For the first time in years, the hardware sector of Canada’s IT industry is growing, according to data from IDC Canada Ltd.

In 2004, Canadian companies spent about $13.4 billion on hardware; this will increase to almost $14 billion in 2005 and reach about $14.6 billion in 2008.

But this increase will be short-lived, tapering out somewhere in mid-2006 and returning to only moderate growth, says Denis Vance, group vice-president and chief research officer at IDC Canada Ltd. in Toronto.

That’s because, companies are looking to replace hardware installed to deal with Y2K and when the refresh cycle is over, sales will taper off again.

However, growth in storage hardware will remain strong. Between 2004 and 2008, the terabytes of data stored will have a compound annual growth rate (CAGR) of 48.9 per cent, Vance said, which is “astounding.” Because the amount of data stored is skyrocketing, companies will continue to spend on storage.

Overall, Canadian companies will spend $37.2 billion on technology in 2005, up 3.9 per cent from 2004 according IDC Canada. This figure, it says, doesn’t include money spent on telecommunications, which will reach $36.1 billion in 2005.

“Let there be no doubt the years of negative growth are behind us,” Vance says.

Vance made the announcement at IDC Canada’s “Directions 05: The Push for Productivity” event in Toronto on Wednesday.

While Canada’s tech industry won’t experience the double-digit growth it saw during the tech boom, it is growing across all sectors — hardware, software and services, Vance adds.

“We are in what we expect to be a long period of sustained growth in the IT industry,” says Michael O’Neill, managing director of IDC Canada Ltd. in Toronto.

Between 2004 and 2008, the IT industry in Canada will experience a compound annual growth rate (CAGR) of 3.1 per cent, with IT spend reaching almost $41 billion in 2008.

The software industry is expected to grow at a CAGR of 3.8 per cent between 2004 and 2008, reaching $7.1 billion in 2008 from $6.2 billion in 2004. Spend in 2005 on software is predicted to hit $6.4 billion.

But the services market is still where the lion’s share of money is spent; it will reach $18.7 billion in 2008 up from $16.1 billion in 2004 and $16.8 billion in 2005.

Vance said hot areas will be network consulting and integration, and companies will continue to demand services to increase security as well as maintaining existing applications.

In the Canadian telecom market, wireless is the big winner, and telecom revenues from local and wireline long distance services will diminish. In 2005, wireless will grow 10 per cent to reach about $10 billion and following that will experience high single-digit growth until 2008, Vance said.

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