Canada Gets with IT: eMarketer

September 29, 2004

eMarketer reports that 2004 will see the first significant increase in technology spending by Canadian businesses and government since 2001.

Over the past three years, IT spending in Canada has remained essentially flat, ranging between CAD $92.0 billion and $93.0 billion. But Forrester Research predicts that, at long last, spending this year will reach CAD $96.0 billion, up 4.3%.

A comparative estimate from IDC puts IT spending in Canada at CAD $35.1 billion in 2004, although it is important to note that IDC’s forecast is not as expansive as Forrester’s, which includes telecommunications equipment and services in its forecast, in addition to wages paid to IT workers, while IDC’s forecast does not.

In July of 2004, IDC raised its long-term guidance for IT spending growth in Canada to a 2.7% compound annual rate between 2003 and 2008. This is up from the 2.4% compound annual growth rate that IDC had predicted earlier in the year. As an explanation of its upward revision, IDC cited strong sales in the IT hardware and software markets as replacement sales of PCs, entry-level servers, and storage units have been stronger than initially anticipated.

No matter which numbers you go by, the question remains: What’s driving the rise in spending at this time? eMarketer answers this question in its latest report, IT and E-Business in Canada: Spending and Trends.

Looking back at the peak of the technology boom, eMarketer finds that IT spending in Canada was increasing at about the same rate as it was in the United States, posting double-digit growth in both 1999 and 2000. And while IT spending growth dropped to just 3% in the United States in 2001, Canadian firms continued to spend on technology, as their IT spending grew by 8% that year. More recently though, Canadian IT spending growth has lagged the United States, as the two countries have started to climb out of the economic downturn of the past few years.

With small and medium-size enterprises (SMEs) making up a significant portion of the Canadian business market, it should come as little surprise that the adoption of advanced e-business solutions has been somewhat slow in Canada, since smaller companies are typically more conservative when it comes to technology spending.

Now Canadian government and industry organizations are putting considerable efforts into to educating SMEs about the benefits of e-business, because up until now most Canadian companies have hesitated to invest in advanced e-business solutions.

Canadian companies have been reluctant to adopt such solutions due to their complexity, as well as the shortage of skilled IT labor that is able to implement and maintain them. Several decision-makers also say that the cost of e-business solutions remains high, noting that it is preferable for them to continue doing business using taditional methods, rather than risk implementing an e-business solution with an uncertain return on investment.

Nevertheless, small, medium-size and large business leaders in Canada are taking another look at e-business solutions today. Many technology vendors have spent the last few years adapting their solutions to better fit the needs of SMEs in particular, while the growing acceptance of IT outsourcing is encouraging Canadian companies to consider using third-party service providers to implement and manage e-business solutions.

Change is coming, though still relatively slowly.

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