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| The Rise Of Halifax, Tech Mecca |
January 19, 2005 |
By Andy Pedersen
Stephen Lund’s story is a familiar one in the Maritimes. After finishing public school in New Brunswick he looked around for opportunities. But there wasn’t much to catch the attention of an ambitious young businessman in the region’s traditional industries like shipbuilding, mining, farming and forestry. So, like many others, he left, seeking to fulfill his ambitions in the bigger cities of Toronto and beyond.
But the beauty and the easier pace of the East Coast drew him back. It was a lifestyle he valued, and as the CEO of Nova Scotia Business Inc., a governmentsupported organization charged with expanding the province’s economy, he has since discovered that others value lifetyle as well.
“I grew up here, and I missed it,” he said. “I wanted to come home.”
Back now for eight years, Lund is helping to engineer what promises to be a remarkable comeback for the region. And in a place that’s known for its conservative values and old-world industries, that comeback is being waged from a surprising direction: technology.
“We’re convinced we’ve got the bestkept secret in North America,” he said about the fledgling software industry in Atlantic Canada, and particularly in Halifax. “Now, we’ve just got to get the word out there.”
It’s no small task. Mention the Maritimes to most people and images of fishers and fiddlers arise. But the current move isn’t just another government-
funded pipe dream. When Lund approached the Ottawa-based technology consulting firm Branham Group Inc. to help attract software companies to the East Coast, Branham’s president and CEO Wayne Gudbranson was impressed by what he saw.
“What is happening out there is an incredible story about application-development capability,” Gudbranson said.
“Halifax is a real diamond in the rough right now.”
It doesn’t match India yet — with that country’s exploding outsourcing sector — but a growing list of major information and communication tech firms are setting up shop in the little city on the Atlantic. CGI has 400 people there developing and maintaining software for major American insurance and wealth-protection companies. Keane has hired another 400 people for its businessservices endeavours. And the Japanese consulting firm Fujitsu is another new ICT corporate citizen.
Gudbranson wonders if the Fujitsu executives could previously have even placed Nova Scotia on a map. “I bet you dollars to doughnuts that the Japanese had no idea where Halifax even was before we got them to focus their attention there.”
BUILDING MINDSHARE
So what got Fujitsu’s attention? Like India, Halifax offers something that CEOs can’t resist: savings. It’s simply cheaper to do business — rent space
and pay workers — in Halifax than it is in California or Washington, or even Toronto or Ottawa.
The financial consulting firm KPMG regularly audits the cost of doing business in dozens of cities around the world, and Halifax is always near the positive end of its results. Gudbranson figures running an office is 15 per cent cheaper in Halifax than in the next cheapest Canadian city.
“The cost of doing business in Halifax is very low compared to the rest of the country,” he said. “Probably the next lowest cost is Montreal, and that’s only because of all the support that the Quebec government offers.
Halifax is 15 per cent less expensive than Montreal.”
Overall, KPMG’s 2004 report puts Halifax at a 16.2 per cent cost advantage relative to the U.S. in software design, and at a 15.2 per cent advantage for Web and multimedia content development.
The complete study is available at http://www.competitivealternatives.com.
Labour and business costs might not be as cheap, dollar-for-dollar, as they are in a place like Bangalore, India, but Gudbranson said Halifax’s appeal has more to it than simple financial considerations.
He said North American and European executives can’t help but feel slightly more at ease about doing business with companies that aren’t halfway around
the world and, in some cases, a world apart culturally.
“What also gives us an incredible advantage is that there’s an undeniable comfort level that American companies have with us compared to places farther
away,” he said. “Culturally, we’re very similar, and I think that American organizations like the idea that, if they wanted, they could actually drive to Halifax to see these operations.”
