We are pleased to be appearing before the committee once again.
Your committee is about to undertake a study on the importance of digital technology for small and medium-sized enterprises in Canada. I would like to take this opportunity to discuss the context in which SMEs operate, as well as provide you with some statistics we hope will support your efforts and help move this study forward.
[English]
To turn to slide 2, when we are talking about small and medium-sized firms, or SMEs, we are referring to firms with 500 employees or fewer. I don't intend to walk you through all of the data on this slide, but I would like to highlight three points. First, SMEs make up 99.8% of the firms in Canada with employees. Second, they employ two-thirds of the private sector workforce. Finally, they account for 40% of the GDP.
We'll turn to slide 3. As with any firm, digital technologies are becoming an increasingly important element of an SME's success. They are transforming the way business is conducted and how businesses operate.
Newer and easier-to-use technologies and applications are constantly hitting the marketplace, making digital adoption possible for more firms. For example, digital technologies are helping companies manage systems such as their supply chains or vehicle fleets, which in return is helping to improve their productivity. Through e-commerce and social media, SMEs are opening new markets domestically and around the world. Finally, faster processing speeds, greater connectivity, and applications like cloud computing are helping to spur innovations across a range of industries, leading to the creation of new products and services.
Let's now turn to slide 4. As you can imagine, there are many types of technologies being used by SMEs today. I'd like to highlight five examples that reflect, to some degree, various levels of complexity.
First is having a web presence. This is important, for example, for a tourism operator who needs to ensure that they are found on the web, as most bookings are now taking place online.
Second would be engaging in e-commerce and being able to sell your products online, which increases your customer base.
A third one would be using business systems, such as human resources, finance, or supply chain management systems.
A fourth one would be applying digital controls, whether for automation, remote sensing, or other types of similar activities.
Finally, the last would be using cloud and high-performance computing to manage and analyze large amounts of data.
There are many good examples of Canadian companies that are using digital technologies. Let me highlight a few examples.
The Tim Hortons website, for example, was voted one of the top 50 Canadian sites by a group of experts. Also, BeyondtheRack.com, which is a Montreal-based company, is one of Canada's fastest-growing e-commerce companies. For example, it hit $6 million in its first year. Three years later, it was already at $100 million in terms of revenues. Finally, a company called Select Technology Corporation from Nova Scotia is using the CANARIE network to test concepts that will allow businesses to better monitor network traffic, handle big data, and offer better services to their clients.
Let's turn to slide 5. What is interesting is that these success stories are increasingly no longer the exception. What we see is that there has been a steady increase in investment over time, from $11.3 billion in 1990 to $33.7 billion in 2012. However, while that investment has been steadily increasingly, overall Canadian investment in ICT per worker has traditionally lagged behind U.S. investment levels. For example, in 2012 Canadian ICT investment per worker was 58% of the investment in the United States.
Now let's turn to slide 6.
[Translation]
One of the challenges we face is the lack of a single source of data on the adoption of technologies by SMEs. So our information comes from a number of sources. The latest national survey Statistics Canada conducted in 2007 indicated that less than half of the businesses had a website and that 8% of them sold online. However, in 2011, CEFRIO, a Quebec-based organization, found that 70% of Canadian SMEs had a web presence and that 18% of them sold online. The same study also found that one in four SMEs were investing in business and management systems.
Although those two sets of data cannot be directly compared, they show that SMEs are adopting ICTs and improving over time. The good news is that, next June, Statistics Canada will publish new data on the adoption of digital technologies. We will then be able to see how much progress has been made since 2007.
We will make sure to send the new data to the committee clerk once it has been made public.
[English]
Let's turn now to slide 7.
Regardless of what data we look at, we know that SMEs face more challenges than do larger firms, as they don't always have the skills or the scope to adopt digital technologies. Despite this, many understand the benefits and are taking advantage of digital technology adoption.
These SMEs recognize that integrating digital technologies into their operations and changing their business model will lead to greater efficiencies. They are aware that there are a variety of technologies available to them that can help to determine the solution that best meets their needs.
Lastly, those that have invested successfully have the right mix of experience and skills to undertake the adoption process.
[Translation]
Let's now turn to slide 8.
The government recognizes the importance of adopting digital technologies and has already taken a number of steps to facilitate the adoption of ICTs by SMEs. When we appeared before you last March, we provided an overview of what had already been accomplished to improve our networks, increase access to broadband services and ensure a healthy level of competition in industry. We also talked about the various legislative measures implemented to create conditions that help enhance the online marketplace.
