized labour and cutting edge capital inputs. Emerging economies are beginning to compete for research- intensive jobs. –In September 2004, Bill Owens, CEO of Nortel said at an event hosted by OCRI that Chinese telecom manufacturers, Huawei Technologies and ZTE are forcing established players like Nortel and Lucent to cut cost and adopt more flexible product strategies. At the same time, these companies are becoming increasingly sophisticated in their R&D capabilities. Tech multinationals are investing directly in facilities and R&D on location in Asia to capture market opportunities. Several well known examples: –Nokia plans to develop 40% of its new handsets at a research center in Beijing. –WiPro employs 6,500 people in and around Bangalore doing R&D for others, including nine out of ten of the world’s top telecom manufacturers. Global Reality: high end of innovation spectrum

10 Success of ICT is linked to companies focusing on high-end technologies SectorsNiche ActivitiesPlayers – Companies/Research Institutes Microelectronics Digital imaging equipment MEMS Semiconductor design ATI Technologies Dalsa Zarlink Semiconductors Tundra Semiconductors Software & related services Business Intelligence software Digital entertainment Encryption technology Open Text Cognos Hummingbird Alias Dreamcatcher Interactive Telecom Wireless VOIP Nortel Research in Motion Bell Canada Redline Communications

11 The Competitive Environment SkillsNetworks R&D Business Technical Universities Industry – MNE & SME Government BasicApplied Attract & Retain Capital/Investment Reduce Cost Increase Trade Increase Innovation In a perfect world Ontario can compete in a competitive environment by ensuring that its Innovation System is working. The Innovation System

12 What’s Missing? SkillsNetworks R&D Business Technical Universities Industry –MNE Government BasicApplied SMEs Skills: need the right mix of business and technical skills. Ensuring that new grads not only have the best technical skills but also business and management skills as they enter the workforce. Networks: ensuring that Universities, Industry and Government are able to work together in achieving their goal. Also, SMEs need to be included in the innovation process. R&D: support for basic research; enhanced focus on demand pull. These three areas need to work together in order to be effective.