IT underspending widens Canada-U.S. productivity gap: experts

Canadian businesses will have to increase their productivity to prevent a widening prosperity gap with the U.S., according to researchers and vendors who are studying the problem.

“Even though Canada is doing quite well in the world setting, we do see that we’re drifting further and further behind the U.S. in terms of prosperity, innovation and competitiveness,” said Jim Milway, executive director of the Institute for Competitiveness and Prosperity, during a teleconference call late Monday.

Canada’s prosperity compared to other countries of a significant size (a third of our population or greater) ranks second in the world, beat out only by the U.S. But Canada is slipping further behind, and in 2004 GDP per capita was 18 per cent lower in Canada than in the U.S.

Right now we’re about $8,700 per capita GDP behind the U.S., said Milway. But what does that mean to the average Canadian? “We estimate that would translate to about $12,000 in after-tax disposable income for a family of four,” he said. About 30 per cent of that gap is due to the fact that Canadians are not working as many hours as Americans and 70 per cent is due to lower productivity. “We’re not working as smart as the Americans (either),” he said.

We don’t invest as much in education, he added, and we don’t invest as much in machinery or equipment, particularly information and communication technologies. “And that means our workers have less advanced tools to support them in their efforts,” he said.

“We invest 10 per cent less than our counterparts in the U.S. as a percentage of GDP. As a result of that under-investing in capital, our workers have fewer advanced tools to support them on the job, and as a result they’re less productive.”

Ninety per cent of Canada’s economy is made up of small and mid-size businesses. Small businesses are concerned about exploiting existing markets more effectively and improving customer service, according to recent research from IDC Canada. But once you get above the 50-employee mark, productivity becomes increasingly important.

“As you go into the medium market, improving productivity was the No. 1 business priority,” said Michael Hyjek, research director of customer segments with IDC Canada. “So improving productivity is resonating with smaller firms that are trying to compete.”

There are mobility opportunities out there for SMBs and strong growth in wireless networking. “Over 62 per cent of the companies we talked to saw mobile computing devices having a direct impact on improving their operational efficiency,” he said, adding that more than half saw wireless networking as a contributing factor to operational efficiency.

“We see a developing preference for tools that support time shifting, the ability to accomplish the task at a different time,” said Doug Cooper, country manager with Intel of Canada. Another preference is time slicing, which makes previously unproductive times productive – such as being able to spin off an e-mail response when you’re on the subway with nothing else to do.

In a study conducted by Intel, the company found that wireless users spent less time in the office and gained about 52 minutes per week through time shifting and time slicing – and that is productivity they wouldn’t have otherwise gained.

“To a certain extent the competitive environment is going to force the conversation,” said Cooper. “There’s a lot of discussion of late about how globalization has really allowed businesses to outsource their services to any part of the globe, so that fundamentally rests upon a basis of information technology.” The question is how to make this a national priority, he added, so Canadian businesses will not compete on labour costs per hour but on value and prosperity at a knowledge work level.

“Innovation and breakthroughs come as a result of the support from vendors, who have new products and education, and it also comes from pressure from competitors and customers who are demanding that they do it,” said Milway, “so you almost need those two pieces together to make innovation happen.”

Comment: info@itbusiness.ca

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