canada’s information and communications technology (ict) · 4 in 2009, ict sector revenues have...

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Canada’s Information and Communications Technology

(ICT)Sector Analysis

The University of Toronto

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Presentation Overview

1. ICT Industry Overview– Introduction– Scope / Scale– Emerging Markets– Industry Trends

2. ICT Companies– Sector Profile– Top Industry Players

3. Factors– Labour Force– Salary Information– Education and Training– Infrastructure / Cluster Information

4. Industry Relationships- International Comparison

5. Intellectual Property Measures– Patents– R&D Funding (including Foreign

Investment)– International Comparison

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ICT Industry OverviewIntroduction

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In 2009, ICT sector revenues have declined by 0.8% from the 2008 level

Market Value• In 2009, ICT sector revenues have declined for the first time since the 2003. ICT

sector revenues were estimated at $154.2 billion in 2009, a decrease of 0.8% from the 2008 level

• But the cumulative revenues from the top 250 ICT companies in Canada increased by 3.66% from $71.32 billion in 2009 to $73.93 billion in 2010 but still trailing the $75.97 billion generated in 2008

Source: Industry Canada Sector Report 2010; Branham Group: Canada’s Top 300 Tech Companies 2011

SECTOR COMPANIES FACTORS INDUSTRY RELATIONSHIPS

INTELLECTUAL PROPERTY

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Alberta continued its emergence as a hotbed for leading ICT activity as the province realized a 46.3%

increase in provincial revenue

Results by Region• Alberta, British Columbia, Ontario and Quebec represented more

than 97% of total revenues on this 2010 top 250 ICT companies• Companies from Ontario represent 55% of revenues collected from

the top 250 ICT companies of Canada

Source: Branham Group: Canada’s Top 300 Tech Companies 2011



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ICT Industry OverviewScope/Scale

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On average, the annual growthin this sector has been 4.1% since 2002

Source: Industry Canada Sector Report 2010


There is a clear trend towards ICT services. ICT Services is the only segment which grew by 2.8% in 2009

reaching an estimated total of $92.8 billion

8Source: Industry Canada Sector Report 2010



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Telecommunications and Computer Systems Design & Related Services account for 63.7% of ICT’s

contributions to the GDP in 2009




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Communication Services and Wholesaling accounted for close to 60% of growth in revenues for 2009




Canada ranks eleventh in ICT expenditure per capita in the world

11Source: TRRA Reports 2010



ICT Canada expects software to grow the fastest at an average annual rate of growth of 4.8%

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Greatest increase in investment is expected to take place with computer and electronic manufacturing

sub-sector

13Source: TRRA Reports 2010



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ICT Industry OverviewEmerging Markets

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An emerging market is the multimedia sector which is growing at 20% and generates $3B in revenue

Emerging Markets: Digital Media• The expansion of distribution channels has Digital Media companies

seeking to exploit the direct-to-consumer online distribution channels• Canada is on the cutting edge of the digital revolution when it

comes to multimedia and gaming technologies• Canada’s multimedia industry is growing at an annual rate of about

20% and generates $3 billion a year in revenue• Canada has over 2,300 multimedia firms that employ over 18,000

employees• Canada enjoys a 6.2% cost advantage over the US in web and

multimedia content development• Canada has vibrant multimedia clusters that are located in Montreal,

Vancouver, and Toronto

Source: Industry Canada Sector Report 2010; Conference Board of Canada 2006, Location Canada 2006



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Telecommunications Services and Environmental Sustainability are emerging trends in ICT

Emerging Markets: Telecommunications• Telecommunications Services accounted for 33.7% of the ICT sector

revenues despite erosion of traditional voice services• New technologies are helping the telecom industry lower its cost

base and generate new products• Since 2002, the wireless communication equipment industry has

grown by 143%, an annualized growth rate of 13.5%Emerging Markets – Environmental Sustainability• The global information and communications technology (ICT)

industry accounts for approximately 2 percent of global carbon dioxide (CO2)

• Gartner, a leading IT research and advisory company, expects consumer awareness of the impact of ICT on the environment

• A growing concern for improved public health processes and eco-friendly IT has created new niches for existing players

Source: Industry Canada Sector Report 2010, Gartner 2007, Branham Group: Canada’s Top 300 Tech Companies 2011; utoronto report



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ICT Industry OverviewIndustry Trends

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Software and Computer Services forms the largest product and service group of Canadian exports




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Total ICT exports decreased by 13.2% in 2009, totaling $27 billion. As total Canadian exports decreased by 24.1% in 2009, the share of the ICT sector in total of

