Canada represents the best bang for the buck as far as international IT development is concerned, according to a study released by KPMG.
Conducted by Vancouver-based MMK Consulting Inc., in cooperation with KPMG, the study
measured the economic attractiveness of 11 countries using the United States as a baseline.
In terms of advanced software development and Web content development, Canada ranked second with a 13.1 per cent cost advantage over the U.S. First in that category was Australia, with 15.5 per cent. The U.K. holds a slight economic advantage over the U.S. with 5.1 per cent. Japan trailed last with a 20.6 per cent disadvantage.
In terms of research and development, Canada is first overall with a 21 per cent cost advantage, followed by Australia in second.
“”Since the dot-com period a few years ago, companies have become a lot more focused once again on making sure the cost of doing business is reasonable,”” said Glenn Mair, project director for the study, the results of which were gathered late last year.
Contributing to Canada’s favourable place on the study is a relatively cheap labour force, R&D tax incentives from the federal government, and favourable real estate and office leasing costs.
It’s not that Canadian wages are out of synch with the rest of the world, but that they seem low compared to what American high-tech workers are paid, said Mair. “”We were actually expecting to see a significantly larger drop (in U.S. wages),”” he said. “”I guess I would have to characterize it as (being) those IT professionals still working in the field in the U.S. have done a fairly good job of maintaining their value in the marketplace.””
The results of the study are being used by the government of Canada to promote the nation as a viable nearshoring option for American firms, he added. The study was sponsored in part by the Canadian government, as well as the Australian government and groups from Iceland and Northern Ireland.
India, a popular offshore outsourcing destination for American companies and several Canadian firms, was not taken into account for the study but may be for a future edition, said Mair.
The study considered strictly economic factors, but it’s Canada’s skilled labour force that has attracted several U.S. companies north of the border, according to IBM Canada spokesperson Mike Boden. One of IBM’s largest software development labs is in Toronto, which employs 2,500 people.
“”The lab has been around in Toronto for 37 years now. Over that time you build quite a collection of hot skills that’s not easy to replace. It’s primarily the people,”” said Boden.
The Canadian Advanced Technology Alliance, based in Ottawa, has long used a platform of skilled labour and affordable development costs to attempt to lure American dollars north.
CATA vice-president Barry Gander actually puts cost advantage at the bottom of the list of reasons to do business in Canada, behind a skilled labour force, employee retention and research. “”We are known as innovators,”” he said. “”We’re always going to at the forefront of whatever people are looking for.””
Ken Wasch, president of Software and Information Industry Association, based in Washington, D.C., recognizes Canada’s reputation for talented IT professionals, but sees an overall trend in the U.S. of companies aiming to reduce the bottom line.
“”The software industry thinks much like the motion picture industry, which has found that the quality of production and the quality of development work is higher in Canada than it is in the United States at a lower wage rate,”” he said.
There is a constant push to lower the cost of development in several U.S. industries, he said, and in many cases that means relocating business. “”If it means going to Canada or Romania, our companies are interested in doing it.””
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