Technology driving Interior’s economy in British Columbia – More than 200 high-tech firms call the affordable region home

With three green glass towers occupied mostly by high-tech companies and a fourth going up, the Landmark Technology Centre would not look out of place in Burnaby, Richmond or Annacis Island.

Michael McCullough
Vancouver Sun

(Thanks to Greg Lakes at Headwaters News for passing this along- Russ)

But this is in fact the B.C. Interior, and it could well be the new face of industry here, in contrast to the popular image of cow pasture and beehive burners.

When Al Stober Construction first proposed the Landmark complex five years ago, many in Kelowna were skeptical, said Raghwa Gopal, president and chief technology officer of Vadim Software, one of the anchor tenants.

Today it’s the hub of the information technology sector — or, as the Okanagan Science and Technology Council likes to call it, the "Silicon Vineyard" — that is becoming a key driver of the Okanagan economy.

More than 200 high-tech firms with estimated annual revenues of $203 million call the Okanagan home, according to OSTEC. Most are startups with just a handful of employees. Others, including Vadim, Bridges.com and Total Care Software, are well established, with dozens of employees, a solid revenue stream and the wherewithal to withstand the financial markets’ ups and downs.

Big or small, they tend to be export-oriented. Fully half the companies surveyed by OSTEC this year reported having international customers.

According to the provincial government’s B.C. Heartlands Economic Strategy, the Thompson-Okanagan region contains almost 44 per cent of the high-tech companies outside Greater Vancouver and Victoria. The lion’s share is clustered in and around Kelowna.

Gopal can remember a time when high-tech and Kelowna never appeared in the same sentence. Trained as a programmer, he was visiting from his native Fiji in the mid-1970s when he came across two locals, Mike Schleppe and Dave Harris, who were trying to form a company around an enterprise program they had developed for a failed local mobile home manufacturer. Gopal had to admit it was the best business opportunity he had ever seen, and offered to work for free until it got off the ground.

The partners called it Vadim, backwards shorthand for Mike and Dave, and repurposed the software for municipalities to bill landowners for taxes, permits and utility fees.

Today Vadim is probably the largest municipal software provider in Canada, serving 165 communities, and is planning a push into the global market.

"Our grand plan is to be a North American company and then expand from there," says Vadim president and chief operating officer Larry Smith.

The company is currently in a growth phase, having doubled its staff and client base in the past two years. Privately owned and profitable almost since its inception, Vadim suffered little from the 2000-2002 technology meltdown, Smith says.

The business climate has changed dramatically in Kelowna since Smith moved here from Vancouver 10 years ago.

"Any level of entrepreneur, business executive or talented technical person can be challenged in this environment," he says. That’s important, because where technology companies choose to locate begins with the founders, their roots and lifestyle preferences.

"A lot of it starts with personal choice," Smith says.

Most B.C. cities have lifestyle to burn, however. What Kelowna has over other heartland cities is good air links with the outside world and a relatively sophisticated business environment, Gopal and Smith agree.

It still takes longer to fill positions than in the city, says Smith, but once employees arrive the turnover is lower because there are fewer alternative employment opportunities.

On the downside, you don’t have the educational infrastructure available in the Lower Mainland or Victoria.

"This valley would do a lot better if it had a full-fledged university with research and development capabilities and things like that," Smith says.

Much of the IT growth right now is coming from U.S. companies setting up branch operations and Lower Mainland firms relocating to take advantage of its relatively low costs. A 2001 study of 115 cities by management consultants KPMG ranked Kelowna as the most cost-effective location in the Pacific region of North America in terms of labour and other operating costs.

A similar study of 32 Canadian cities published by Canadian Business last month named Kelowna the most cost-effective location in B.C., though no other Interior cities were included on the list. (Vancouver, incidentally, came in at No. 32 nationally as the most expensive place to do business).

Compared to Silicon Valley or western Washington, Kelowna is a bargain, confirms Jennifer Nyland, director of engineering, Internet acceleration products for Packeteer, Inc. Based in Cupertino, Calif., Packeteer develops traffic management software. In 2000, it bought Workfire, a Kelowna start-up co-founded by Nyland, that created programs to speed up access to Web sites.

"When we started Workfire, there were some lifestyle advantages. The lifestyle here is very compatible with the sort of ideal lifestyle in the technology industry. You got lots of recreational activities and such and that’s definitely a big draw to workers," says Nyland, who moved to the Okanagan from Vancouver.

Now the Kelowna operation serves as an R&D office for Packeteer, with 30 software developers and quality assurance workers. College-educated employees who spend a lot of time in front of a computer value having uncrowded mountain bike trails and ski slopes within easy reach Nyland says.

Part of the importance of recreational amenities boils down to the relatively young age of the workforce. A 2003 survey by OSTEC indicated that almost half the high-tech companies in the valley have employees under the age of 24.

The same things that favoured Kelowna’s IT sector have helped grow clusters of companies in aerospace and environmental technology.

Huge commercial airliners crowd the hangars at Kelowna Flightcraft, at Kelowna International Airport. The hulking machines are in various stages of being gutted, rebuilt, stretched and repainted. Many more sit on the tarmac in the October drizzle, awaiting a similar makeover.

"We can get a candidate airplane that’s been sitting in the desert for 18 months and totally strip it to the bare bones," says Barry Lapointe, president of the Kelowna Flightcraft Group of Companies, as he strolls through the fuselage of a former American Airlines 727 now bearing the Purolator Courier logo.

Flightcraft barely felt the worldwide downturn in aviation following 9/11. In fact it created the opportunity to buy airliners cheaply from beleaguered American carriers, refit them and sell them to opportunistic African and European airlines.

"Our business is like being a lawyer. When times are good we’re busy. When times are bad we’re busier," Lapointe jokes.

"Kelowna Flightcraft could be located anywhere," he notes. Its customers, from Conquest Vacations to the national airline of Mozambique, are located around the world. Its largest business is owning and running the aircraft for Purolator. It plans to bid against aerospace giant Bombardier for a 10-year, $50-million-a-year federal defence contract to train air force pilots.

With 600 local employees (out of a total 850), Kelowna Flightcraft is the city’s largest private-sector employer. Though not listed on any stock exchange, it would be B.C.’s 10th largest company by revenues, founder and majority owner Lapointe lets on.

In the past Kelowna was the kind of place that simply waited for the fruit to ripen, says Lapointe, another former Vancouverite who made the Okanagan his home. But it always had the elements that increasingly count in a service and information-driven economy. It had the sunny climate, the gorgeous scenery, the chance to sail, ski or golf more often than big-city folks see, with a lower cost of living. And with the Internet and other communications advances reducing the need to be physically near your customers or suppliers, raw material or regulators, such livable places stand to prosper.

"It was always easy to attract people to Kelowna," says Lapointe. "I just think we have a happier workforce here."

Residents used to refer to the "sunshine tax" — the lower pay most had to accept for the privilege of living in the Okanagan. But if it’s accompanied by a lower cost of living than urban centres, today’s lifestyle-oriented employees appear willing to pay it.

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© Copyright 2003 Vancouver Sun

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