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TMX POV - How Canadian Tech is Facilitating the Global Transition to Digital

TMX POV - How Canadian Tech is Facilitating the Global Transition to Digital

37.8%. That was the return on the S&P/TSX Capped Information Technology Index ("TSX Tech Index") for the first six months of 2020. This comes after a return of 61.7% for the entirety of 2019. If you're kicking yourself for not having taken part in the amazing run that public Canadian technology companies have seen recently, don't worry, many still think this great run is not done yet. But consider this -- the S&P/TSX tech index has outperformed the Canadian benchmark index over the last 1-, 3-, 5- and 10-year periods (to the end of June). The same index has also outperformed the S&P 500 over the last 1-, 3- and 5-year periods (also to the end of June).

As we talk about trends and market conditions, we can't ignore the effects of the global pandemic. From business shutdowns to border closures, COVID-19 has upended the global economy and has proven a challenge to many industries. As I reflect on the challenges that emerged at the onset of this pandemic, there is a sense of pride seeing how many home-grown Canadian technologies lead the charge in providing solutions to the massive logistical challenges we faced on a global scale.

While market uncertainty brings forth a lot of unknowns for both investors and public companies, it's worth taking a moment to recognize the Canadian tech companies that found success despite periods of unprecedented volatility.

The dramatic shift to ecommerce

Front and centre through this dramatic change has been Shopify Inc. (TSX:SHOP), which during the first half of 2020, became the largest company by market capitalization on Toronto Stock Exchange. The company played a critical role in helping merchants affected by COVID-19 pivot their operations online, which in turn grew their platform by 71% in Q2 alone. In fairly quick order, the company introduced many new initiatives to help its current and new merchants reach consumers pandemic-friendly methods of delivery. For example, Shopify's services gave many craft breweries the ability to quickly pivot online and set up home delivery, allowing them to survive as their traditional sources of income, while bars and restaurants had dropped to zero. We're seeing similar stories coming from all types of industries. Even as places around the world begin to allow physical storefronts to open up, it's clear the dramatic shift to online shopping is not a fad that will go away not, especially as more consumers discover the benefits of its convenience.

Bulking up our supply chains

Early on in the pandemic, the quick and sudden lock down in many areas forced major disruption to the global supply chain. While these issues aren't unique to the COVID-19 pandemic (natural disasters often highlight the pitfalls of global supply chain networks), it's a global challenge that persists and requires solutions. We're currently seeing these challenges at play in the pharma industry through mounting worry that the supply chain will not be able to support the global delivery of a vaccine once developed. As a result we are already seeing governments stockpiling up all resources now to ensure they are not faced with shortages later.

To help better mitigate these risks, two Canadian companies have developed leading software to help companies better understand and manage their supply chain. Kinaxis (TSX:KXS), based in Ottawa, is helping companies correct misalignments in supply chains caused by volatility. The company's flagship product, RapidResponse, is being used by many major companies including Unilever, Ford and Merck. In Q1, the company's software has run 10 billion planning assessment calculations to help customers make fast decisions around COVID-19.

Montreal-based Tecsys Inc. (TSX:TCS) is another Canadian supply chain software vendor spanning healthcare, retail, and general wholesale high-volume distribution industries. The company saw a surge in demand related to COVID-19, resulting in the company posting its first year of $100M-plus revenue. Peter Brereton, president and CEO of Tecsys explains the importance of supply chain software adoption, "If we learn nothing else from COVID-19, we should realize that supply chain can make or break your business. Adding to the complexity of converging and consolidating markets is a massive acceleration in omnichannel consumer adoption, and we're very quickly seeing less nimble operations crumble."

Better understanding changing sentiment

One of the challenging parts to the pandemic, is understanding the changing economic landscape and consumer sentiment as a result of this vastly different environment. To make assessing sentiment easier, Canada's RIWI Corp. (TSXV:RIWI), a global trend-tracking and prediction technology firm, is helping to get clean data signals on what is happening in the world. The company's origins are in pandemic surveillance, as the company was conceived during the H1N1 outbreak. The technology was designed to understand how the public responded to the outbreak in real-time, across multiple countries. Now more than ever, RIWI's data can, according to CEO Neil Seeman, "provide a unique, predictive lens into fast-changing business trends, public health risks, international security and dynamic consumer activity in diverse sectors and regions."

We are unlikely to see a return to normal for a long-time to come. So the importance of these technologies, including enabling retailers to move online, beefing up manufacturing supply chains, and better understanding the shifting dynamic of consumer sentiment will continue to be important.

Source: TSX Market Intelligence Group.

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Dani Lipkin

Innovation Sector Head
Toronto Stock Exchange & TSX Venture Exchange

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This article is provided for information purposes only, is not intended to provide any type of advice. This article is not an endorsement or recommendation of any securities or industry referenced herein. Views, comments or opinions expressed in this article are those of their respective contributors only, and are not necessarily endorsed by TMX Group Limited, any of its affiliates or their respective management or employees.