This is the third post in a series of three looking at what it might take to put Vancouver in the same echelon as the top software and technology centres on the planet. Regions like greater Boston, San Francisco and Silicon Valley, Tel Aviv, Austin, the powerful clusters and mega-regions of Asia. Is it possible for Vancouver to be mentioned in this class? The first two posts looked at potential reasons why it might not be possible, or at least why it isn’t today. Today’s post questions exactly what it is that Vancouver could be best suited for. What could we likely be the global leader in, if anything?

All roads lead to Rome, goes the old adage. At the height of the Roman Empire the major trading networks, supported by superior Roman road building, bridge and aqueduct construction meant that it was the place to be if you wanted to reach an affluent market. Wealth poured in from the vast outskirts of the empire and fueled the urban economy. Like a pressure cooker, Rome condensed this wealth scoured from millions of square km of European, African and Middle Eastern regions and made one of the mightiest cities to ever exist. It was the centre of the universe, when the universe had a centre.

That’s just the problem though, here today gone tomorrow is the loose capital in a globalized marketplace.  Though this is pretty much an economic truism I’ll still use a recent example of the fleeting nature of regional importance to illustrate why in my opinion geography is both  one of Vancouver’s most valuable assets and at the same time completely irrelevant to its potential as a hi-tech leader. It’s all about the product, or the service.

It was recently announced that the Chief Technologist of, Applied Materials, one of Silicon Valley’s most prominent firms, would be relocating to Beijing where the company’s newest and largest facilities were recently built. China has been booming for several years, developing new automobiles, computers, and gadgets for an increasingly affluent population. Applied Materials, along with many other makers of technology products, rely on proximity to markets, they’re one of the premier producers of components for semiconductors, solar panels and flat-panel displays. Two things that are likely going to be in increasing demand in China are energy, and entertainment. Therefore, putting facilities right in the heart of the market makes sense. Applied Materials are like the merchant who follows the road to Rome in this instance.

In my previous post, Jonathan Kassian, Manager of Research & Communications at the Vancouver Economic Development Commission, helped me cover some of the nuances of Vancouver’s economic competitiveness and challenges in regards to other Cities, regarded as high-tech and software leaders. Airline restrictions, proximity to markets, incentives, cost of living, and other details were picked apart a little just to give an idea as to how complex and subtle the issues and challenges in Vancouver could be.  So if it’s that complicated, what is the path of least resistance if Vancouver is to become a global powerhouse in something?

If we’re too far removed from markets, not connected enough globally, and too expensive to locate manufacturing in, then technology components, boxes of software or hardware, and other physical products involving global transportation are largely out of the question. And so because of this other types of industries that overcome or avoid these obstacles will flourish, and are flourishing here.  In my estimation, the most innovative and successful companies in Vancouver are increasingly internet based, offering SaaS (Software as a Service) or a product/service that uses instant electronic transportation. By transcending the challenges of geography the internet offers a forum for Vancouver companies to reach the global market without worrying about airline routes, proximity to markets, the costs of office or manufacturing space, and traditional “all roads lead to Rome” barriers. While some technologies and some components are made here, the major players in our high-tech industries (which I use as an umbrella term for ICT, high-tech, digital arts, eCommerce and other internet software developers) produce “light” goods. And by light I mean, they’re light to transport and can be downloaded almost as fast as the speed of light. These include entertainment, digital animation, eCommerce, apps development, games, software etc.  If our greatest challenges lay in economic geography (cost of living, cost of office space, scarcity of office space, geographic isolation and so on) then companies that offer online solutions or products and services that transcend the challenges of space and cost will likely continue be the most successful here by and large, the other pillar of this theory rests on Vancouver being a highly creative city that nurtures innovation and art; particularly in the digital medium(s).

A creative population makes for creative companies with creative business models and business cultures. Companies are increasingly adopting flex hours, mobile or remote working- because let’s face it, when the sun is shining in Vancouver we make the most of it. We network and collaborate where a lack of large management structures leaves a career path vacuum. We need to run lean businesses, that can adapt quickly and produce products involving minimum storage, shipping, or even packaging. Yes Vancouver is expensive, no one argues that, but that forces the companies here to be even smarter and more innovative.  We might not be Hollywood, but our digital effects and animation studios are consistently creating internationally renowned and award winning products. The talent and resources in the city have drawn the interest of Pixar, who announced they will be opening a 20,000sq foot studio in downtown Vancouver, because who wouldn’t want to locate their business here if they could?

