Jeffrey Dale (Photo by Darren Brown)

Ottawa's technology sector picked itself up and brushed off some of the dust in the latter half of 2004 thanks to a strong entrepreneurial spirit, according to the Ottawa Centre for Research and Innovation.

In tandem with the latest release of the OBJ's Technology Industry Guide, OCRI released an updated tabulation of high-tech companies and workers in the nation's capital.

OCRI's latest report illustrates modest improvement in the latter half of 2004 as growth by smaller firms and new startups offset fresh layoffs among larger multinational companies.

The report shows that the number of technology companies increased by more than six per cent to 1,688 in the latter half of 2004 while employment levels increased by 600 people to 67,800.

OCRI president Jeffrey Dale pointed out that the net gain came despite the loss of at least 1,000 local jobs during the period from the big multinational firms, namely Nortel Networks Corp.

In September, Nortel announced another 750 local job cuts as new CEO William Owens struggles to get the company back on track and escape the spectre of its accounting scandal. Those layoffs were scheduled to be completed by this June. Mr. Dale said it is his understanding that they were in fact largely finished by the New Year.

Despite the tribulations of big firms such as Nortel, the local tech sector gained ground in 2004.

"You know, I was always the one who would be 'cautiously optimistic, right?" Mr. Dale said. "I think we've turned the corner. We've now seen 12 months of good solid growth behind us. I think we're now seeing the recovery of the tech sector. Most of the restructuring's been done. Nortel's a particular situation. It's not a bellwhether, whatsoever, for the rest of the Ottawa tech economy."

OCRI illustrated the strength of the regions up-and-comers by highlighting the workforce growth among several local firms. Neterion (formerly S2io), for example, increased its workforce from 22 employees to 35 in latter half of 2004. N-able Technologies went from 50 to 124, while Neptec grew from 70 to 102.

"We've more than doubled our workforce in the past year and will continue to hire the staff that will help strengthen our business and provide more valuable services for our customers," said Derik Belair, VP of marketing at N-able.

In addition to growth among latter-stage startups and established privately held tech firms, Mr. Dale said Ottawa continues to see a significant number of new startups.

"We know we're having a lot of startups close down as well, but the trending is still upwards," he said.

"I think we have a very entrepreneurial spirit here. People are trying new things and if one company doesn't work, they're trying something else. We have been continually impressed by the level of new company startups. Now we know that there very small, most of them are only one or two people ... but the fact is, we're probably having a couple of hundred failures every year, yet we're still trending upward overall ..."

He acknowledged that the failure of one startup can have benefits for another if it has developed a valuable piece of intellectual property that can be transferred. Nor is he concerned that, for most startups, there is seldom much to offer employees in the way of compensation. So-called "sweat equity" is simply the nature of the beast.

"Sweat equity is always something you're going to see in startups," he said. "They don't have a lot of cash when they're getting off of the ground. I can't see how it could increase because I think it's almost universal that when you start up your own company, you don't have a revenue stream your donating your own time or putting it in for some kind of future equity. I think that's just a normal part of business."

Going forward, the critical need is to rebuild confidence in the tech sector, he said, after several lean years that have given rise to the perception that technology is no longer a viable career option.

"The technology industry is back as being a driver, a growth engine, for our local economy again. We're seeing the employment growth, we're seeing the sales growth ... what we now need to see is more IPOs."