Government spending drives IT growth

Canadian IT spending will grow by three percent in 2004, led by government spending, according to Forrester Research. GDP growth is a key factor in driving business investment in IT, just as in the US, but a slower Canadian economic recovery and the adverse effects of a stronger Canadian dollar on exports are causing a one- to two-quarter lag behind the US.

While Canada’s IT spending is fairly similar to the US’, there are unique patterns, such as:

Canadian government IT spending is stronger than Canadian business IT spending, as governments continue to spend on eGovernment initiatives and the replacement of antiquated systems at local, municipal, and regional levels. Canadian businesses are more reluctant to increase IT spending.

Software represents a smaller share of expected 2004 Canadian IT spending than in the US. The Canadian economy has a higher portion of larger enterprises compared to the US, many of which have already bought their infrastructure, integration, and application software.

Canadian firms in 2004 will devote a larger portion of IT budgets to IT services than will US firms. Application development or implementation and Web site design top the list for spending increases for 2004.

Historically, Canadian firms have spent more on outsourcing, but demand is weakening in most categories.

Internet and eCommerce initiatives, networking equipment, and PCs are areas where high proportions of Canadian firms plan to increase spending, while application software and servers attract less interest; 42 percent plan to increase spending on Internet and eCommerce initiatives; 39 percent will spend more on networking equipment; 35 percent will step up outlays on PCs and workstations.

Forrester surveyed more than 30 large Canadian firms and analyzed data on IT spending and employment from sources like Statistics Canada.

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