Canada’s densest tech hub attracts R&D investment from global brands

itbusiness.ca
May 29, 2017
By Brian Jackson

When the federal government unveils its short-list in contention for the $950 million it has earmarked for innovation superclusters later this year, don’t be surprised if a consortium from York Region is on it.

Up to five superclusters will share the funding based on the merits of their proposals, with Innovation, Science, and Economic Development (ISED) Minister Navdeep Bains saying the objective is to create Canada’s own “Silicon Valley,” and create good middle-class jobs. Most industry watchers would expect to see bids come in from technology hubs that are often in the headlines - Toronto, Montreal, Vancouver, and Waterloo, Ont. - but it’s actually just north of Toronto, in York Region, where the densest cluster of Information, Communications, and Technology (ICT) employers in the country is found - with more than 4,200 ICT firms making 3.9 firms per capita. (See our Tech Sector Growth Map of Canada for more data.)

York Region’s growth does include startup activity, but its defining characteristic as a tech hub is its ability to attract investment from large multi-national companies with headquarters in innovation hubs like Silicon Valley, Beijing, and New York. Technology firms including IBM Corp., Huawei Technologies, and AMD are just a few examples of the region’s “Goldilocks” environment. It’s not too far from Toronto (linked by two major north-south highways), the office space is much cheaper than what’s found in the megacity, and the well-educated worker base can actually afford to buy the real estate near their office – meaning it’s just right.

The catalyst

It’s a secret that Pat Horgan, the vice-president of manufacturing, developing and operations at IBM Canada Ltd. knows well. He just opened the new IBM Innovation Space in early May, adding on to the Big Blue facilities available at its Markham, Ont.-based headquarters that have been open since 1995. But the 35-year IBM veteran remembers when the firm first decided to move its offices from Toronto to Markham in the ’80s.

“At the time, the concept of moving further north was to head to get to a more quiet area,” he says. “But we have significantly grown over our time here.”

IBM expanded from one building to two at its main campus, and opened up what’s become the largest software lab in the country at a third location nearby. As it grew, an eco-system sprouted up around it.

“We were one of the first,” Horgan says. “And as our partners moved in around us, it grew to now more than 1,000 ICT companies in Markham.”

Clustered around IBM are companies tightly woven into its eco-system, from partners like Flexity Solutions Inc. to mid-range managed services. Also sprouting up are startups, some of them hosted in the new IBM Innovation Space, such as Studio1Labs, which is making a “smart blanket” for infants that helps doctors and nurses monitor vital signs.

“You provide the sandbox and capabilities for people to work, and things really start to ripple out and grow,” he says.

IBM’s York Region hub has been much more than a sales support center and collaboration hub over its two decades plus. The office played a key role in developing artificial intelligence Watson to answer Jeopardy questions fast enough to defeat the game show’s most successful human champions.

It was the IBM Cognos team out of Ottawa that was developing the deep analytics that allowed Watson to answer questions with certain confidence thresholds. As it showed the audience for each response, Watson would only buzz in if it was at least 75 per cent confident in its answer. The Markham-based database experts helped accelerate how quickly that could happen.

“When we signed up to do that, the computer was taking nine minutes to answer questions,” Horgan recalls. “The team from Cognos got very involved in speeding that up and within eight or nine months we were able to help get it to its state where it won the challenge.”

Also emerging out of York Region are the airport kiosks that major airlines around the world use to provide self-service check-in and baggage tags. Horgan describes it as “a little-known Canadian invention that came out of our work here.” It started with a pilot project for Air Canada and quickly expanded.
The investor

IBM is hardly alone in using York Region as its research outpost for Canada. Moving into Markham in 2008, Shenzhen-based Huawei Technologies Co. opened its Canadian arm with a team of 22 people, recalls Scott Bradley, vice-president of corporate affairs at Huawei Canada. A decade later, it’s at more than 425 people, with 125 of those in a dedicated research facility.

“There’s a huge ICT ecosystem that exists in York Region and we wanted to be a part of that,” he says. “What exists in York Region is world class.”

Known in the consumer market for its smartphones, Huawei is working to develop 5G telecommunications equipment. The Markham-based lab, in particular, is dedicated to hardware acceleration research that will help that effort, as well as other applications such as machine learning.

Over the past five years, Huawei had plans to invest a total of half a billion dollars in Ontario, and in doing so it earned a partnership with the Ontario government. The province invested $16 million last year as part of its Jobs and Prosperity fund to help Huawei expand its R&D operations and add 250 jobs.

Bradley says he knows exactly where to find that talent.

“The talent is there in York Region, we’re looking to recruit people that thave been in the industry for 10 or 20 years, and they have families,” he says. “They’re at a point in their lives where being able to buy a relatively affordable house in the GTA is going to determine where they work.”

The returner

York Region does have a highly educated and diverse population available to hire from, agrees Sebastian Distefano, regional managing partner for the GTA at KPMG. Even better, it offers a growing host of clients for the consultant service company.

That’s why KPMG decided to return to York Region, years after departing the area for a Toronto location.

“We were in the region about 15 years ago and the firm when through consolidating offices and as a result we were relocated to North York,” Distefano explains. “We returned because we felt York Region was appealing for a number of reasons. The transit, the growth, and the talent.”

Based in Vaughn, a city located just north of Toronto along Highway 400, KPMG now has about 800 employees in York Region, or about half of its workforce for the GTA. To stay connected, the KPMG team encourages a virtual community approach where employees can choose to work from home, or out of a flexible office with hoteling spaces.

For many companies that don’t have the need to be based in the core of downtown Toronto, York Region’s cheaper office space is appealing, he says. For workers, they avoid a long commute in gridlock traffic, and have options for homes thanks to a boom in residential development that includes condo towers and ground-oriented housing. Transit is improving too, with a subway station connected to the TTC slated to open in December.

“There’s a number of incremental offerings that are finally being realized,” he says. “York Region and Toronto complement each other.”

The newcomer

The dense tech cluster formed in York Region drew in General Motors like a magnet. The automaker saw it as the obvious choice to host the Markham Software Centre, opened up June 2016 in an event that included Prime Minister Justin Trudeau, to develop the software that would be used in its autonomous driving features and infotainment systems.

“It offers access to some of the world-class research institutions nearby,” says Brian Tossan, director of Canadian Technical Centre for GM Canada. He points to the University of Toronto as one example. “It makes a lot of sense for us to go there and find the talent we need and make partnerships as well.”

As part of GM’s extensive footprint across Ontario that also includes the Communitech Innovation Lab in Waterloo and the Urban Mobility Campus in Toronto, the Markham location is still growing. The staff is now more than 150 people, working in state-of-the-art collaboration spaces that allow them to connect with other engineers around the world.

“We’re trying to accelerate our efforts in autonomous capabilities,” Tossan says. The team is also focused on next-generation infotainment systems that will be used in GMC-brand trucks and the Chevrolet Cruze.

“This is a very exciting system in the vehicle that represents the connectivity platform for the customer to bring their digital life into the vehicle,” he says. “We expect it will enhance the customer experience.”

A place to work, a place to live

As the ICT cluster in York Region cements itself as a place that technology leaders need to pay attention, IBM’s Horgan helps illustrate some of the intangible factors that draw people to the area. Over the course of his career at IBM, when he was not busy running the business, or volunteering on the Innovation Council of Newmarket, Ont., or serving as the Chamber of Commerce chair for Canada (just three years ago), or serving on an organizational board, he was being an involved father.

His kids grew up in York Region and he coached them on baseball, basketball, hockey, and even frisbee teams.

“That’s a form of parenting, but the community needs people to do that,” Horgan says.

So he did it.