Canadian IT spending is still in its recovery stage, according to IDC Canada Ltd. The research firm predicted a four per cent compound annual growth rate over the next five years, driven by strong growth in the software and cloud computing industries and weak gains in the struggling hardware market.
For 2010, IDC Canada predicts “tepid growth” overall, with the gains made in software and services industry to be offset by further declines in the hardware market. By 2014, the software and services market will reach 72 per cent of the total IT spending.
The research firm plans to classify Canada’s IT market as a “recovering” for at least the next two years, because overall spending will not reach pre-recession levels until 2012. This is partly due to the fact that hardware spending will not fully recover from 2008 numbers until 2014.
IDC Canada predicts some growth in the server market starting in the second half of 2010, but warns that the continuing interest in server virtualization is increasing server lifespan and impacting growth.
“In the next two to three years, (the hardware market) is going to be about 25 per cent of the total IT spend,” said Vito Mabrucco, managing director at IDC Canada. “So from an IT manager’s point of view, it’s something they should be looking at as a benchmark.”
Mabrucco said hardware vendors that are continuing to feel the heat when trying to move units out of their warehouses could present an interesting opportunity for some enterprise IT shops.
“It could be a good time to open up contract negotiations, as the vendors are really struggling to get any growth from their hardware,” he said. “If I was an IT manager and I saw a market where the vendors were disappointed in the growth, it might be an opportunity for me to open up that discussion.”
While not a giant market yet, the research firm said the cloud computing space is set to explode in Canada over the next five years. Mabrucco said the cloud market specifically will see a 31 per cent CAGR over that time period.
“Virtualization has been going on for 25 years and it only became mature when people realized you can actually take this software, starting with VMware, and implement it on x86 servers,” he said. “That really opened up everybody’s eyes and cloud computing will experience the same thing.”
Mabrucco said that with cloud computing following the same path, use cases will increase among CRM, e-mail client and collaboration applications. On-demand platform services such as Amazon EC2 will also see tremendous growth in the coming years.
With collaboration services specifically, Mabrucco said, it will be almost standard practice among IT shops to source these apps through the cloud. He added that Microsoft Corp.’s decision to move its Office 2010 productivity suite to the Web underscores this point.
“This is the kind of thing IBM has always been famous for,” Mabrucco said. “Once IBM got into a market it became okay for an enterprise to buy it. Microsoft is at that level and they are moving in that direction.”
Mabrucco said IT shops can’t be too optimistic or too skeptical when it comes to moving their apps to the cloud.
“Be skeptical when you hear it’s going to solve all your problems, but also be diligent enough to find the opportunities, even if they’re small, to deliver value to the business.”
In the mobility space, the research firm predicts that enterprises will continue to view mobility as a strategic differentiator with the overall mobile phone market expected to see a seven per cent CAGR over the next five years. Mabrucco said that most of this growth will be driven by smart phone purchases.