Today, I would like to highlight other recent government initiatives that have helped create an environment conducive to a more substantial adoption of those technologies.
More specifically, the government implemented the Digital Technology Adoption Pilot Program. That initiative provides funding and advisory services in order to speed up the rate at which SMEs are adopting digital technologies. In addition, the Business Development Bank of Canada provides online tools and consulting services to help SMEs increase their web presence.
For instance, BDC created a $200-million envelope to help business owners acquire the equipment and software they need. I think that those two organizations have been invited to testify over the next few weeks. I am sure their testimony will be very useful to you.
Finally, I would like to point out that Budget 2013 includes some initiatives for encouraging skills development and training. For instance, the government announced the Canada Job Grant, which earmarks $500 million annually for better harmonization of Canadian companies' training and needs.
[English]
Let's turn to slide 9.
In conclusion, Mr. Chair, and as you have heard from us today, SMEs are adopting digital technologies, and there are some great success stories across Canada. However, as we saw, there is still room for improvement.
Digital technologies have evolved over time, and there are more solutions available for the SME market. Cloud computing, in particular, can provide a model that works well for these firms, as do mobile applications.
Finally, there's a role for everyone to play. Our previous slide highlighted the areas in which the government can help, but ultimately it is up to the private sector to continue investing and producing the digital solutions that Canadian SMEs need.
Thank you for inviting us back to this committee. We look forward to your questions.
:
Thank you. That's a very good question.
I think a simple answer would be to say that increasingly firms see the importance of having, for example, a web presence. I referred earlier to tourism operators. Increasingly individuals are doing their bookings online. A large majority of bookings, as a matter of fact, are taking place online.
Obviously firms and SMEs will see the benefits of having a sophisticated presence online to, first, make sure they can be found, and second, to make sure that people can do the booking in and of itself. A lot of people might decide not to go to a particular location if they can't do the booking online. If there's a phone number to call, they might decide otherwise, depending on where they are and the type of customers they are.
With regard to selling online, I referred to companies like Beyond the Rack, and there are other examples. I think there's a firm not too far from your own riding, Well.ca, which is growing exponentially as well. It's a very successful firm. They see that there are some opportunities there. People are increasingly interested in buying products and services online. It's increasing.
This doesn't talk about increasing revenue as well, which is likely bigger in terms of growth as a whole.These are figures that capture just a certain number of firms. We talked earlier about how not all firms necessarily need to have a web presence, nor do they need to sell online. Some of them don't sell online, but they still need to have a web presence or to use digital technologies, for example, to manage their own supply chain.
There are different ways; this is not, in and of itself.... We will never reach 100%, just because of the industrial structure and because of the business structure of those firms, but it at least shows that there is positive growth. There is progress. The 2013 StatsCan survey results, which will be released in June, will give us a better understanding of how much progress we've made since 2007 or 2011.
Hopefully that answered your question.
:
Having only five minutes to spend on such a technical and important topic is torture.
Mr. Beaudoin, I will try to present the four issues I am concerned about.
I do not like the fact that deputy ministers are appearing. I like meeting with you, given your knowledge, but you have a mandate. I will be very critical, but I know that this is your mandate and that things are not always up to you.
Here is the first issue I am extremely worried about.
You develop an equation and say that it will be possible to determine the increase, since the best statistics will soon be available. Yet you yourself admitted that you did not have adequate statistics in 2007. If good data is available on one side and bad data is available on the other side, the improvement cannot be assessed. The statistics should have been adequate from the beginning to make it possible to measure the increase. I do not understand that.
Will you make sure to cover different categories this time? By that I mean computers, communications equipment, the use of software, presence on social networks—which are like another world—domestic and international online transactions. Those factors have a huge influence on tourism. As Ms. Peters must know, the SME sector is big. Are the manufacturing sector and the goods and services industry looked at separately? Both sectors consist of companies of fewer than 500 employees, but they are still very different. Are you planning to cover all those aspects when, in principle, the data will have been improved?
As for the connection between Canada Job Grant and SMEs, I would like you to check something. The manufacturers association has many chambers of commerce in the regions. However, their opinions on that initiative with regard to SMEs are very negative. If a program requires 15 electricians, companies like Bombardier will be successful, but SMEs are extremely critical of this program. A small company that needs an electrician will not always have the required $15,000. This information is not coming from me, but from most SMEs. They find the program to be ill-suited to their needs. So before we say that this is a wonderful solution, these issues need to be looked into. That's pretty important.
