Technology News In Alberta

---- New Technology Newsletter to start April 1, 2006 week ---

Booming Economy Aside, Nearly Half of Alberta's Tech Firms Would Leave the Province - 2006 Alberta Technology Report

The Ernst & Young report reveals that 80% of technology companies continue to cite a lack of available financing as a key challenge

CALGARY, March 28 - The unprecedented boom in Alberta's oil and gas industry isn't preventing the province's top technology leaders from thinking about leaving the province in search of greener funding pastures, according tothe findings of a study of leaders of Alberta's technology companies, releasedtoday by leading professional services firm, Ernst & Young LLP. Virtually every respondent (99%) believes the province's economy is strong, yet nearlyhalf have considered or would consider relocating outside the province - with a fifth of these businesses citing better access to funding as the primary reason for thinking about relocation.

"There's a sense among Alberta's technology entrepreneurs that because ofthe high returns in the oil and gas sector, the available capital out there is being reinvested in the energy markets rather than the tech sector," saysTerry Booth, executive director in Ernst & Young's technology practice. "So, despite believing that the Alberta economy will continue to experienceconsiderable growth, 49% of our respondents felt the competition for financing - either from equity groups or government - is a major competitivedisadvantage in growing a technology business here. Astonishing, however, isthat of the companies surveyed that actually tried to raise capital last year, nearly two-thirds were successful. This figure demonstrates that funding is available but companies need to be diligent in finding these sources."

As with previous years' conclusions the latest findings show that Alberta's technology firms continue to use family and friends, and private or angel investors as the most common sources of financing. A full 87% of the companies surveyed plan to find an alliance or merger partner within the next three years and 67% will seek angel or private investment. Thirty-eightpercent will seek financing from a venture capital firm.

Three-quarters of respondents also consider an inability to access government grants and funding for research and development as an obstacle to their companies' growth. "The disconnect between the perception of poor government funding and actual attempts to access this financing needs to be addressed," says Peter Josty, executive director of The Centre for Innovation Studies. "It has been an ongoing concern in the tech sector here, with toomany funding opportunities being missed. Only one-third of respondents report accessing funds through the Industrial Research Assistance Program, or IRAP,and fewer than half say they take advantage of SR&ED tax credits - findings identical to our report of two years ago. So, despite a clear indication that funding sources are not being fully exploited, there remains an overall apprehension about a lack of funding. Clearly, the message is not getting out that good R&D funding avenues exist," Mr. Josty says.

Alberta's market size is another concern for technology companies. An overwhelming number (91%) of those leaders surveyed see attracting newcustomers in the limited marketplace as their greatest challenge, indicatingthat few of the province's technology companies have broken through to becomeplayers on a global scale. Additional barriers to growth cited include thegrowing strength of the Canadian dollar against the U.S. dollar, as well asrising interest rates. Respondents are also concerned about being able to hirequalified employees (84%), and finding an entrance into U.S. and globalmarkets (80%).

The good news is respondents consider the strength of global markets (theIT sector in particular) as a positive factor which will drive future growth in Alberta's technology industry. Overall, the province's technology community remains optimistic, even as companies continue to struggle with the unique challenges of doing business in Alberta. Other key findings of the report include:

- Quality of life (27%) and the availability of a well-educated and skilled work force (20%) are identified as the most significant advantages of being based in Alberta.

- A large majority (73%) of respondents see innovation in their products and services as their competitive advantage, with product quality a close second (72%).

- The majority of respondents report that corporate spending on software (58%) and equipment (56%) increased over the past year, and even higher numbers (64% and 59% respectively) feel that the spending in these areas will increase further in 2006.

- Most companies plan to grow by penetrating existing markets or customers (94%), enhancing existing products (87%), introducing new products (87%) or adding new markets (73%).

The Alberta Technology Report 2006 is based on a survey conducted in September 2005 by Ipsos Reid, involving the leaders of companies from a wide cross-section of the Alberta technology sector. The report captures theopinions of 128 of Alberta's high-tech company leaders.

Thank you

Norman Greenfield

Calgary, Alberta, Canada
403-807-1251
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