Canadian exports has increased to 6.7%




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Canadian exports of ICT goods declined by 16.2% in 2009 and further declined by 7.9% in 2010 and totaled at 17.1 billion; Exports of ICT services also declined by

5.4% in 2009




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Computer and Peripheral Equipment constitutes the largest product group of Canadian Imports




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Total ICT Imports were $45.8 billion in 2009, 8.9% decline over 2008, compared to a drop of 14.8% in

total Canadian imports




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Canadian imports of ICT goods declined by 9.5% in 2009 and increased by 9.2% in 2010 and totaled at 43.6 billion; Imports of ICT services also declined in

2009




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ICT CompaniesSector Profile

Source:

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ICT companies are relatively small in size and there were only 100 companies which had employees

greater than 500

The ICT sector consists of mainly small companies• 79% of the 31,500 companies in the ICT sector are in software and

computer services• Within the software and computer services sub-sector, computer

systems design contributes over 94% of total companies. ICT wholesaling accounts for 10.6% and ICT manufacturing for 6.9%

• The ICT manufacturing subsector has more than 15% of the companies which have more than 50 employees while the whole ICT industry has 4.2% of the companies having more than 50 employees

• Some of the key Canadian players in the industry are Research in Motion, BCE Inc., Rogers

• Many global companies have also selected Canada to operate world-class ICT research centers, including IBM, Xerox, Open Text, Cisco, Nokia, and Ericsson

Source: Industry Canada Sector Report 2010, Location Canada 2006



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The majority of ICT firms are small in size with 98.1% having less than 100 employees




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In 2008, 79% of the companies in the ICT sector specialize in Software and Computer Services


Sub‐sector %

Software and Computer Services 78.6%

ICT Wholesaling 10.6%

ICT Manufacturing 6.9%

Communications Services 3.9%



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ICT CompaniesTop Players

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The top ten Canadian and multi-national firms by revenue are shown below

Source: Branham Group: Canada’s Top 300 Tech Companies 2011

Top Canadian Players Top Multi-Nationals

Research In Motion IBM Canada Ltd.

BCE Inc. (wireless and data) Hewlett-Packard (Canada) Ltd.

Rogers Wireless Communications Inc. Apple Canada

TELUS Corporation (wireless and data) Microsoft Canada Co.

Celestica Inc. Cisco Systems Canada Co.

CGI Group Inc. Xerox Canada Inc.

Shaw Communications Inc. (Internet) Ericsson Canada

CAE Inc. Oracle Canada

SoftChoice Wipro Technologies

MacDonald, Dettwiler and Associates Ltd. (MDA) SAP Canada



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FactorsLabour Force

Source:

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Over 544,900 people are employed in the ICT sector. An additional 89,000 jobs are expected to be created

in 3-4 years

Current Labour Force• 544,900 people are employed in the ICT sector; approximately 3.2% of all

Canadian workers• The gains in employment have come from software and computer

services subsectors, with telecommunications services growing to 20% higher than that in 1997

• ICT manufacturing employment decreased by 2.9% in 2009, to around 92,300 employees. Since 2002 employment in the manufacturing sector has gone down by 8.8% or 1.3% pm average annually

• ICT services employment increased by 2.2% in 2009, reaching approximately to 376,000 employees

• ICT wholesaling employment declined by 2.5% in 2009, reaching about 76,000 employees

• ICT sector needs to fill 89,000 jobs in the next 3-4 years• ICT employment has not changed much since 2002, growing by 0.2% on

average annual basis

Source: Industry Canada Sector Report 2010, ICTC - Enhancing and Leveraging Capacity: Information Strategies for Internationally Educated Professionals 2008



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The ICT sector employed approximately 3.4% of all Canadian workers in 2008




ICT employment has not changed much since 2002, growing by 1.6% in total




The top ICT sectors in terms of employment are related to Computer Systems Design, and

Communications Services (2009)




ICT manufacturing employment decreased by 2.9% in 2009; ICT services employment increased by 2.9% in

2009; ICT wholesaling employment declined by 2.5% in 2009




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FactorsLabour Force

Canada has the highest post secondary education attainment levels of all OECD members

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Source: ICTC – ICT Sector Diagnostic 2008, Outlook for Canadian IT Occupational Employment 2006


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In Canada’s ICT industry, jobs requiring specialization are in demand while manufacturing jobs are declining


Changes in ICT Labour• In the ICT industry, jobs requiring specialization and high levels of

innovation are coveted while a range of manufacturing and assembly jobs are transferred to low cost locales to save money

• Canada’s ICT sector is losing manufacturing, production, basic technical, data processing and information services positions

• Employment has risen since 2003 with most gains in software and computer services

• The main challenge is to attract top managers, engineers, programmers, designers and other ICT specialists for the development and commercialization of innovative and desirable products and services

