A weakening European economy could have a major impact on the demand for IT products and services over the next three years, according to International Data Corp., but Canada should have no problem weathering the storm.
In a bulletin released Monday, Framingham, Mass.-based IDC said the likelihood of the U.S. technology slowdown spreading to Europe is increasing and that this slowdown could reduce worldwide IT spending between 2001 and 2003 by as much as US$150 billion.
IDC is currently forecasting 11 per cent growth for IT spending in Western Europe this year. Francis Chang, manager of IDC Canada’s analysis group in Toronto, couldn’t speak directly to the U.S.-based forecast, but said recent data gathered in Canada suggests that IT spending is still relatively strong here. “Our forecast for the year is around 10 per cent overall in the Canadian market,” he said. “What we did see in one of our surveys that we just got back from the field at the end of April was that Canadian businesses are not showing a slowdown in terms of their spending.”
About 70 per cent of respondents are either maintaining their levels of spending on IT or increasing it, while 30 per cent are decreasing their IT expenditures. “Overall it’s a positive outlook for businesses in Canada,” he said.
One reason for the healthy outlook might lie in a study released late last year by the Information Technology Association of Canada, which was conducted by the Conference Board of Canada. The reported charted the impact that IT investments have had on growth and productivity. In 1980, Canada’s IT capital totaled $440 million. By 1999, it reached $80.4 billion. Despite the growth, the report also suggested that Canada lagged quite a bit behind the U.S., putting Canada where its neighbor to the south was 20 years ago.
Chang said the slowdown has hit the U.S. harder, “so companies are taking a more reactive step in cutting back their spending versus what’s going on in Canada.”
Bob Morine, vice-president and general manager, public sector, IBM Canada and past chairman of ITAC, said there is little indication that IT spending is slowing down in Canada. “Obviously the Nortels, Ciscos and Lucents are having dramatic challenges right now,” he said. For the more traditional IT — hardware, software and services — it has been a little slower for everyone, but Morine said he doesn’t believe that anyone foresees growth dropping to low single digit growth or negative numbers. “Anyone I talk to is seeing high single digit or double digit growth or expecting that in the next little while in Canada. I don’t see anything dramatically shifting.
“This is not the best of times in the IT industry,” Morine acknowledges, “People have excess inventories. There’s some restructuring going on. Demand has softened somehwhat [but] I still think most people are seeing positive growth.”
Morine said the lion’s share of IT exports out of Canada go to the U.S. with Europe being a distant second. “They’re becoming more important, but they’re way behind our alignment with the U.S.”