|
Slashing R&D dollars now can erode a company’s innovative abilities in the future, tech industry rep warns Curt Cherewayko Companies in B.C.’s high-tech sector need to ensure that the cuts they make in research and development today don’t undermine their ability to innovate tomorrow. This according to Pascal Spothelfer, president of the British Columbia Technology Industry Association, who is warning technology-driven companies to keep an eye on the long term even if the current market climate requires reduced spending in the short term. “The money you don’t spend today on innovation can have an impact on the products you launch in the future,” Spothelfer said during an interview with BIV in which he provided a synopsis of the year to come in B.C.’s technology industry. Whether they’re experiencing challenges related to the declining public markets or are anticipating tougher times ahead, companies of all sizes are examining ways to cut spending.
Spothelfer noted that some companies that have remained relatively unexposed to market conditions in 2008 might encounter economic headwinds in 2009 when some of their fixed-term contracts come up for renewal. He said research and development is often the first division in a company that faces cuts – be it in headcount or spending – because it typically doesn’t have obligations to current customers. This is in contrast to other divisions such as production and distribution, which have immediate commitments to fulfil client contracts. “You may have an innovation gap or a reduction in innovation a few years down the road due to reduced research and development budgets today,” said Spothelfer. While the reductions might be inevitable, Spothelfer noted that technology companies should rely on their own objective data rather than gloomy market projections before taking action. Adding that companies shouldn’t hesitate to make needed reductions, Spothelfer said, “the most unaffordable thing is procrastination.” He noted that in the market downturn, the high-tech sector – which was largely isolated as the lone victim of the dotcom crash in 2001 – is in the same position as other industries. That makes the downturn’s impacts relative. And because the B.C. technology sector exports only 19% of its output (70% of that is into the U.S.), Spothelfer said it’s sheltered from much of the market turmoil compared with other sectors that are more reliant on the U.S. market. He believes that companies in the technology sector that are developing energy alternatives to fossil fuels are best-positioned to weather the downturn and will continue to attract the investment required to continue innovating. Richard MacKellar, managing director of clean-tech venture capital firm Chrysalix Energy, agrees. Although Chrysalix – like many investment management companies – has advised its portfolio companies to reign in spending to preserve their current working capital, MacKellar listed various factors that will continue to drive clean-tech innovation. He said although the price of oil has dropped drastically in the past 12 months, demand for oil in countries like India and China is increasing, even as supply shrinks. As a result, the price of oil will increase, as will demand for alternative energy technologies, which are becoming more cost-efficient to develop as they advance. Other mechanisms that will spur new energy innovations, according to MacKellar, are government support for clean-energy projects and capital from investors that are sitting on the sidelines. “There are people with cash today who are wondering where to put it,” said MacKellar. “This is one of the attractive asset classes.” •
This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
Business in Vancouver January 13-19, 2009; issue 1003 |