But inexpensive labour and physical proximity do not, on their own make a success story. They get executives’ attention in the first place, but what holds their attention is how surprisingly capable the Maritimes’ labour force is for knowledgebased industries. In Halifax alone, there are eight universities and three community-college campuses. Nova Scotia has three more universities outside of Halifax, and there’s half a dozen more in the rest of Atlantic Canada. More and more of these graduates are entering the workforce with computer science degrees.
“This is really the key thing,” Lund said.
“We have the highest-educated workforce in the country. We turn out about 2,000 IT grads every year. We have the first master’s of Internet studies that we’re aware of. And we have the first master’s of e-commerce.
“From a straight workforce education standpoint, we have a significant advantage here.”
EAST COAST SUCCESSES
The American insurance giant Manulife was certainly aware of that advantage when, last year, it swallowed its competitor John Hancock Financial Services and its Maritime Life division, headquartered in an office tower overlooking Halifax’s Northwest Arm. Manulife moved much of Maritime Life’s insurance jobs to its other offices, but decided to leave its software division in Halifax under a contract with the Canadian ICT firm CGI.
“They wanted to be in Halifax, and since we’ve had a successful presence in Halifax since 1991, so did we,” said Doug McCuaig, CGI’s senior vice-president and general manager for Toronto and Atlantic Canada.
“Halifax has got all the right platforms.
Infrastructure costs are lower thanin the rest of the country, it’s very close to the world’s biggest markets, and it’s got an incredibly skilled IT workforce. There are something like 8,500 IT professionals right there in Halifax, and there are 2,200 more coming out of its universities every year.
“We look at that and think, ‘Geez, we should be growing even larger out there.’”
Which is exactly what McCuaig is planning. He and his company are hoping to spin off their contract with Manulife into a full-fledged insurance
and wealth-protection vertical. CGI employs 400 people in Nova Scotia now; that number could more than double within three years.
Keane, an application-services company, is also thinking of future expansion.
In fact, the company’s Halifax operation last year became the first ICT company in Canada to be certified by the Software Engineering Institute at the highest level of its Capability Maturity Model (CMM), a sort of ISO standard for software developers.
“Nobody thought we’d be able to do that,” said Alasdair Graham, the managing director of Keane’s Halifax operation.
“The prevailing wisdom is that the North American mentality is not suited to that level of rigour. But in Halifax, we’ve proved them wrong.”
With that success, Graham said he’s optimistic his company can draw even more business and expand its 400-person Halifax operation.
“A large investment bank in New York is going to provide us with a lot of growth over the next year,” he said. “And we’re also dealing with a major
pharmaceutical company, which is a new client of ours, and we expect some growth from its business, too.”
People in the Maritimes have always had a reputation for having fun, so it’s no surprise their fledgling software development industry isn’t all business. When an English video game developer named Jeremy Wellard moved to the seaside town of Lunenburg five years ago with his Nova Scotian wife, he didn’t think twice about setting up shop there. His company, HB Studios, has already created several sports games for Electronic Arts, and just finished the alpha version for its Rugby 2005. Wellard said he’s had no trouble finding the people he needs for his 40-person operation.
“There are definitely a lot of talented coders coming out of this part of the world,” he said. “They don’t necessarily have a lot of experience at this point, but I take talent over experience any time.
“This is where we’ll be forever,” he said. “There’s just no reason for me to think about moving.”
Executives aren’t the only ones eyeing the Maritimes as a home. Like Lund, many Maritimers who’ve left are dying for the opportunity to get back home.
“Before our deal, Maritime Life wanted to hire 40 IT people.
They got 1,800 applications,” said CGI’s McCuaig. “Forty-five applications per IT job is two times the North American average and three times what you’ll get in Bangalore.
“This business is all about (people with) skills. If you’ve got a great education system and a great ability to attract people, you’ve got something incredible on your hands.”
Web Halifax
Branham Group http://www.branhamgroup.com
CGI http://www.cgi.com
HB Studios http://www.hb-studios.com
Keane http://www.keane.com
Nova Scotia Business http://www.novascotiabusiness.com
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