A tale of two studies: Controversy erupts over conflicting IT spending predictions

An Ipsos-Reid study claiming Canadian companies will be spending less on information technology (IT) has sparked a controversy within Canada’s IT sector.

On Tuesday, the Information Technology Association of Canada (ITAC) disputed the findings of the study released earlier this month and titled 2005 IT Vendor Roadmap to Buyer Dynamics.

ITAC is an industry association representing around 1,300 Canadian companies in the tech sector.

Based on a survey of 603 companies across Canada, Ipsos-Reid concluded businesses would spend Can$ 44.6 billion on applications, hardware and infrastructure and security in 2005 – down from the $45.1 billion and $46.7 billion spent in 2004 and 2003 respectively.

In a letter circulated among its members and on the group’s Web site ITAC challenged these findings. It called the Ipsos-Reid study “significantly out of step” with IT spending data it received from analyst firm IDC Canada.

Citing an earlier IDC Canada study, ITAC said IT spending by Canadian businesses would actually increase this year to Can$ 37.7 billion from the $36.2 billion spent last year.

The letter also suggested the Ipsos-Reid study was methodologically flawed as its sample size was too small — “623 companies compared to the approximately 10,000 upon which IDC estimates are based.”

It said the disparity in market size estimates occurs because Ipsos-Reid’s numbers include spending which IDC does not normally include in its definition of IT spend, and vice-versa. “This can account for the difference in the estimate of market size but not the rate of growth,” the ITAC letter said.

ITAC president and CEO Bernard Courtois said all his discussions with Canadian businesses suggest their spending on IT would increase this year.

This view was echoed by Michael O’Neil, managing director for IDC Canada in Toronto.

O’Neil said IDC Canada studies indicate IT spending will be up in 2005. In January, IDC Canada predicted the Canadian IT market would grow by 4.3 per cent in 2005, driven by increased hardware purchases as companies start to replace older systems and desktops. These numbers, O’Neil added, come from the numerous studies and executive panel surveys IDC Canada does each year, and amount to a review of some 10,000 Canadian companies.

Ipos-Reid, on its part, says it’s ready to counter the points raised in the ITAC letter.

“We are aware of the letter…it has been in our possession for the last 48 hours,” said John Wright, senior vice-president of Ipsos-Reid’s public affairs office in Toronto. “We intend to respond vigorously and aggressively.”

One industry insider takes a slightly different view of the whole kerfuffle.

According to James Norrie what really matters in any IT spending survey is not so on how much is being spent, but how it is being spent. Norrie is director of the School of Information Technology Management with Ryerson University in Toronto.

A company may spend fewer dollars on IT, but get more bang for their buck by carefully selecting what that money is spent on, he said. “Companies are starting to…get pretty selective [about] the kinds of investments they are prepared to make. Everybody is looking for efficiencies and ROI from their IT dollars.”

Norrie said this means companies will only invest in technology if a strong business case can be made for that investment – that it will generate cost efficiencies, increased productivity, and a better bottom line.

“We are going to see a lot more focus in the next six to 12 months on the realization of benefits,” Norrie said. “Chief Financial Officers and Chief Information Officers are going to be held liable, post-project, for determining the realization of benefits from IT investments.”

One company that’s going to be spending more on technology is Burnaby, BC-based Pacific Blue Cross. Senior vice-president, information technology, Dr. Catherine Boivie said the increased spend would be to renew and replace older systems and improve customer service.

“Technology is being used increasingly more as a strategic differentiator,” Boivie said. “We are refreshing our entire technology in order to provide more flexible products and services.”

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