Saskatchewan's advanced technology industry is emerging as "the next big thing," says Greg Sutton, executive director of the Saskatchewan Advanced Technology Association (SATA).

Evidence of the robust growth of the advanced-technology (AT) industry was released Nov. 21 in a state of the industry report, TechVIEW, commissioned by SATA.

The study was completed by Calibre Strategic Services and Innovo Consulting, and financed by SATA in partnership with Saskatchewan Industry and Resources and Western Economic Diversification Canada.

The report is an important snapshot of the growth of Saskatchewan's AT industry. "This report shows where we're very strong, where we've had success. It also shows where we need to have a stronger focus," says Sutton.

Jeannie Armstrong, Business Edge
SATA executive director Greg Sutton, left, and president David Milne see the TechVIEW report as an important snapshot.

"The report shows that the Saskatchewan advanced-technology industry has never been more poised for growth and expansion," notes David Milne, SATA president and a director of TRLabs in Saskatchewan. "SATA is determined to help Saskatchewan become a global leader in the knowledge-based economy.

"But we really need to focus and commit our energy to capitalize on these opportunities."

The study revealed that 935 companies in Saskatchewan's AT industry had 27,015 employees in 2004, generating an estimated annual payroll of $1.5 billion.

In that same year, these companies hired 1,815 graduates. "Over 85 per cent of the hires were from Saskatchewan. This industry is creating good jobs for Saskatchewan graduates," says Sutton. "Not only is the AT industry keeping our youth here, it is also attracting young people from other regions. For example, 7.5 per cent of all new grads hired came from Alberta."

VCom is one AT company recruiting new employees in Alberta. The company is a designer and manufacturer of advanced broadband products.

"We have a number of people from Alberta and some from Manitoba. When we advertise for staff now, we advertise across the Prairie provinces," says VCom chief operating officer Hugh Wood.

Wood reports that VCom's sales have increased by 42 per cent over the past year. Approximately 77 per cent of the company's sales, totalling $48.5 million for the 12 months ended June 30, 2005, are to export markets outside Canada.

Wood reports that VCom hired 100 new staff in the last year, bringing the company's total staff number to 515.

With skilled workers in demand by all sectors of industry in Saskatchewan, Wood says it has become more challenging to meet VCom's staffing needs. "It takes a bit more work. We're actually doing some publicity these days to encourage students to go into technical careers, including engineering and computer science at the University of Saskatchewan, and into technology programs at SIAST (Saskatchewan Institute of Applied Science and Technology)."

More than 40 per cent of employees in Saskatchewan's AT workforce have undergraduate or post-graduate degrees. Another 30 per cent hold technical training diplomas. Less than 30 per cent have secondary education only.

"It's a very knowledge-based industry. To compete on a global scale, Saskatchewan needs to have this level of education in our industry, and to harness the knowledge and innovation that come with that," says Sutton.

The AT industry will be an increasingly important factor in Saskatchewan's efforts to retain its young workforce.

"The AT industry presents great opportunity for young professionals," says Sutton. "Nearly half of all employees in this sector are under the age of 34, and another quarter are between the ages of 34 and 44. This means the current workforce has many years to contribute to growing the industry."

Saskatchewan AT companies chalked up gross sales revenue of $5.1 billion in 2004, an increase of 4.8 per cent from the year before. More than 25 per cent of total sales were to export markets, primarily to the U.S. and countries of the European Union.

"The most export-oriented sectors of the AT industry are electronics and instrumentation, life sciences, and information and communication technology (ICT). The sector reporting the fastest sales growth in the industry is ICT/new media," says Sutton.

Dispelling the myth that AT companies are dependent upon government grants and tax credits, the report reveals that the majority of startups in this industry are self-financed.

"The 'do-it-yourself' nature of Saskatchewan advanced-technology entrepreneurs came through very clearly in this report," says Sutton.

During the first two years of business, personal funds made up 44.7 per cent of sources of financing, with operations and cashflow providing 26.8 per cent of capital. Only 16.9 per cent of capital was contributed by commercial financial institutions.

Financial support from commercial institutions increased after two years, as companies demonstrated early success. At this point, financing from personal sources diminished to 14.6 per cent.

"Although many companies have been able to succeed through self-financing, there are many others unable to get off the ground due to a lack of access to capital," says Sutton.

"Sometimes, it's only $20,000 that's between you and your idea getting off the ground. If you're unable to get traditional financing, this could really be the missing step in the equation."

Sutton says the report will be an important step forward in improving the investment climate in Saskatchewan. "Having this study done shows the investment community that Saskatchewan's advanced-technology industry is a strong industry. It is worthwhile investing in this industry, because there is potential for economic return, for investment return. It's not the dot-com era that we saw come and go. This is a solid, well-established industry."

One strategy stemming from the report is SATA's establishment of an angel investment network to bridge the gap between entrepreneurs and investors.

"Another strategy is within the realm of scientific research and experimental development (SR&ED) tax credits," says Sutton. "We're looking at different ways of structuring the provincial component to make it into a tax refund, which would inject money earlier into an AT company.

"Because it's currently set up as a credit, a company can't realize the benefits of that credit until it has a net income to pay taxes on. If you're in the commercialization or pre-sales stage in your company, and you don't have any income to report, the credit doesn't come into play. We're trying to find as many ways as we can to ensure success, as opposed to only rewarding success."

"We need to continue our collaborative consultation with industry, government, academia and the sciences in order to make sure that we incorporate and create actions for growth," Milne says. "The recommendations from this report will be merged into an action-based strategy, our TechAction initiatives, to grow our advanced- technology industry."

"It's a good time to be a tech company in Saskatchewan," adds Sutton. "There's a lot of support in the investment community, in government circles and in the education area.

"We have the synchrotron now and an entire infrastructure of world-class research facilities that industry can work with to leverage technology and knowledge to really grow."

(Jeannie Armstrong can be reached at jarmstrong@businessedge.ca)