Canada’s technology sector will likely need to be more agile to cope with the disruption that has been triggered by a new set of government regulations that will likely take effect this fall, according to a new report.
The federal government is also requiring new technology firms to provide data on their workers’ skills and experience before hiring them, according an analysis by McKinsey & Co. In addition, the government has begun rolling out a new job classification system, which has resulted in some companies being forced to change the number of jobs they are allowed to open.
The report, which was based on interviews with more than 1,000 Canadians, predicts that, with the current pace of change, by 2021, the industry will have to be as agile as it was a decade ago to cope.
The McKinsey report predicts that the technology sector could take more than 20 years to adapt to these changes.
The industry will need to adapt quickly, and fast, McKinsey said.
“A software company could lose 20 to 30 percent of its business, and that’s just a small part of the challenge,” said John Lefebvre, a senior vice president with McKinsey Global Institute who co-wrote the report.
“But with the new regulations, the pace of disruption will accelerate dramatically, and we are looking at a period of transition.”
A decade ago, tech was seen as a place where innovation thrived and people were treated like professionals.
In the past decade, however, the tech sector has been hit by several major technology disruptions.
A global recession, global financial turmoil and a series of cyberattacks in the United States and Europe have also caused a major shakeout in the sector.
While the government-sponsored tech training programs have helped keep workers in the tech industry, they have also prompted companies to lay off many of their workers.
According to McKinsey, a combination of new rules and the need to recruit more people is driving the tech economy to the edge.
The government also has been working to increase its oversight of tech firms, including by requiring them to keep a record of the hours they work, which is meant to prevent tech firms from “losing the trust of their employees,” according to the report, “The Impact of Regulation on the IT Industry.”
“There’s going to be an increase in the number and quality of audits and the frequency and severity of the audits,” said Jason Kavanagh, senior vice-president with the National Centre for Competitiveness at the University of Waterloo.
“They’re going to have to think harder about the kinds of things that they do.”
According to the McKinsey analysis, a company will likely have to spend $10 billion over the next decade to fully adapt to the new rules.
It is likely to need to hire and train as many workers as possible, to stay on top of the new technologies, and to find ways to improve the efficiency of the IT industry.
“There are so many factors that will determine the long-term impact of regulation on the economy,” said Andrew McBride, an assistant professor of economics at the Canadian International University in Ottawa.
“Some of them will be good for business, some of them won’t be.
But they will affect everything.”
While some of the changes will have a positive impact on the industry, others could have a negative impact on it, he said.
For example, if the new regulation requires companies to be transparent about their workforce, companies could find themselves in trouble, and many tech firms have already been forced to alter their hiring practices.
But as more businesses adopt technology, those changes could have the opposite effect.
If a company wants to remain competitive in the world economy, it will need a more robust business model that involves an ability to grow, McBride said.
If companies have to adopt a new technology, they will need an efficient way to grow and retain employees, and they will be much more susceptible to disruption from new technology.
“What will be a much more complex process for companies, and a much greater risk, will be the introduction of new technologies,” McBride added.
For the IT sector, the changes to its business model and the potential for more job losses could mean that the industry could face a “critical mass” of layoffs over the coming years, said Josh Lissner, the managing director of consulting firm Gartner.
If the industry has to shrink by as much as 50 percent, it could face an economic crash, Lissners said.
The new regulation is expected to be fully implemented in 2021.
For now, some sectors of the tech space are already looking ahead.
Google, which recently acquired the mapping and navigation company Mapbox, has started using the data it collects on workers to inform decisions about where to build new offices and to plan for the future.
“The fact that we have access to this information means that we know where our workforce is going to go and what they’re going need to do to survive,” said Larry Page,