pending
in Canada’s IT sector is expected to slow this year as a result
of the global downturn, but most firms remain bullish and indications
are that many will expand operations.
The IT industry includes many
world-class firms, ranging from GEAC Computer Corporation to graphics
companies Softimage and Matrox, and from CGI Group to IBM Canada, which
employs more than 17,000 people.
The
sector has tended to focus less on back-office operations and more on
specialised areas such as graphics – Canadian firms account for
80 per cent of the world’s animation and special effects. Besides
well-known IT centres like Toronto, Montreal and Ottawa, there are clusters
of specialised companies in Edmonton, Calgary, Winnipeg, Saskatoon and
Vancouver.
Canadian software firms earn 73 per cent and IT services firms 20 per
cent of their revenue from exports. Strategic alliances and niche marketing
are characteristic, and many domestic firms now have a presence abroad.
Canada is one of the top investors in China, with over US$10 billion
invested in projects from biotech to IT since 1980.
Canada’s highly-developed IT sector is not expensive to break into.
Unlike in the US, the Canadian government bears the cost of social security,
healthcare and education, including university level. Overall, taxes
are lower in Canada too, while a 1999 KPMG study showed that advanced
software firms locating there enjoyed a 14.5 per cent cost advantage
over similar firms in the US.
A
recent survey reveals increased optimism regarding the application of
IT in Canadian business. “The survey shows we are on the verge
of a second technology expansion,” says Dr Peter Carr, director
of Athabasca University’s Centre for Innovative Management. “Confidence
is growing, spending is increasing and Canadian IT companies are becoming
more competitive.”
The survey, conducted by Athabasca University and CIO Canada magazine,
involved more than 2,800 IT managers and professionals. Dr Carr says
that for the positive trend to continue, business and government must
take security and privacy issues much more seriously.
Meanwhile, research by Toronto IT analysts IDC Canada suggests the industry
is being redefined. Its findings paint a picture of a sector in which
fewer new services are introduced. Instead, it will be more about how
products are packaged, sold and delivered worldwide.
IDC
Canada says overall spending on information technology in Canada will
increase to US$48.6 billion by 2003, down from the previous projection
of US$53.6 billion. However, the firm says that, unlike the US, Canada
will see gradually slower growth rather than a slide. Services, and
to a lesser extent software sales, will compensate for hardware declines.
Montreal-based
Saturn Solutions is a major player in international IT and, more
recently, a certified replicator of copy-protected disks to combat software
piracy. Company president George Hurlburt says IT-user businesses considering
reorganisation, particularly via outsourcing, recognise the internet’s
cost-effectiveness, but concerns about security remain.
He
says: “Our core competency is sourcing, assembling and shipping,
using the internet. In this economy, prospects are good because people
are going to look at outsourcing seriously as they are looking to economise.
If they manufacture in-house, they understand the extra fixed-cost infrastructure
that the cyclical nature of the sector involves. Outsourcing eliminates
this.”
Saturn has integrated its distribution system to enable its plants in
Montreal and Utah to assemble and ship 750,000 packages within five
days, and operations on this side of the Atlantic have been streamlined
too.
Mr Hurlburt says: “We will generate new revenue and invest in more
customer support staff in the UK, but we will not be investing in more
CD-manufacturing because we have underused capacity in Ireland. But
we are seriously looking to re-establish our final assembly and distribution
operations in the UK. The Channel Tunnel makes a big difference to our
ability to deliver products economically to the continent overnight.”
Montreal-based
Softimage, a division of Boston-based Avid, is a 3D animation and special
effects specialist whose revolutionary software product was used to
make the Jurassic Park dinosaurs, the first photorealistic computer-generated
characters to hit the big screen. The firm’s newest offering, SOFTIMAGE/Xsi,
slices the time required in animating a character and was used in Gladiator
and The Phantom Menace.
Managing director Michael Stojda says: “Since our inception in
1986, Softimage has been synonymous with turning dreams into reality
through the magic of digital artistry. Our mission is to fuel the imagination
through the creation of innovative software tools for digital artists.
In this we are all pushing the boundaries of our craft.”
Canada’s
largest computer services firm, CGI Group, is planning to expand this
year through acquisitions in the
US and Europe. Chairman Serge Godin says that CGI is seeking to tap
large, long-term outsourcing contracts in both continents. “It’s
not about getting bigger, it’s about having the critical mass needed
in the countries where we want large outsourcing contracts.”
CGI suffered a slump in 2000 after its Y2K-related business ended, but
its outsourcing business fuelled a rebound last year. First-quarter
figures for 2002 show revenues up 51 per cent and the firm expects it
to be a record year, with revenues topping US$1.4 billion.