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Canada Information Technology Report Q1 2011
Business Monitor International, Feb 2011, Pages: 44
The Canada Information Technology Report provides industry professionals and strategists, corporate analysts, information technology associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Canada's information technology industry.
The Canadian addressable domestic market for IT products and services is projected by BMI to reach US$43.9bn in 2011 and US$52.8bn by 2015. Canadian PC sales grew strongly in 2010, with H110 unit sales estimated by BMI at above 3mn units. Business demand is expected to be driven by data centre consolidation and growing interest in cloud computing.
In BMI’s core IT forecast scenario, IT market growth will be around 5% in 2010, consolidating a rebound in 2010, and then advance at a CAGR of 3.6% over the five-year forecast period. Government spending in 2011 will be constrained by a focus on cutting costs, but new outsourcing and IT services contracts in both public and private sectors in 2010 pointed to the underlying demand potential. The government’s digital economic strategy provides a framework for IT market growth, with a number of two-year programmes having been confirmed in the federal 2010 budget. Meanwhile, the consumer segment remains a bright spot, with a steadily improving unemployment situation supportive of consumer confidence, despite some concerns of a dip in 2011.
In its 2010 budget, delivered in March, the Canadian government confirmed plans to launch a digital economy strategy. In the 2009 budget, the government announced several two-year programmes, and much of the budget this year was focused on the roll-out of these existing plans rather than new funding initiatives. Among the initiatives confirmed from 2009 was Broadband Canada, which received US$225mn of funding over three years.
In the 2009 budget, the government introduced a subsidy for business computer hardware purchase, which is expected to have a major impact on the IT market. The measure proposed a 100% capital cost allowance rate for computer hardware and systems software acquired between January 27 2009 and February 1 2011. It has been estimated the measure could provide a US$700mn boost to the information and communication technology (ICT) market.
International vendors dominate the Canadian PC market. HP, Acer and Dell were the leading vendors in Q310, ahead of rivals such as Toshiba and Lenovo. Telecoms operators have emerged as one significant channel for PC sales, with Canadian telecoms companies competing to offer bundling deals involving Apple’s iPad. Rogers and Bell both offered plans that gave users 250MB of data for CAD15 per month, as well as a high-end plan of 5GB of data for CAD35 per month.
IT services vendors in the Canadian market reported a pick-up in projects in H110, with a boost from tenders delayed from 2009. In May, US leader IBM announced it had won an IT infrastructure operations and hosting contract from Canada’s largest cooperative financial group Desjardins Group. Meanwhile, IBM also signed a CAD130mn five-year agreement with the Greater Toronto Airports Authority to create a more efficient transport system.
The pick-up in project flow also brought opportunities for leading local market service provider CGI Group, which recorded some big project wins. In August, CGI announced it had signed a six-year, US$46.2mn contract with eHealth Ontario, an Ontario government agency. This followed another high profile success for CGI in July 2010, when the company announced it had won a multimillion-dollar contract renewal from financial services giant Manulife.
Canadian PC sales grew strongly in 2010, with unit sales in H110 estimated by BMI at above 3mn units, representing at least 15% growth on the same period 2009. There was evidence of renewed consumer confidence, resulting in less price sensitivity, as an increase in average sales prices reversed a long established global downward price trend. Notebooks accounted for around 60% of PC sales in the first half of 2010, but desktop sales rebounded in H210. Meanwhile 2010 also saw the emergence of tablet notebooks, spearheaded by Apple’s iPad.
In 2011, Canadian market software sales are projected by BMI at US$8.7bn and revenues are expected to rise to US$11.0bn in 2015. Software CAGR for 2011-2015 should be in the region of 6%. Export-focused Canadian companies are looking for integrated tools that enable them to share critical sales and operations data and reduce costs.
Given the large deficits faced by the Ontario government, vendors will need to provide clients with ways to reduce costs by increasing efficiency. At the same time, the software market will be influenced by a continued move towards distributed computing, software-as-a-service (SaaS) and service-oriented architectures. Governments at all levels are also expected to be a growing market for cloud computing services.
Canadian IT services spending is forecast to reach around US$20.1bn in 2011, up from US$19.0bn in 2010. In H110, vendors reported a pick-up in IT project flow in key IT spending verticals. The market is projected to pass US$24.0bn by 2015.
One demand driver going forward will be organisations looking for help with to utilise efficiencies from cloud computing such as SaaS and infrastructure-as-a-service. Government agencies at all levels are expected to be a growing market for cloud computing services as small towns and cities strive to cut costs and raise efficiency.
The Canadian broadband market appeared unaffected by the recession and strong growth was recorded by most service providers in 2009. There remains a considerable number of fixed lines in service and fixedline operators are deploying fibre and WiMAX platforms. However, many operators balk at the cost of building out infrastructure to under-served areas.
Canada’s penetration rate for mobile services remains well below that of comparable developed markets, and this is expected to remain the case for at least the next five years, even taking into the account increased competition as new players finally enter the market. However, 3G has been available in some form for several years. Faster speeds and more bandwidth-heavy applications mean operators must move quickly to roll out platforms that offer high-speed connectivity in line with demand from subscribers.
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