Is Canada Losing Its Edge?

Although Canadian companies once led the way with high rates of Internet connectivity, there is growing concern that Canada’s private sector is falling behind international competitors when it comes to the adoption of e-business solutions.

August 30, 2005 – “According to Statistics Canada, more than 99% of all Canadian businesses are small or medium-sized organizations that employ less than 500 employees. For a number of reasons, firms of this size have traditionally been slow adopters of information technology � not just in Canada, but throughout the world. Canadian SMBs risk falling behind their international counterparts, however, if they continue to take a cautious approach to investing in IT,” says Steve Butler, Senior Analyst at eMarketer and author of the IT and E-Business in Canada report. “Large enterprises in Canada also need to do more to drive e-business adoption � not only within their organizations, but throughout their supply chains as well.”

Dollar value estimates of IT spending in Canada vary widely, largely because of differing definitions of the IT market and what it includes. Growth estimates are bunched more closely, but still show significant variance, ranging from a decline of 1% to a gain of 4%.

Forrester Research uses the broadest definition of the Canadian IT market, and foresees the strongest spending growth. Forrester predicts that Canadian consumers, businesses and government will spend CAD $95 billion on IT in 2005, an increase of 4% over 2004.

The World Information Technology and Services Alliance (WITSA) estimates that information and communications technology (ICT) spending in Canada will total USD $54.4 billion in 2005 (CAD $65.9 billion), an increase of 3.8% over 2004.

Ipsos-Reid has the narrowest focus, looking only at spending by Canadian businesses. It projects that IT spending by Canadian businesses will surpass CAD $44.6 billion this year. That is a 1% decline from 2004 levels.

“The most significant change during the past year has been in Canadian business leaders’ recognition of the need to increase their investment in IT in order for their companies to remain internationally competitive,” says Mr. Butler. “On the other hand, although some Canadian businesses have stepped up their investment in new technology, there is still an overabundance of caution and not enough action on the part of many Canadian firms.”

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