• ICIT’s ICT focus group indicated a shift from generalists with a broad awareness of ICTs to product and application specialists



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There has been a 22% decline in enrolments in computer science, computer engineering and

software engineering from 2002 to 2007




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Canada’s ICT sector will experience annual growth of 2.3% resulting in an additional 58,000 jobs by 2010

Labour Shortages• In the next three to five years, there will be a significant shortage of

people in the six major occupational groupings: managers, engineers, analysts, programmers, technicians, and technical writers and designers

• The ICT sector will experience continued employment growth at a compound annual rate of 2.3% through 2010, adding an estimated 58,000 jobs to the existing base of 600,000




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Employment growth is primarily in applications development and technical skills

Labour Shortages• Employment will grow by approximately 2.7% in the IT producer

industries, but only 1.9% in the IT user industries• Hiring plans for 2008 would require a 5% increase in the current IT

workforce; an unlikely occurrence given that over the last five years the industry attracted less than 7% of its current population.

• So the skills shortage reported in previous years continues, but is more acute for specific skill sets, particularly applications development technical skills, which is the largest IT job category and the one presenting the greatest challenge for hiring managers

• The computer industry is hiring the greater number of application developers while the end-user organizations – the banks, retailers and manufacturers, etc. – are focused more on project management, business analysis and architecture skills, all of which are identified by hiring managers as difficult to find




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FactorsSalary Information

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In 2008 on average, employees in the ICT sector earned 47% more than the Canadian average

Salary Information• On average, employees in the ICT sector earned 47% more

($61,618) than the Canadian average of $42,143

• The largest salaries were paid to software and computer services employees, who earned an average salary of $68,126

• The lowest paid subsector in ICT, electronic components, earned $50,836 on average which is 20.6% more than the average Canadian




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In 2008, the Software and Computer Services subsector receives the highest compensation on

average




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FactorsEducation and Training

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The ICT sector employs a knowledge intensive workforce

Education• 42.1% of workers had a university degree in 2008, compared to a

national average of 23.9%• The top three industries that employ the largest share of university

educated personnel are:• Communications equipment (50%)• Software and computer services (51%)• Computer equipment (43%)

• Electronic components and instruments manufacturing industries recorded the greatest increases of university educated workers from 2006 to 2007 at 3.9% and 3.5% respectively

Training• Canada's universities produce more than 40,000 graduates a year in

mathematics, engineering, and pure and applied sciences

Source: Industry Canada Sector Report 2009, ICTC - Enhancing and Leveraging Capacity: Information Strategies for Internationally Educated Professionals



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42% of ICT workers had a university degree in 2008, compared to a national average of 24%




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FactorsInfrastructure/Cluster

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Canada’s four ICT clusters are dominated by foreign multinationals, except for Vancouver

Overview

• Canada has for main metropolitan cluster areas: Toronto, Montreal, Ottawa and Vancouver

• Foreign multinationals (e.g. IBM, HP, Siemens, Microsoft, Xerox, Cisco, etc.) dominate the Canadian ICT industry in all clusters except Vancouver

Source: ICT/LIFE SCIENCES CONVERGING TECHNOLOGIES CLUSTER STUDY: Greytech Management Inc. 2004, Denmark Report 2007



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Toronto is the largest ICT cluster in Canada contributing over $20B a year to the economy


Toronto Montreal

• The cluster in Toronto includes Toronto, Markham and Mississauga and is the largest cluster in Canada

• The Toronto cluster consists of approximately 9,000 companies and 200,000 employees

• Toronto’s ICT sector has contributed more than $20B/year to the Canadian economy

• Toronto’s ICT sector does little manufacturing and specializes in development of software, e-business, new media and communications equipment

• The Montreal cluster consists of approximately 2,500 companies and 110,000 employees

• Montreal represents approximately 20% of the Canadian ICT industry

• Montreal’s ICT sector specializes in telecommunications and new media and shifting its emphasis from traditional manufacturing to emerging markets



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Vancouver is a unique cluster with a lack of multinationals


Ottawa Vancouver

• The Ottawa cluster consists of approximately 1,500 companies and 64,000 employees

• Ottawa’s ICT sector’s key strength is its wireless and photonics industries

• Ottawa’s ICT sector focuses on ICT services (60%) and the government is the main customer

• Nortel is the largest player with approximately 6,000 people

• The Vancouver cluster consists of approximately 1,000 companies and 30,000 employees

• Vancouver represents approximately 10% of the Canadian ICT industry

• The Vancouver cluster is unique with few multi-nationals and a large number of smaller service providers

