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Under-Spending on Software Hurts the Canadian Economy: 5 Years On

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Back in the summer of 2005 I wrote the following in our now defunct paper newsletter.

Canadian companies are under-investing in software, and that is hurting national productivity and competitiveness, according to a new study released by The Institute for Competitiveness & Prosperity. Consistent under-investment in software, capital equipment and machinery has created a 16 per cent prosperity gap compared to the United States, the report found. From 1991 to 2003, Canada’s business community annually invested an average of 13.1 per cent less than U.S. businesses in software, capital equipment and machinery, and the Institute pegged the per-capita cost of that at $427 in lost GDP. That’s $14 odd billion dollars by my calculation.

“Although Canada’s economy is strong, we can’t rest on our laurels. Canadian businesses, government and individuals need to work together to close the prosperity gap,” said report author Roger Martin, chairman of the Institute and Dean of the Joseph L. Rotman School of Management at the University of Toronto. “From a business perspective, investing in software is one way to help increase productivity, drive innovation and increase our competitiveness on the world stage.”

For governments, specifically, the report said there is a need to better balance the pressing problems of today, such as funding for healthcare and other services, with investment in the future strength of the Canadian economy.

Quoted and reprinted from Backbone Magazine. Web Edition 2005

So fast-forward 5 years…Seems that although five years have passed since that newsletter article, not much has changed on Canada’s productivity landscape.

This past week I received a presentation done by the TD Bank’s economic unit. A clarion call to Canada’s business community. The two important points.

“Between 2002 and 2007, businesses failed to take advantage of an exceptionally favourable investment climate” and

“In the face of an increasingly competitive global economy and pressing demographic challenges, Canadian businesses must seize this opportunity and invest in new innovative productivity enhancing technologies.”

So the Bank’s position is business needs to step up to the plate and invest to remain relevant. Yet the exact opposite is happening. Canadian business is not investing in cutting edge automation technologies and software.

So this first salvo in the Bank’s study presents some very sobering facts. I am absolutely delighted to see this topic getting press. It’s long, long overdue. Does Canada need a national dialogue on this subject? I believe so and have felt that way since 2005.

You can read the full TD Bank document at the following address.

http://www.td.com/economics/special/ca0510_innovation.pdf

It is a very sad tale to see that 5 years on nothing has really changed. Anyone have any ideas they want to share?

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