Glenn McDougall: The Ottawa Technology Cluster

The Ottawa area has been fortunate over the years in that it has always had a good supply of entrepreneurs and innovators. While most of us consider the origins of what we call Silicon Valley North or the Ottawa  Technology Cluster (OTC) with the start-up of Computing Devices of Canada Ltd. However, in 1948 – seventy years earlier, there were two gentlemen by the name of Tomas Ahearn and Warren Soper who were extremely active entrepreneurs.

Tomas Ahearn was fascinated by the work that Alexander Graham Bell was doing in the early 1870’s on the development of the telephone and he decided to try to develop one of this own. A telegraph operator by trade, he assembled something out of cigar boxes and in 1875 he is said to have established a telephone link with another telegraph operator in Pembroke. On the strength of his ingenuity, he was hired to run Bell’s Ottawa office in 1879.

This gave him a platform from which to experiment with all sorts of innovators. In 1888, he and Mr. Soper got the contract to construct and operate the first electric streetcar system in the city and he patented efficient electric heaters to keep the cars warm. Ahearn obviously knew something about product migration strategy because in 1892 he unveiled what was the predecessor of today’s electric stove. It was probably inevitable that the electric stove would be developed in Ottawa, because the surrounding area was a hotbed of wood stove manufacturing. (Pardon the pun). Towns like Carleton Place, Smith Falls and Merrickville had been manufacturing wood stoves for at least thirty years and some of them were quite ingenious. You could cook meals on them, bake bread in them, boil water in them, and dry socks with them. In fact, if we wanted to be precise about it, the wood stove was probably Ottawa’s first high-tech product because it was a major departure from the open fireplaces that were used by Canada’s early settlers for all of the above purposes.

The technology era that was introduced in 1948 was quite a different one than that pioneered by Ahearn and Soper. Computing Devices was founded by two Polish engineers, Joe Norton and George Glenski with financial backing by a prominent Ottawa entrepreneur by the name of Peter Mahoney. Its early products were a digital trainer for the Canadian navy and an instrument known as a position and homing indicator (PHI) for the Canadian Air Force. The company grew very rapidly during the fifties and early sixties, supplying a wider variety of systems to the Canadian military.

It also generated a lot of spin-off companies, one of them being Leigh Instruments of Carleton Place. Wile most of Leigh’s key people came from Computing Devices, it technology came from the National Research Council. Its first product was a ruggedized crash position indicator (CPI) to assist in the location of downed aircraft. Its early investors were prominent business people from throughout the Ottawa Valley, but it is interesting to note that the group was led by the Findlay family of Carleton Place who had been in the stove manufacturing business for more than a century at that time. It was not the first instance of a new generation of entrepreneurs (and technology) being funded by a previous generation. One of the companies that spun out of Leigh Instruments was Lumonics whose early products were laser systems developed within the Defence Research Board laboratories. Its early financial backers were the people who managed the MacLaren Lumber Company of Buckingham, Quebec. In fact, the origins of the venture capital industry in Ottawa can be traced to the MacLaren people. They sold their company to Noranda in the early seventies and Noranda decided to set up Noranda Enterprise, a venture capital company focused on high-tech investments. It played a major role in the financing of several Ottawa high-tech companies like Dy-4, Mitel, and Cognos.

At about the same time that Leigh Instruments and other spin-offs from Computing Devices were establishing what was predominately a military era of the OTC’s development, a giant new wave of development was on the horizon. In 1962, Northern Electric established a research laboratory on the western outskirts of the city. That laboratory was later called Bell Northern Research and it became the research arm of Nortel, which became the new corporate name for Northern Electric.

The technology and the products developed by BNR bore little or no resemblance to those developed by the military-oriented companies mentioned above. The company was focused on telecommunications, but telecommunications with a new twist, in that it was nearly all digital in nature as opposed to analog. The objective was to take advantage of computer technology to send voice and data through telephone networks more efficiently and with more tolerance for noise on the lines. The company made intensive use of highly compact integrated circuits and soon developed a huge pool of expertise in the design of such circuits.

At the urging of the Canadian government, the company established Microsystems International in the late sixties to design, manufacture, and market integrated circuits to markets other than the telecommunications market. It soon became apparent that this would require a great deal of management and financial resources because the company found itself competing with companies like Intel Corporation and Fairchild. The operation was closed down in 1974 and this resulted in yet another wave of entrepreneurship and innovation in the OTC. Two young engineers by the name of Terry Mathews and Mike Cowpland, who had left MIL just before the closure started Mitel Corporation. Its corporate mission was to take advantage of the very fast and highly miniaturized microprocessors that were coming on the market at the time to supply highly intelligent private branch exchanges (PBXs).

Although only a half dozen or so companies can be identified as coming directly from MIL, they in turn were very prolific in their spin-off activity. At least one hundred of the sixteen hundred high-tech companies in the OTC today can be traced back to Microsystems International or their spin-offs.

