IDC: Growth will be marginal for Canadian IT

Describing it as “mature,” IDC Canada said the Canadian IT market will only grow about one per cent in 2003, according to predictions the Toronto-based firm released on Thursday.

Findings from the research company show the IT market is characterized by excess capacity, decreasing margins, and lower consumer demand. In particular, the software market will grow at a rate of four to six per cent – lower than its historical average of six to 10 per cent. Supply chain management (SCM), secure identity management, and content management are areas of growth in the software arena.

“Anything with the word ‘management’ in it will do well because it speaks to lowering costs,” said Vito Mabrucco, group vice-president, product services and research at IDC Canada.

Alternatively, the Canadian hardware market will once again have a year of negative growth – about two or three per cent.

“IT companies need to be more focused about where they want to participate, and divest areas of low growth and low returns and potentially harvest areas for high growth and low returns,” Mabrucco said. “This is going to result in a number of companies adjusting their portfolio of offerings based upon their own strategy for growth.”

Mabrucco said this is quite a balancing act for some companies – pursuing new strategies, new markets and trying to return to an acceptable level of profit – and he said some companies just won’t make it.

However, growth of about five or six per cent is predicted for the telecommunications market, he said, driven mainly by wireless and local revenues. In fact, IDC Canada predicts wireless local area networks (WLANs) hotspots will curtail the rollout of 3G wireless equipment.

The approximate $70-billion Canadian IT market is split roughly into two between the IT and telecom sectors, according to Mabrucco. IDC Canada also predicts there will be an upheaval in the telecom sector overall, and he highlighted a predicted shift to IP-based services in this telecom space. In particular, IDC Canada expects IP-based virtual private networks (VPNs) will displace 1G VPNs.

Also, IDC expects Linux to “eat” Unix in the entry-level server market with Microsoft NT challenging Unix on the higher end. The entry-level server market is growing overall from 66 to 70 per cent because of lower price points and greater functionality.

However there is one area experiencing a whopping amount of growth – e-mail. IDC Canada predicts it will skyrocket by 30 per cent to a whopping 40 billion e-mails per day, while instant messenging (IM) is expected to increase 100 per cent to 30 million users.

IDC Canada also predicted Canada would be able to leverage its similarities in language, culture and tax structure with the United States to market itself as a low-cost operational alternative to American companies. IDC says Canada would be attractive to the U.S. not only because of its large pool of skilled workers, but also due to its lower wages and stable political structure.