Is Ottawa still Silicon Valley North?

Canada's capital once had a nickname likening it to the sunny California home of companies like Apple and Google.

It was the large concentration of high-tech companies around San Jose, Calif., that led the area to be dubbed Silicon Valley. An abundance of those companies much further north earned Ottawa the nickname ofSilicon Valley North.

InJune, executives at Nortel Networks Corp., Ottawa's former high-tech star,began selling the company off, piece by piece, afterseeking bankruptcy protection five months earlier.Under the circumstances, some people wereno doubtquestioning if the city still deserves its nickname.

Denzil Doyle, chairman ofDoyletech Corp., which does business planning for high-tech companies, says Ottawa's technology industry is in rough shape these days.

"To put it harshly, it's not just in decline, but it's in decay," he says.

Claude Haw, president of theOttawa Centre for Research and Innovation, an economic development agency that promotes high-tech businesses,sees things differently.

"I think we've got a great technology base here," he explains. "We've continued to see the number of companies grow year over year for the last several years."

Less than a decade ago, there was no question. The western outskirts of Ottawa were weighed down with shiny, sprawling glass buildings on breezy campuses. Inside, tens of thousands of well-educated employees were researching and developing new technologies for companies with international clout. Surrounding them were smaller companies they nourished through the services they purchased and the educated workers they attracted to the region.

Now, the former JDS Uniphase campus is owned by local real estate company Minto Developments, which has leasedit to the RCMP to be used for new headquarters. Nortel's Skyline campus at Baseline and Merivale roads wassold to the federal government in 2003(the governmentput it up for sale again in 2007), while its 11-building Carling Avenue campus sits largely empty.

'Anchor' company

Jeffrey Crelinsten, president of theImpact group, a company that offers science, technology and innovation consulting services,admits a large "anchor"company like Nortel really benefits a city like Ottawa.

"It spawns new companies, it spawns experienced managers, it creates an environment that understands the global scene and it supports universities," he says.

It acts as a customer for smaller companies. It also provides huge opportunities for the development of staff in the many areas of its organization, giving them the skills tostart and headup new companies, Crelinsten says.

Doyle describes Nortel as an "incredible incubator."

"I think people completely underestimate the incredible impact that Nortel has had on the high-tech community in Ottawa," he says, crediting it with helping companies like Mitel Networks Corp., Newbridge Networks Corp. (bought by Alcatel in 2000),Mosaid Technologies Inc. andTundra Semiconductor Corp. get their start.

Startup struggles

Nowadays, Doyle says, many people in Ottawa have great ideas for a technology company, but are having trouble moving beyond the research and development stage.

"We're not getting the startups that we used to get, as our existing companies either get amalgamated or go out of business," he says. "Or many of them, of course, are getting bought out by foreign buyers and they tend to move them out of the country, primarily to the United States."

He says part of the problem is Canada's tax system doesn't offer the same incentives to invest in venture capital as it does to invest in oil or mining exploration.

Hawbelieves Ottawa is becoming less dependent on "large, large players."

"We've really seen a broadening of sectors, a significant number of smaller companies," he says. "The information and communications technology background that many people in the region have is very applicable looking at clean technology, at IT and health care so we're not so dependent on a single industry any longer."

According to the Ottawa Centre for Research and Innovation, there are currently 1,800 high tech companies in the region with 79,000 employees, the same number as there werein 2000.

However, that figure includes lawyers who specialize in high-tech and support staff. Statistics Canada, which doesn't include such employees, reported 54,000 employees in Ottawa's technology sector last year, down by almost 5,000 from the year before.

'It's more fragmented, it's smaller'

Crelinsten says there's no doubt the technology landscape in Ottawa has changed.

"It's more fragmented, it's smaller," he says.

But he thinks the destruction of Nortel has had an upside,as it has allowed smaller companies to pick up talented, experienced employees.

"The destruction of Nortel although it's short-term pain, it may be long-term gain."

He says that while Nortel may havepumped a lot of money into research and development, it didn't have a good business culture and wasn't spending the money in the right places.

"They weren't solving customers' problems," Crelinsten says.

Waterloo rising

AsOttawa residents contemplate what went wrong, Doylenotes that there is another Canadian city which seems to be doing a better job of nurturing its technology sector.

"The whole Waterloo [Ont.] area, there's something about it that they seem to have local angels there now that will take companies to a size," he says.

Doyle even suggests Waterloo might now be in a position to overtake Ottawa and claim its former title.

"They're still smaller than Ottawa, but they're moving at such a clip. Ottawa's becoming a branch-plant for Canadian companies," says Doyle.

Henotes that BlackBerry smartphone-maker ResearchIn Motion Inc. and business softwaredevelopment companyOpen Text Corp. both have headquarters in Waterloo, but smaller offices in Ottawa.

Crelinsten admits Waterloo is growing, but says Ottawa should be able to hang on to its technology title.

"Absolutely there's still a large critical mass of high-tech companies."

Even though the industry may be smaller now, he says that doesn't necessarily mean it's dying.

"It may become better," Crelinsten says.