Slumping energy prices and weak economic growth will continue to soften Canadian tech spending in 2017, according to Forrester Research Inc.
At a conference held in Toronto on Thursday by travel and expense software firm Concur, Forrester’s Andrew Bartels updated a 2016/2017 forecast first released in March. Although oil and gas prices have rebounded a bit since March, the outlook for tech spending in Canada will stay skittish next year, largely due to “very weak business investment and government investment” in technology, said Bartels, a VP and principal analyst at Forrester.
In provinces relying heavily on oil and gas revenue, businesses and governments are cautiously cutting or holding their budgets on new technology, he explained.
Forrester expects Canadian tech spending to grow by 3.3 per cent in 2016 and 3.1 per cent in 2017, down from five per cent growth in 2015. Canada will also lag behind tech spending in the U.S., which is expected to grow by 4.5 per cent this year and 5.4 per cent next year.
Bartels attributed some of this to the fact that Canada’s economy is weighted more heavily towards industries that traditionally don’t invest as much of their revenues in technology: energy, natural resources, durable goods manufacturing and construction. Forrester research suggests these sectors spend only two per cent of their revenues on technology.
‘Cautious’ Canadian execs
But Bartels said a reserved mindset inside the Canadian C-suite also holds back tech investment here.
“A lot of Canadian executives have taken a somewhat cautious, conservative attitude toward new technologies,” he said.
North of the forty-ninth parallel, companies tend to take a wait-and-see approach by experimenting with new tech rather than procuring it right away, Bartels added.
That may not be best for business, however. A study released last year by Dell Inc. found that companies adopting technologies linked to mobility, security, big data and cloud see revenue growth that is 53 per cent higher on average than firms that don’t.
Bartels reminded budget-conscious Canadian businesses at Thursday’s event that buying new technology can help them cut costs. Companies can then use those savings to invest in driving sales, profits and productivity elsewhere in their operations, he said.
David Samuels gave some examples of those potential gains while co-presenting with Bartels in Toronto. Samuels, Concur’s senior VP of client sales and development, said Concur users get their expense reports approved in an average of 4.5 days and receive reimbursements in about 2.8 days. Those activities used to take weeks or sometimes months using manual paper methods, he said.
Samuels said one company has reported saving $1 million since deploying one of Concur’s SaaS offerings less than four months ago in May.
Saving with SaaS
Forrester’s Bartels cited subscription-based SaaS as a key area where prudent Canadian businesses can put their money during ongoing economic uncertainty without inflating their long term capital spending.
“Companies want to conserve cash so they don’t necessarily want to invest in new software … So certainly SaaS is attractive for that reason.”
In its forecast, Forrester also advises Canadian businesses to make the following strategic moves in 2016-2017:
- Cut back or defer spending on hardware and telecom because “these are technologies that don’t contribute directly to business transformation or competitive differentiation”;
- Negotiate with vendors to extend existing contracts in exchange for a cut in rates, or look for cheaper alternatives;
- Focus discretionary spending on business technologies like analytics, mobile and Internet of Things “that can help Canadian firms win, serve and retain customers.”