IDC Canada: The good news about 2003

If IDC Canada predictions for the IT industry hold true, the year 2003 should mean lots of new business for outsourcers and even more spam in our inboxes.

Toronto-based IDC Canada‘s report is an amalgamation of research and forecasts

done by local analysts and their global counterparts. This year’s version estimates that the IT industry will bring over $70 billion to the Canadian economy, a modest growth of one to three per cent from last year. Growth will be split relatively evenly between the IT and telecommunications sector, said IDC Canada products and services research group vice-president Vito Mabrucco.

Even with a low growth rate, IDC Canada reports good news in terms of spending. Total absolute spend over the next five years is being forecast to be much higher than in the previous five. Mabrucco described the worst case scenario as a 14 per cent increase in spending. Analysts actually expect that increase to be closer to 25 per cent.

Outsourcers can expect to be part of a strong market in 2003, especially as enterprises focus on cutting costs and their own core competencies. IDC Canada predicts that the overall outsourcing market should surpass $7 billion this year.

“”Traditional outsourcing of IT systems has become more acceptable and we continue to see large outsourcing contracts,”” Mabrucco says. “”Also there’s increasing focus on outsourcing key business processes such as H.R. or customer care and logistics. And this area of business process outsourcing is not in the $7 billion (overall outsouring forecast), so it’s a whole other market opportunity.””

Business process outsourcing is certainly becoming an area of keen interest for EDS Canada Inc., says spokesperson Stephen Heckbert, particularly in the last two years.

“”We’ve got a customer contact centre that we just opened in Sault St. Marie in 2002 to support General Motors,”” Heckbert says. “”It’s simply General Motors saying, effectively, ‘Our core strength is building cars.’ And so all of the other support functions we think we can turn over. So we’ve seen pretty big growth in that area.””

Because of the forecasted tendency to underspend IT budgets, Mabrucco says servers are going to go through a bit of a shakeup, with entry level models gaining even more of the market share. A continually increasing focus on cost will mean that the lower end servers will claim about 70 per cent of the market.

“”At the same time lower end servers are becoming more functional, getting better price performance,”” he says. “”And the price performance curve of this technology is relentless and continues at historical rates so this is also driving a high degree of discounting, just to hold on to share.””

Discounting, according to the forecast, will mean that even some of the higher end servers will be knocked down into the low-end price level. The overall server market should account for about $2 billion in 2003, Mabrucco says.

The telecom sector is expected to grow at about five to six per cent, driven mainly by wireless and local service revenues. And while a wireless revenue growth should continue, the price competition is expected to hurt the over-all profitability in that market. A wider deployment of wireless LANs may also prove to become another hurdle in the road to 3G deployment, Mabrucco says.

IDC Canada senior telecommunications analyst Warren Chaisatien, explains that as the number of providers entering both the enterprise and public access WLAN market the matter will become a simple matter of economics.

“”Wireless LAN today offers a speed much higher than 2.5G, so users already like it. And in terms of investment, I would think that as a public carrier when you implement wireless LAN hot spots . . .that would cost you significantly less than if you have to implement 3G cellular networks,”” he says.

The situation is not critical for the much-hyped technology, however. Chaisatien sees a place for it in the market even with a proliferation of WLANs since cellular networks still have the advantage of quite wide coverage.

“”But I think that will have an impact on how soon wireless carriers will implement 3G technology,”” he adds.

E-mail inboxes may also soon be groaning under an even bigger loads of messages, the report says. The number of e-mails sent around the world, already at 40 billion a day, is supposed to grow by 30 per cent.

“”And that’s not including the instant messaging users who are growing at 100 per cent.””

Not surprisingly, a big portion of all e-mail sent is spam. IDC predicts that by 2006, spam and automatic alerts will account for 40 per cent of worldwide e-mails. And that’s not counting the so-called “”colleague spam,”” where one employee sends an email to the entire organization.


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Jim Love, Chief Content Officer, IT World Canada

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