The success of recent post production studios, digital effects companies, animation studios, and Pixar opening shop here combined with the recent creation of Great Northern Way Campus signals to me that digital entertainment, a massive and growing industry, is going to continue to be one of Metro Vancouver’s most prominent sectors for a while to come. This makes perfect sense, we’re a creative population, not a manufacturing population. And as was pointed out in the two previous posts Vancouver’s business culture plays a powerful role in the kinds of companies that locate here and begin here. We might not have MIT, but our universities and other post secondary institutions are world class, and GNWC is the culmination of those institutions in an innovative and collaborative environment. The Provincial Government has also recognized the importance of the digital entertainment industry and has created incentives to aid in its growth. What’s particularly interesting to me is how as time goes by, the video game, software developers and film industries are beginning to coalesce, and nowhere does it seem to be happening more seamlessly than in Vancouver. Will we see a new mega-sector evolve from this? (or simply re-categorize our economic sectors?)  If we do, that might make Vancouver a globally recognized cluster for whatever this sector becomes, or is named. A combination of digital entertainment, eCommerce, social media, software development and some things we haven’t even seen yet. It’s an exciting possibility.

I believe that our rising stock as a global leader in digital entertainment, online content, software as a service and other light products looks pretty good.  While we’re in no way limited to just these light products, they represent to me the best chance of Vancouver being  recognized as a global leader in the information age. Digital animation, software language and other skills can be taught, creativity itself is something that can’t be. It’s this intangible and prized trait that Vancouver as a city nourishes, welcomes and inspires. This combined with the economic and geographic nuances of firm location creates an environment where the creative sector finds ways to create light products with major value and impact. Does this put us in the same category as San Jose, Boston, and the rest? Will all roads lead to Vancouver? Maybe, but the combination of strong and longstanding clusters with major management structures, the presence of some of the most highly praised universities and technical schools on the planet and proximity to larger markets will likely make those places dominant for a while to come, but Vancouver is definitely mounting a charge. We just need to realize what we’re good at, and become the best at it.

I think we’re on our way to doing that.

The Software as a Service industry is in the midst of an astounding 5 year 43 per cent average annual compound growth, and is expected to own a 23 per cent share of the $120 billion U.S. software market by 2010 according to the recent Royal Bank of Canada report “SaaS Primer – An Emerging Asset Class.”

Virtualization and Software as a Service have been slowly transforming the business landscape by offering effective ways to consolidate and manage massive amounts of data without having to buy your own football field to house servers. They’re also more cost-effective options because companies no longer have to buy physical product and install software,  it’s as simple as buying the service and logging in. Virtualization and SaaS don’t just save space they also save time. SaaS providers have begun to get more creative though as the industry moves from primarily IT data management into new realms. An earlier post examined LendingClub.com a company that launched via Facebook and quickly outgrew the platform. Though the company is viewed as a social media lending portal I feel compelled to include it in the new virtual business model- where the software coding is less of a product and more of a construct in which a service is experienced. They are the newest kind of business models in an exciting field of entrepreneurship. Another great example of innovative SaaS  comes from InTouch, a Vancouver business that creates comprehensive marketing and sales solutions for fitness companies world-wide. The software engages both staff, management, potential clients and existing clients through multiple digital mediums. For management and staff it organizes and clearly lays out all sales data including reminders of appointments and upcoming meetings, instantly informs the company of business leads from activity on their website, tracks sales and shows all leads and what kind of follow-ups have been done. For potential fitness clients it keeps the company in touch with them through reminders and info about the services that the company offers; “Touches” being a key concept in sales and marketing and something that many companies under perform in. According to a PR Wire release the InTouch SalesTracker Software (their virtualized sales tracker):

“helps clients sell more memberships and increases their revenue by an average of $25,000 to $35,000/month/location by ensuring that all leads are contacted automatically, frequently and consistently.”

InTouch clients take “luck” out of the sales process. The average health club only contacts a lead 3 times, while our clients realize that most people need to be contacted 7 to 11 times before they will become a member. Clubs that do not follow-up frequently and consistently, suffer from follow-up failure. SalesTracker stops follow-up failure by guaranteeing that clubs communicate with all of their leads frequently and consistently through multiple communication channels including the phone, email and SMS text” messages.

I met InTouch CEO Scott Johnston at an event recently and we discussed in depth just how profoundly SaaS and virtualization are affecting business. InTouch continues to  explore ways to enrich the service experience for users as the company grows, further developing this robust platform for business to client interaction. I believe they’re another excellent example of the kinds of new business models that we are going to see as engines of growth in the software industry.

Gimme that SaaS!