My third point has to do with how our results stack up against those achieved in the United States. You may say that our results are extremely good, but the U.S. is our neighbour and main competitor. Our figures in terms of communications equipment are at 28.6%. Do you have any idea why? Is access to tools in francophone sectors slowing things down so much? Why are we so behind? We can't even produce a third of what they do.
Some of the aspects—such as having a computer—are not so bad. We are at 80%. However, we are at 28% when it comes to communications equipment. Something is seriously wrong. Do we know what is at the root of this? I think it would be very important to find out.
I am getting to my last point, concerning the whole e-commerce field. We have to position ourselves much better in that area. The U.S. administration is considering overtaxing e-commerce. The logic behind that is to level the playing field, since real retailers have to pay taxes.
Are we ready to deal with that? What is Canada's position? What would be the impact of Canadian e-commerce? Should we follow the American lead?
:
Thank you, Mr. Chairman.
Some of the questions that have been directed to you have been regarding what government can do to encourage more digital uptake by businesses. But already the CRA will be requiring people in businesses to do their annual tax filings online. Companies are being required to submit electronically their monthly source deduction remittances above a certain amount. We have the accelerated depreciation of computer ware as an incentive to bring people online.
In my riding, we have a new dairy. A young family didn't want to let the business go under when the owners decided to retire, so they took it over. They wanted to be more efficient, and they're only using a certain capacity of it. But through leveraging with the eastern Ontario development program and IRAP, they were able to take a $150,000 project that essentially allowed the truck driver for the milk delivery to take an order, send it to the dairy, have everything put into production for the next day, and have delivery. Training as well was involved, so it was quite costly. They could have done it themselves, totally, but it would have been a much longer process.
Here we have an example of government doing something already to help them over that huge cost of becoming more efficient. Over time their investment will be paid off through bigger sales, and the government will get its money back through higher tax revenues.
Another company, Deslaurier woodworking and cabinetry, had a fire on New Year's Eve a number of years ago. They could have taken the insurance money and run, and just retired nicely. Instead, they had a commitment to the 150-odd employees who worked there, and they found another location to do their manufacturing.
When they did so, they were able to obtain a grant as well. They got this CAD software and upgraded their system stabilization. Now when an order comes in and somebody decides on what they want, every component in that kitchen or washroom or whatever cabinetry system gets a bar code as it's produced. Waste is minimized, because the pattern of what needs to be cut out overall is fed into a computer and scanned. A saw cuts it in the most efficient method so that the least waste comes out from the board, and so on down the line. It's put together by hand, and then eventually put out on the lot and sold. The taxes and everything due are all in one, streamlined. It's just wonderful.
So here we're doing that as well, and my question is this: we're doing so much already, what else is there besides what we're already doing? We have the stick and the carrot in place through programs and forcing people to do their tax remittances online. What else do you think we can do that won't necessarily be an overall cost to taxpayers, but where they'll recoup the money?
:
Thank you for your question.
I will refrain from offering new ideas that the government could undertake, because that's the prerogative of the government and the minister.
One thing I want to emphasize, though, is that, as I said in my presentation, we think the private sector has a key role in playing into this. We hope that some of the success stories referred to earlier, and the positive outcomes that will be spurred on from the investments in BDC and IRAP, and I earlier referred to CANARIE as well, will be useful for the private sector, for various organizations themselves, to raise awareness among their own members and with companies so that they can see the benefits of investing increasingly in ICTs, in digital technologies.
Like some of the great examples you referred to, they're already doing this. For example, the Canadian Chamber of Commerce has a very large network, as do both Canadian Manufacturers & Exporters and Information Technology Association of Canada. They, essentially as providers of those technologies, are trying to increase awareness throughout the economy, but this will, we think, have to increase in order for people to see these benefits.
We hope that those pilots, those initiatives that we've put forward, will have a spillover effect as a whole. Those federal organizations are already working, for example, with organizations and colleges. IRAP, with the digital transformation program, has a number of partnerships with colleges across the country in order for those colleges to provide the type of advice and expertise that these firms require. At the same time, it helps develop the type of skills and talent we need in colleges, and then they can transfer that knowledge to firms in order to benefit everybody as a whole.