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Ottawa becomes an incubator for a new kind of manufacturing

To understand Canada’s new place in the manufacturing world, consider Ottawa – that sleepy government town that burst on to the international technology scene in the 1990s.

“Silicon Valley North” was the domain of goliaths such as Nortel Networks Corp. and JDS Uniphase Corp., which employed a combined 24,000 people in Ottawa in 2001.

Most know how that fairy tale ended. The tech bubble burst and Nortel, JDS and others crashed.

JDS’s payroll crumbled to 2,500 in 2002 from 10,000 in 2001, according to survey data compiled by the Ottawa Centre for Research and Innovation. Nortel employed 17,000 people in 2000, more than the next nine biggest technology employers in Ottawa combined. When the company collapsed and was sold off in chunks in 2009, Nortel’s payroll stood at 3,000.

The tech crash ushered in a period of volatility in the Ottawa economy. Overall employment in the technology industry plunged to 63,700 in 2003 from 79,000 in 2000, but then climbed to 82,000 in 2007. The global recession dealt another massive blow, slashing tech payrolls to 74,600 at the end of 2010, the lowest level since 2004.

Yet an interesting thing happened throughout this period: the number of new companies kept growing. There were 1,944 technology companies in Ottawa at the end of 2010, almost double the number a decade earlier. The growth illustrates a trend toward the formation of smaller, more entrepreneurial companies that have a highly skilled work force, but might not own their own factories. Instead, they will own the idea, the prototypes and control the sales force, while farming out everything else. Successful companies could choose to “manufacture” everything from software programs to logistics strategies and ship these “goods” all over the world.

“The word ‘manufacturing’ now means different things,” says Tony Bailetti, a professor at the Sprott School of Business at Carleton University in Ottawa and a former engineer at Bell-Northern Research, which was absorbed by Nortel.

“It is no different from moving from the agricultural era to the industrial era. We are now moving to a different era.”

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