The booming sector is expected to rise 5.3 per cent in 2022, study says
Author of the article: Noella Ovid
Publishing date: Feb 04, 2022
Canada’s technology services sector is fuelling growth across the economy and showing no signs of slowing down.
According to a recent study by Business Development Bank of Canada (BDC), one in three smaller businesses (30 per cent) is planning on investing in software over the next year as demand for digitization continues to soar.
That’s good news for software developers. The booming sector’s revenue increased at an average annual pace of 9.4 per cent between 2015 and 2020. Revenue is expected to rise 5.3 per cent in 2022 and 22.4 per cent between 2021-24, the study said.
Growth would be even stronger if not for a scarcity of skilled workers. Over half of tech entrepreneurs (55 per cent) are struggling to hire employees, and 29 per cent are having difficulty retaining workers, the report said. To maintain current staff, some companies have already bumped salaries by 20 to 25 per cent.
“To really benefit, the sector will also need to overcome major challenges, such as a growing shortage of qualified workers and increased threats from cybercriminals,” Dwayne Dulmage, BDC’s national technology lead, wrote in the report.
The big increase in remote work over the past couple of years, along with ever more sophisticated online attacks, represents a growing risk for businesses. In the last twelve months, 16 per cent of smaller companies and 28 per cent of medium-sized businesses have been targeted by cyber-attackers.
Yet, this hasn’t slowed the transition to the cloud. Firms are now offering all types of tech products and tools to users as services over the internet rather than locally or on site.
In the software market, cloud penetration rose to 37 per cent in 2020 from about 29 per cent in 2018. By 2024, public cloud services are expected to grow by an annual average of 15 per cent.
Deal-making has also been happening at a record pace this year. In the next five years, 3,900 Canadian tech businesses (eight per cent) are expected to be up for sale and one in three (36 per cent) is likely to complete an acquisition.
These acquisitions have tripled the chances of a company experiencing high sales growth. Tech entrepreneurs that made acquisitions in the last decade were three times more likely to experience annual sales growth of five per cent or more over the past year. They also reported increased market share (46 per cent), expansion into new markets (40 per cent), reduced operating costs (39 per cent) and access to better technology (35 per cent).
“With a robust financing ecosystem, one of the world’s most highly educated workforces, and a wealth of passionate entrepreneurs, Canada’s tech businesses are well positioned to capitalize on these opportunities,” said Dulmage.