IDC Canada predicts 4.3 per cent growth in IT spending

Demand by Canadian executives for productivity improvements in their businesses will drive a 4.3 per cent increase in spending on IT infrastructure, applications and employee training this year, market research firm IDC Canada predicted.

The findings are a result of a survey of 100 C-level executives

selected from the Financial Post’s group of 800 companies, which was conducted between November and December. While productivity has been a “”hot issue”” among this group for the last three years, it is a much more dominant theme in 2005, said IDC Canada chief research officer Denis Vance.

Primary concern

IDC based this prediction on three main responses from the survey. For example, executives’ primary concern with IT has shifted away from reliability and uptime to IT’s ability to change and adapt in a timely manner, Vance said. Whereas 28 per cent of respondents cited reliability and uptime as their main concern the year before, only 17 per cent said the same in 2004. Conversely, the percentage of respondents who voiced concerns about the ability of IT to adapt or change jumped from 15 to 34 per cent, said Vance.

Secondly, IT vendors can improve return on investment by helping employees understand how to use IT solutions, according to respondents. Finally, 67 per cent of executives surveyed believed that IT is a significant source of competitive advantage over other companies or is a steady contributor to ongoing operational capabilities.

“”We believe that represents strong case for productivity,”” said Vance.

Recapping last year’s predictions, Vance said 2004 marked the IT market’s return to growth in Canada.

IDC estimates that 2004 will go into the books at four per cent — more than 1 per cent higher than it had originally forecast last year at this time.

In 2005, Vance said the IT market will grow 4.3 per cent year over year with a compound annual growth rate of 3.5 per cent from 2004 to 2008. Leading the charge will be hardware at a year over year growth rate of 5.5 per cent when measured by number of units shipped and revenue, he said. Growth in this area will be largely fueled by desktop replacement cycles.

“”There’s still some pent-up demand out there,”” said Vance, adding that survey respondents are confident in the Canadian economy despite the Bank of Canada’s David Dodge decision earlier this week not to increase interest rates. Potential drawbacks to increased spending include a strong Canadian dollar and unforeseeable events such as BSE and SARS, which plagued the market in 2003.

Growth in the server and storage space will be driven by the increasing demand for blade servers, which IDC predicts will represent 20 per cent of the market in 2008, and more attention being paid to regulatory compliance statutes such as PIPEDA and Sarbanes-Oxley in the U.S.

The software market will experience 3.3 per cent growth in 2005 as new platforms emerge in a transitional market, he said.

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Jim Love, Chief Content Officer, IT World Canada

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