Canada lags in IT spending

Worldwide IT spending will grow four per cent this year, driven by an improving global economy and the need for users to resolve infrastructure problems, market researcher IDC said recently. But the situation in Canada is less rosy.

The survey shows that U.S. buyers expect a five per cent IT spending increase, Western European buyers foresee a two per cent rise, their Japanese counterparts see spending going up three per cent and in Asia Pacific without Japan seven per cent growth is expected, resulting in a worldwide average of a four per cent increase, said John Gantz, IDC chief research officer.

But the situation in Canada more closely parallels Western Europe than it does our neighbours to the south, said Vito Mabrucco, group vice-president with IDC Canada Ltd. in Toronto. “We are definitely not that optimistic. We’re going to be lower than the U.S. and global, we’re projecting it at two to three per cent.”

“The U.S. is creating a fairly high profit recovery situation so a lot of their organizations are showing very strong year to year growth, which tends to be a driver of business investment,” Mabrucco said.

Best Buy Canada Ltd., owners of Best Buy Canada and Future Shop, would not comment on specific IT investment numbers. But spokesperson Lori Decou said the company’s IT growth is directly related to overall corporate needs. The electronics retailer chain will grow from 127 stores to 145 this year, she said, so an increase in IT spending will occur.

While an improving economy and necessary infrastructure upgrades are the expected drivers for IT spending in 2004, other motivators listed by U.S. IT buyers in a recent survey are more interesting, Gantz said. “What I like is new product innovation and customer demand,” Gantz said. New product innovation was listed by about a quarter of respondents, and customer demand by just under a third.

As spending picks up, IT departments are also less focused on cutting costs. “Cost cutting has finally moved down the stack,” Gantz said. Users in the IDC survey described infrastructure and software as more of a priority for IT than cutting costs, he said.

After 2004, IDC expects growth to level, with 6.5 per cent in 2005, 6.8 per cent in 2006 and 6.4 per cent in 2007, according to the December report, IDC’s current worldwide IT spending forecast. An update is due out soon, a company representative said.

Mabrucco said the numbers for Canada from 2005 to 2007 will also remain lower than in the U.S. IDC Canada projects services to grow three to four per cent, software to grow two to three per cent and hardware to remain flat at less than one per cent.

-with files from IDG

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