manager, technology infrastructure, Deloitte and Touche

Canadian companies aren’t keeping-up with their American cousins when it comes to investing in information and communications technologies (ICT), and an IT industry group is warning that it’s making our economy less productive.

The Information Technology Association of Canada (ITAC) said last month that, according to data from Statistics Canada and the U.S. Bureau of Economic Analysis, U.S. companies invest on average 42 per cent more in ICT than Canadian companies. In 2003, Canadian companies spent US$1,332 per worker, compared to US$3,137 invested by U.S. companies. ITAC vice-president Lynda Leonard said there is a direct link between ICT investment and productivity.

New technologies can help companies make better business decisions by giving them quicker access to the information they need.We’re sort of a make-do, can-do country compared to the U.S.Michael Hiscocks>Text The group has launched a study to determine why Canadian companies aren’t investing at the same rate as those in the U.S., and what can be done to address the situation. Leonard said there are a number of theories as to how these circumstances came to be.

“The Canadian economy is very heavily weighted to small and medium businesses, and we know from other studies that SMBs are lagging in ICT adoption, so it may be a structural issue,” she said.

Whatever has caused the gap, Leonard said that if Canadians care about their standard of living and productivity, the situation needs to be addressed.

ITAC has already called on the Canadian government to consider tax incentives, competitive with those in other countries, that would spur ICT adoption. “If you’re serious about the productivity gap then maybe the next logical step is to look at ways to incent behavior that changes the adoption pattern,” Leonard said.

Marc Perella, vice-president, IT and communications clusters with Toronto’s IDC Canada, said U.S. companies have historically invested more in ICT and the productivity gap between Canada and the U.S. continues to widen. He added the International Monetary Fund has tagged ICT under investment as the top reason Canadian productivity is lagging.

With some exceptions, particularly around telecommunications, Perella said Canadian organizations tend to lag U.S. organizations by six to 18 months in adopting new technologies and business practices.

Perella notes Canada’s tax on capital is higher than it is in the U.S., and vice versa for labour, encouraging Canadian companies to add headcount and U.S. companies to invest in IT. The low dollar also made imports of technology to Canada more expensive.

“Government needs to look at the tax on capital, and ensure it makes good business sense to invest in technology,” said Perella.

However, it’s not just up to the government, he added. Companies need to be educated on how specific ICT investments can increase revenue, and workers need to be trained to get the best use out of the investments made. “At the end of the day, companies will invest in IT if they see they can improve profitability,” said Perella.

Michael Hiscocks, manager of technology infrastructure for Deloitte and Touche in Ottawa, said while differences in U.S. and Canadian tax laws make direct comparisons in ICT investment difficult, he called the gap “mind-blowing.”

Still, Hiscocks said he doesn’t think it hurts Canada at the end of the day. “We’re sort of a make-do, can-do country compared to the U.S.,” said Hiscocks.

Still, he added there are certain areas where ICT investment can be beneficial to productivity, including communications devices like Blackberries and PDAs for a mobile workforce. Investing in security infrastructure is also a necessity, said Hiscocks.

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Related links:

Canadian ICT shows steady growth

Canada needs foreign investment in telcos: Expert

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Jeff Jedras
Jeff Jedras
As an assistant editor at IT World Canada, Jeff Jedras contributes primarily to CDN and, covering the reseller channel and the small and medium-sized business space.

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