• Vancouver’s ICT sector specializes in new media and wireless communications

• Telus is the largest player with approximately 10,000 people in 2003



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Industry Relationships

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Since ICT is an enabler of productivity in other sectors, linkages are a key area for exploration

Relationships with Other Industries

• Based on the major metropolitan clusters for ICT, the following industries are ones where partnership or licensing is possible

• Toronto: Canada’s largest ICT cluster and 3rd largest in North America. New media, finance, automotive, manufacturing, retail and health

• Montreal: New media, aerospace, transportation and distribution• Ottawa: Government and bio photonics• Vancouver: Wireless cluster, Bioinformatics

Source: Centre for the Study of Living Standards 2008



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Industry RelationshipsInternational Comparison

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Canada lags the US in business sector ICT investment

ICT Investment• In 2010, total economy ICT investment in Canada, expressed in current dollars,

increased 1.6 per cent to $39.0 billion• This is slightly below the average annual increase of 2.1 per cent experienced

between 2000 and 2009, but still a good performance compared to the 4.3 per cent decline witnessed in 2009

ICT Investment per Worker• Nominal ICT investment increased 1.6 per cent in 2010, and the number of people

employed increased by 1.4 per cent the same year• This resulted in a 0.2 per cent increase in nominal ICT investment per worker in 2010,

slightly below the average annual growth rate of 0.6 per cent for the 2000-2009 period

ICT Prices• ICT prices fell in both countries, but more sharply in Canada due to the strength of

the currency• Prices of all ICT components have declined substantially since 2000, with computer

prices falling the most (66.0 per cent), followed by communication equipment (33.7 per cent) and finally software (12.3 per cent)

Source: Centre for the Study of Living Standards 2010



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In 2004, investment in ICT per worker in Canada was 32.9% less than the United States

Source: Institute of Competitiveness and Prosperity, Financial Services in Toronto Report 2007



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However, Canada has a cost advantage, though the appreciating Canadian dollar has diminished this

advantage

Source: KPMG 2010 Competitive Alternatives Study

Cost Advantage• Canada is the cost leader

among the nine established industrialized countries examined with business costs 5.0 percent below the US.

• With the appreciation of the Canadian dollar, Canada’s cost advantage over the U.S. decreased from 9.0% in the 2004 study



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Intellectual Property MeasuresPatents

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14,436 ICT patents in Canada from 2005-2009

Patents in Canadian ICT Clusters• In Vancouver, the number of patents is high, particularly in the wireless area

where some 375 patents have been filed• In Montreal, patenting in ICTs has declined by at least 20% since 2000• 35% of the patents filed in Canada are ICT patents, which is just above the

total across all countries measured

Source: OECD Science: Technology and Industry Scoreboard 2007; http://www.trra.ca/en/reports/resources/ICT_TO_High%20Tech%20Hub%202010.pdf



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Canada is 6th in ICT related patents filed under the Patent Cooperation Treaty (PCT)

Source: OECD Science: Technology and Industry Scoreboard 2010



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Intellectual Property MeasuresFunding

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The ICT sector is the largest private R&D performer in Canada ($6.2B)

R&D Funding• The ICT sector is the largest private R&D performer in Canada• R&D spending in the ICT sector was $6.2B in 2009, up 2.5% from 2008• Since 2002 there has been a 17% decrease in R&D spending in

communications equipment. The industry accounted for 27% of ICT Sector and 10% of total Canadian private sector R&D in 2009

• Since 2002, software industry has been one of the most impressive performers in R&D expenditures with a 28% increase in R&D spending in 2009 when compared with 2008 and 158% increase since 2002

• Electronics component industry’s R&D expenditure has shrunk by 11% in 2009. Since 2002, the industry has managed to grow by only 2.1% which is well below the total sector’s growth rate of 17.7%

Source: Industry Canada ICT Sector Report 2010



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ICT R&D expenditures have been constantly growing since 2002 and have risen by 17.7%




ICT Manufacturing industry’s R&D expenses is decreasing by 1.7% every year whereas ICT services is

increasing by 7% a year




The gap between R&D expenditure in Canadian Private sector and ICT sector is narrowing down




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Intellectual Property MeasuresInternational Comparison

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Canada ranks 9th and 6th respectively in ICT R&D spending on manufacturing and services

Worldwide ICT R&D Spending Outlook

• Canada ranks 9th in business R&D expenditure in ICT manufacturing

• Canada ranks 6th in business R&D expenditure in ICT services

Source: OECD Science: Technology and Industry Scoreboard 2007



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In 2004, Canada spent a smaller percentage of its GDP on ICT R&D and filed fewer patents per capita

than many countries

Source: Developing and Innovating the ICT Industry 2004



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