Relative to both Canada's economic growth and the US tech market, Canadian business and government purchases of information and communication technologies (ICT) has lagged since 2011. Spooked by European debt problems, uncertain growth prospects in its US and Asian export markets, and the strong Canadian dollar, business executives have been holding back on making tech investments. That pattern has continued in 2013, with our latest Canadian tech market report projecting growth of just 2.2% in Canadian ICT purchases in 2013 when measured in Canadian dollars (see October 25, 2013, “The Canadian Tech Market 2013 To 2014 – Sluggish Canadian Tech Market Will Accelerate In 2014”). Business and government purchases of computer equipment will be down 0.2% in 2013, purchases of communications equipment will rise by just 0.9%, and spending on IT outsourcing and telecommunications services will increase by 2.6% and 0.7%, respectively. The best tech sectors in a generally weak Canadian tech market will be software (with 5.8% growth) and IT consulting and systems integration services (with 3.6% growth).
We think the Canadian tech market will break out of its holding pattern in 2014, with IT purchases (excluding telecomm services) rising by 6% and ICT purchases (including telecomm services) increasing by 4.6%. This forecast assumes that the US, European, and Asian economies will improve in 2014, giving Canadian business executives more confidence in their business outlook and thus more willingness to increase their tech buying. Such investments will be critical for Canadian firms: while their adoption of mobile technologies is at par or slightly ahead of US firms, they are lagging behind their US counterparts in adoption of analytics and smart computing technologies and of cloud computing solutions. 2014 will be their opportunity to start to close these gaps.