BMI View: T he maturity of the Canadian IT market prohibits the high growth rates observed in emerging markets during the period of rapid 'catch-up' growth, but it nonetheless remains a highly lucrative market for vendors in per capita spending terms . Despite the fact that PC hardware prices have declined, Canada will continue to be one of the most lucrative markets globally in terms of spending per capita , with consumers exhibiting a strong preference for premium hardware . There are also areas of enterprise spending outperformance , includ ing enterprise adoption of cloud computi ng, Internet of Things, real-time software and services and big data analytics. We expect Canada's IT market to record growth of 3.6 % in 201 5 , and forecast a CAGR of 3.9 % 2015 - 2019 .
Headline Expenditure Projections
Computer hardware sales: CAD19.1bn in 2014 to CAD19.3bn in 2015, an increase of 1.0%. Growth expected to decelerate from 2015 as a more subdued tablet market is only partially offset by growth in the notebook category.
Software sales : CAD12.1bn in 2014 to CAD12.7bn in 2015, an increase of 4.6%. There is enterprise software growth potential among small- and medium-sized enterprises, as well as for advanced deployments in the large enterprise market.
IT Services sales: CAD23.3bn in 2014 to CAD24.5bn in 2015, an increase of 5.3%. We expect cloud computing and big data deployments will drive IT services outperformance in 2015 and over the medium term.
Key Trends And Developments
In 2015, BMI expects cloud computing growth to accelerate in Canada as an increasing number of local solutions will help alleviate the bottleneck of a lack of confidence in US providers in the wake of the NSA revelations. The NSA scandal was particularly important in Canada, because as in France, there was already mistrust among enterprise decision-makers dating back to the inception of the Patriot Act. However, US providers have also been establishing a local presence to counter the threat from a loss of trust. For instance, IBM opened its first SoftLayer datacentre in Canada in August 2014, with capacity for more than 15,000 physical servers, and in March 2015 IBM opened a second SoftLayer cloud centre in the Canadian city of Drummondville. Additionally, Oracle opened a new cloud development centre in Toronto in December 2014. We believe the investment by US vendors will enable them to compete on a more even footing with Canadian vendors, but caution that they remain vulnerable to further intelligence service overreach by US agencies.
BMI also has a positive view for the growth potential for Internet of Things (IoT) products and solutions in Canada over the medium term. The quality of network infrastructure, technological literacy among enterprise decision makers, high labour costs and vendor investment all help to provide a platform for IoT adoption. One key to unlocking the potential of the IoT is operator investment in networks and platforms for machine-to-machine communication. Given this fact, we consider the February 2015 announcement that Telus signed a partnership deal with US-based global Machine-to-Machine platform market leader Jasper positively. This will contribute to the unlocking of significant growth potential, as illustrated in a Telus-commissioned IDC survey, which reported in September 2014 that only 6% of domestic businesses had implemented an IoT product or solution. However, the medium-term growth outlook is strong, with another 7% of enterprises expected to deploy IoT solutions in 2014 and reach a total of 30% of businesses in 2015, according to the survey. Following the release of the findings, Telus launched the Telus IoT Marketplace, an online space offering turnkey IoT services from leading technology firms. In terms of spending, it is expected to hit CAD21bn (USD19.56bn) in 2018 from USD5.6bn (USD5.22bn) recorded in 2013, which will be a 375% rise.