Market Overview
The Canadian addressable domestic market for IT products and services is projected by BMI to reach US$44.7bn in 2011 and US$53.8bn by 2015. Canadian IT spending is expected to report 7% growth in 2011, with drivers including hardware refreshes, data centre consolidation and growing interest in cloud computing.
In our core IT forecast scenario, IT market growth will advance at a compound annual growth rate (CAGR) of 4.5% over our five-year forecast period. Government spending in 2011 will be constrained by a focus on cutting costs, but new outsourcing and IT services contracts in both public and private sectors in 2010 pointed to the underlying demand potential.
The government's digital economic strategy provides a framework for IT market growth, with a number of two-year programmes having been confirmed in the federal 2010 budget. Meanwhile, the consumer segment remains a bright spot, with a steadily improving unemployment situation supportive of consumer confidence, despite some concerns of a dip in 2011.
Industry Developments
In its 2010 budget, delivered in March, the Canadian government confirmed plans to launch a digital economy strategy. The government had previously announced several two-year programmes and much of the 2010 budget was focused on the rollout of these existing plans rather than new funding initiatives. Among the initiatives confirmed from 2009 was Broadband Canada, which received US$225mn of funding over three years.
Previously the government had also introduced a subsidy for business computer hardware purchasing, a measure that proposed a 100% capital cost allowance rate for computer hardware and systems software acquired between January 27 2009 and February 1 2011. It has been estimated the measure could have provided a US$700mn boost to the information and communication technology (ICT) market.
Competitive Landscape
International vendors dominate the Canadian PC market, with HP, Acer and Dell the leading vendors, along with Apple and Toshiba. In Q111, second-placed Acer reported its highest ever share of the Canadian PC market, based on a strong performance in the consumer notebook segment. Meanwhile, following its launch in May 2010, Apple's iPad dominated the emerging tablet market, with the iPad2 launched at Canadian stores in March 2011.
Demand for hosted software is expected to grow, as vendors and service providers team up to launch more services. In June 2011, Microsoft Canada announced that partners WatServ and Tectura Corporation would provide cloud computing services based on Microsoft's new ERP in the Cloud initiative. Microsoft will promote the solution , which is aimed at local manufacturers, with the partners providing sales and implementation.
IT services vendors in the Canadian market reported a pick-up in projects in 2010. In May, US giant IBM announced it had won an IT infrastructure operations and hosting contract from Canada's largest cooperative financial group Desjardins Group. Meanwhile, IBM also signed a CAD130mn five-year agreement with the Greater Toronto Airports Authority to create a more efficient transport system.
Computer Sales
BMI forecasts that Canada's addressable computer hardware market will be worth around US$15.4bn in 2011, up from an estimated US$14.6bn in 2010. In 2011, BMI expects more restraint in the consumer segment due to intensifying competition for PCs from tablets and smartphones, the slackening of the netbook trend and price erosion.
Notebooks accounted for around 60% of PC sales in the first half of 2010, but desktop sales rebounded in H210. it is projected that tablet sales could be equivalent to around 20% of the PC market in 2011. Software
In 2011, Canadian market software sales are projected by BMI at US$8.8bn and revenues are expected to rise to US$11.2bn in 2015. Software CAGR for 2011-2015 should be in the region of 6%. Export-focused Canadian companies are looking for integrated tools that enable them to share critical sales and operations data and reduce costs.
Given the large deficits faced by the Ontario government, vendors will need to provide clients with ways to reduce costs by increasing efficiency. At the same time, the software market will be influenced by a continued move towards distributed computing, software-as-a-service (SaaS) and service-oriented architectures. Governments at all levels are also expected to be a growing market for cloud computing services.
Services
Canadian IT services spending is forecast to reach around US$20.5bn in 2011, up from US$19.0bn in 2010. In 2010, vendors reported a pick-up in IT project flow in key IT spending verticals. The market is projected to reach US$25.1bn by 2015.
One demand driver going forward will be organisations looking for help to utilise efficiencies from cloud computing such as SaaS and infrastructure-as-a-service. Government agencies at all levels are expected to be a growing market for cloud computing services as small towns and cities strive to cut costs and raise efficiency.
E-Readiness
Canada's penetration rate for mobile services remains well below that of comparable developed markets, and this is expected to remain the case for at least the next five years, even taking into the account increased competition as new players finally enter the market. However, 3G mobile services have been available in some form for several years. Faster speeds and more bandwidth-heavy applications mean operators must move quickly to roll out platforms that offer high-speed connectivity in line with demand from subscribers.
The Canadian broadband market appeared unaffected by the recession and strong growth was recorded by most service providers in 2009. There remains a considerable number of fixed lines in service and fixedline operators are deploying fibre and WiMAX platforms. However, many operators balk at the cost of building out infrastructure to under-served areas
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