We’re a society that’s come to rely on the results of studies to determine the national mood. We smile when Canada is deemed to be the best place in the world to live and frown when unemployment rates skyrocket. Naturally, when KPMG LLP released the results of a 10-month study in February stating that Canada was the lowest-cost country – among the G7 countries – for software development, members of Canada’s political community and IT industry were patting themselves on the back.
This reaction, however, may have been a bit misguided, according to president of Edmonton-based Michetti Information Solutions Inc., Gregory Michetti.
Despite the fact that Canada ranked as the cheapest country in the G7 to develop software, Michetti pointed out that the more important statistic is that the United States is by far the most expensive.
“Canada’s good, but the U.K. and Italy and the others are also good. It’s nice that we’re low, but it doesn’t mean a whole lot. The prices for developing here are low because we pay lower wages, and in software that’s the biggest cost,” Michetti said.
He went on to explain that Canadian software developers are paid lower wages because Canadian software products are generally sold at a much lower asking price than comparable products available in the U.S.
“You could sell a piece of software in Canada for $100, whereas Americans would gladly pay $150 or $175 for that same piece. People in the U.S. seem to have more of an appreciation and are willing to pay for software,” Michetti said.
Stuart MacKay, the Vancouver-based co-author of the study Competitive Alternatives: Comparing Business Costs in North America, Europe and Japan and a former KPMG partner, substantiated Michetti’s advice about taking the results with a grain of salt.
Although the results of the study are very positive for the Canadian high-tech sector, MacKay said it’s still important to keep an eye on the global picture.
“Compared to the U.S. and the (rest of the) G7 we’re a low-cost place to do business, but in terms of the world economy we’re a medium-cost place to do business,” MacKay said.
While Charles Nguyen-Huu can’t foresee a stampede of foreign-owned companies setting up shop in Canada to take advantage of our status as most economical for software development, the e-marketing manager of The Messaging Architects in Montreal concedes that Canada is an attractive locale for other reasons.
“In terms of raw talent, Canada has a good pool, so a lot of U.S. companies will enter into joint venture agreements with Canadian companies,” he said. “We’re also a good borderline country because we understand both the American market and the European market.”
Michetti agrees that it’s unlikely that being crowned with the cheapest country in the G7 is going to turn many American eyes northward.
“I don’t think that there’s a big reason for U.S. companies to march into Canada and set up software development firms here. They view Canada with our 30 million people the way that a guy in Boston would view California. If they can sell it here, fine, but they’re not going to physically move here,” Michetti said.
– with files from Scott Gardner