Canada’s information technology industries are showing signs of growth again and there’s increased demand in the broader economy for employees with IT skills, according to two research reports issued Monday.

The Conference Board of Canada said in its report on the information technology and communications industry that the sector will grow by 4.6 per cent in 2005, the strongest showing since 2000 on an inflation-adjusted basis.

“An improvement in the sector’s trade position will be the primary cause, but healthy growth in domestic demand will also be a factor,” the Conference Board report says.

The ITC industry’s growth will slow in 2006, to 3.7 per cent as the world economy decelerates, but from 2005 to 2009 the IT sector will have an average annual growth rate of 4.3 per cent, the private-sector research group says.

“With revenue growth expected to outstrip costs this year, profits will rise by 26 per cent, reaching a record high. Profit growth will continue over the rest of the forecast horizon, but it will be much more subdued, averaging 2.3 per cent per year between 2006 and 2009,” the Conference Board predicts.

The board says 2004 marked the turning point for the sector, following the disastrous collapse of both the computer and communications segments of the ITC industry that started in early 2000 with the bursting of the dot-com bubble.

“That was extreme, obviously. It was a boom and a bust. So it’s not healthy in a way, anyway. You enjoy it while it lasts but it doesn’t too long, typically,” Conference Board’s Louis Theriault said in an interview from Ottawa.

In the coming years, the growth rate will be more moderate but on a more sustained basis nothing close to what happened in the boom period, he said.

“And that’s better, frankly,” Theriault said.

A second report from CNC Global Ltd., a firm that specializes in placing IT professionals with Canadian companies, found that demand for full-time permanent employees is the highest in years.

“IT hiring was up four per cent during the third quarter of 2005 (July to September), representing the best third quarter for IT hiring in three years,” CNC Global says.

CNC vice-president Chris Drummond said the strong demand for people with IT skills reflects Canadian companies’ confidence in the overall economy.

“In our industry, people tend to hire more on the permanent side when they’re more confident about the future, Drummond said in an interview from Toronto.

CNC says much of the hiring is coming from small and medium-sized companies – firms with 250 to 500 employees.

Only about 20 per cent of CNC Global’s clients are high-technology developers while the remaining 80 per cent are companies with large information technology departments to run their businesses.

“Most of our customers are telling us right now that the reason they’re having to hire is to deal with increased business growth,” Drummond said. “They’re responding to market demand with the need to hire more IT people.”

CNC Global expects demand for people with IT skills will remain strong next year, in part because of changing demographics of the Canadian population.

Terry Power, president of CNC Global, said more companies are beginning to plan ahead for the days when their current personnel begin to retire.

“We see that as definitely continuing to increase pressure on hiring across the country,” Power said.

In addition, the Canadian economy is continuing to do well and information technology is seen by companies as a strategic investment in their businesses, he said.

“So we definitely see the trend towards an increase in demand . . . as something that will continue well into 2006,” Power said.

However, a third report released Monday, this one sponsored by the Information Technology Association of Canada, says Canada continues to lag the United States in terms of business adoption of information technology.

ITAC chief executive Bernard Courtois said the report, the latest in several sponsored by the industry association, attempted to isolate the causes for the gap and identified several factors for the discrepancy.

About 20 per cent of the gap could be attributed to two factors: a smaller portion of Canada’s economy is based on IT-intensive industries, and more of Canada’s economy is made up of small-to medium-sized companies, which tend to spend less on information technology.

However, Courtois said, there are other, less quantifiable factors at play including cultural differences, a lower proportion of Canadian managers with university education and lower labour costs.

“Our salaries are lower, so you’re going to tend to spend more on people than on technology and you may be getting less productivity gains as a result. It might be the right economic choice, at least in the short term,” Courtois said.

However, in the longer term the lag in productivity will have a negative effect on the Canadian economy and Canadians’ living standards,
he said.