IDC predicts Canadian IT spending to grow five per cent in 2007

Canadian enterprises will spend about $78.4 billion on IT products and services, IDC predicted Thursday, an increase of about four to five per cent over last year and a harbinger for increased competition among vendors.

Hardware sales will reach $15.4 billion, IDC said, while software will grow to $7.3 billion. Companies will spend $18.1 billion on IT services and about $19.5 billion on business-related telecommunications products. The research firm’s Toronto-based Canadian arm announced its annual forecast via an online conference.

While IT departments have spent much of the last 18 months consolidating their IT infrastructure through virtualization or other means, IDC Canada managing director Vito Mabrucco said the emphasis will be on building out their data centres based on blades and multi-core processors. Networking gear is also being more integrated into these environments, he said, requiring the use of sophisticated system monitoring tools.

“All these components are coming together in 2007. Infrastructure will be hot again,” Mabrucco said.

The business incentive to invest in IT will vary by vertical market, Mabrucco said, but they could include a need to get new products out sooner, to enter new markets, outfitting sales forces to be more productive or to get services up and running. “Business advantage is not a one-time event,” he said.

IDC Canada is predicting the emergence of technology as a service, one that is not necessarily driven by IT departments, Mabrucco said. The research firm distinguishes the idea of technology as a service from a utility, because it is not merely seen as the cost of running the business, nor does it necessarily come from an external provider, he added.

Mabrucco  described Canadian IT spending as strong and steady, but likely to force some vendors to give up some market share growth in order to meet their profit objectives. He also forecast the a major expansion of Google’s presence in Canada.

“They are going to enter this market with focus and precision,” he said, urging the industry to look at “page 2” of the search engine’s portal, which outlines its work in software and other areas. Google, he said, is the classic example of a “long tail” player – one who has managed to penetrate the masses where cost of access has been high in the past.

“Google has monetized its efforts not by charging users but advertisers,” he pointed out. “It’s like TV but on a global scale with much less regulation. When they offer free software, how does a competing software company deal with that? You’re going to have to ask yourselves . . . what does Google mean to me, my customers and my business?”

IDC Canada is also predicting major changes in the public sector, which accounts for roughly half of all IT spending. Here, government CIOs will become known as pragmatic and effective managers to adopt more business-like decision-making, Mabrucco said.

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