The closure of Microsystems did not mean that Nortel got out of the semiconductor business entirely. The company continued to design and produce unique devices for their own use. In fact, Nortel played a major role in the establishment and development of the Canadian Microelectronics Corporation to assist engineering students across the country in the design and testing of complex semiconductor devices. Nortel provided foundry and design validation services to the CMC, with the result that Canada now has a semiconductor design capability that is unique amongst industrialized countries. That capability will play a key role in future waves of growth in the OTC.

Another group of companies shown on the Doyletech “Family Tree” is referred to as the multinational influence. Most of that can be traced to the formation of a company called Systems Dimensions Inc. in 1969 by a former IBM executive. Its mission was to provide computer users with access to large computers over conventional telephone lines. It was an exciting industry at the time and resulted in the launching of several initial public offerings (IPOs). The industry lasted only about a decade as powerful minicomputers came on the scene, followed in the early eighties by even more powerful personal computers.

One of the more prominent companies in the OTC to be spawned by the time-sharing industry was Systemhouse which provided computer services of all types to large institutional users, government departments, and the healthcare industry. It was taken over by MCI in 1995 and by EDS about three years later.

It is useful to reflect on the various waves of technology that impacted the OTC over the years because its future will also be shaped by waves of technology that we know nothing about at this time. And of course, one should not just look at new technologies but also at the new products and the new markets they are likely to address.

Until Northern came on the scene in 1962, the future of high tech in Ottawa seemed to be tied to the military market. In the late seventies and all through the eighties it was tied to the telecommunications market. It still is. What is different now is that the telecommunications market has broken out into several different markets and several different technologies can be applied to each one of them.

There are some trends emerging that could have a big impact on the OTC during the next twenty years, namely:

  • There is a growing concern about personal safety and the threat of terrorism.
  • There is a growing demand for wireless devices, driven by the need for mobility of individuals.
  • With the advent of nanotechnology, complex electronics devices will continue to be inserted into all kinds of systems, including the human body.
  • Governments seem to want more information, while individuals are concerned about privacy.
  • Globalization will make jobs and technology more transportable.

It is relatively safe to forecast that the existing pool of information technology will be put to work in addressing the personal safety and terrorism markets. It is also safe to assume that there will be a vibrant fabless semiconductor industry in the area, much of it focused on wireless applications.

Nanotechnology could be a sleeper. Canada is building a huge pool of expertise in this field, including within the National Research Council, both here and in Edmonton. It could revolutionize the medical devices industry. However, Canada’s health care system tends to prefer buying proven solutions offshore rather than take risks on Canadian instrumentation.

Globalization is not something we should worry a great deal about; our electronic manufacturing services (EMS) firms are some of the most innovative in the world. They can provide prototyping services that are best performed at home or they can operate at the other end of the spectrum, by providing high volume manufacturing from an offshore location.

The OTC will play a major role in VOIP because there is an unusually large pool of such know-how in local firms.

As for employment projections, one way of going about it would be to apply the same compound annual growth rate (CAGR) for the next twenty years as has applied for the period from 1960 until just before the bubble of 2000. Even though growth had wide swings during the period, the overall CAGR was 6.5%. That is to say that in 1960 the employment was 4,900 and in 1999 it was 57,000. The figure shot up to over 70,000 by 2001 but soon fell back to the 65,000 range. If one applies the 6.5% CAGR figure over the period from 1999 to 2020, the 2020 employment figure turns out to be 213,883.

To be a little more scientific about it, one should segment the 1999 figure of 57,000 into categories like software, aerospace, telecommunications, etc. and apply individual growth rates to each. Doyletech attempted this in a report it published in 2001 and the CAGR of 6.5% seemed to be easy to justify. However, some of the sectors that were hot in 2002 (e.g. photonics) barely exist today (at least in the same form, or applications). On the other hand, there are other sectors such as wireless and VOIP that seem to be prepared to take their place. We feel confident that the 6.5% figure will apply over the next 20 years. There will be periods of slow growth (the OTC had at least four major downturns between 1960 and 2002) and there will be periods of spectacular growth, but 6.5% is as good as anything else we can find, which means an OTC employment of 214,000 in 2020.

Whatever the figure turns out to be, it is safe to say that the next twenty years will be at least as exciting as the last forty.

4 thoughts on “Glenn McDougall: The Ottawa Technology Cluster

  1. Steven Thompson

    Wow, quite an interesting history on Ottawa’s tech sector. It is true that at one time the stove industry was considered a ‘high-tech’ or leading-edge industry, much like how software or hardware devices is today. Interesting!

  2. doylewpc-ca Post author

    For a pictorial representation of the Ottawa Technology cluster (OTC)’s history, check out Doyletech’s genealogy map – called the “FamilyTree of Ottawa-Gatineau High Technology Companies” (see elsewhere on this website).

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.