Canadian Occupational Projection System (COPS)

NAICS 5415

This industry comprises establishments primarily engaged in providing information technologies expertise (such as writing, modifying, testing and supporting software, including the creation of Internet home pages); planning and designing computer systems that integrate hardware, software and communications technologies; providing on-site management and operation of clients’ computer and data processing facilities. It excludes the development and retailing of computer hardware and packaged software. The industry employed 531,000 workers in 2021, mostly concentrated in Ontario (49%), Quebec (21%), British Columbia (15%) and Alberta (8%). The workforce is primarily composed of men (75%) and characterized by a high level of education and a significant proportion of self-employed (19%). Key occupations (4-digit NOC) include:

• Information systems analysts and consultants (2171)
• Computer programmers and interactive media developers (2174)
• Computer and information system managers (0213)
• Software engineers and designers (2173)
• User support technicians (2282)
• Web designers and developers (2175)
• Computer network technicians (2281)
• Computer engineers (2147)
• Database analysts and data administrators (2172)
• Information systems testing technicians (2283)

The industry strongly relies on business investment and government expenditures related to software and information and communications technologies (ICT) in Canada. It is also characterized by a relatively high degree of exposure to trade for a service industry, with about 20% to 25% of its revenues coming from exports, mainly to the United States, making it sensitive to the investment environment south of the border. Driven by the growing adoption of computer technology from the private and public sectors and the necessity to adapt their operations to rapid innovations in hardware and software, output in the industry grew continuously since the late 1990s, even during economic downturns, albeit at a slower pace. Indeed, the increased complexity of ICT systems and the growing use of mobile devices have fuelled robust demand for computer services. Cloud computing, the Internet of Things (IoT), big data and predictive analytics are now part of many Canadian businesses’ daily operations. Output growth and job creation in the industry was particularly strong in the past ten years, driven by robust demand from professional and business services, the largest users of computer services, and by the technological transformation of finance and insurance services which has opened doors to new opportunities. During the pandemic years of 2020-2021, the industry recorded additional gains in output and employment, as many businesses adopted telework policies, supporting demand for IT services. The resulting pace of growth in the industry’s real GDP and employment averaged 5.6% and 6.8% per year respectively over the period 2012-2021, posting the strongest growth rates in output and employment across the 42 industries covered by COPS. However, productivity growth was negative (-1.2% annually), reflecting the fact that the industry is highly labour intensive and mostly composed of small firms that do not benefit from the same economies of scale as larger companies. In June 2022, there were 39,986 firms in the industry, of which 31,939 (80%) had between 1 and 4 employees. Small firms are common in the industry due to the growing number of businesses that are adopting customized software applications, allowing various niche opportunities for computer services providers.

Over the projection period, computer system design services should continue to outperform most industries in terms of production and employment growth, but the pace of growth is expected to moderate relative to the previous decade. More precisely, output growth is projected to remain robust in 2022 (+10.4%), before weakening significantly in 2023-2024, as the slowdown anticipated in business activity (resulting from higher interest rates) and efforts to reduce government deficits (resulting from massive spending during the pandemic) are expected to restrain demand for IT services from the private and public sectors. Growth in output should improve modestly over the medium-term, supported by some cyclical recovery, and remain well above the pace of growth projected for the overall economy in the second half of the forecast horizon. The industry will continue to be driven by the need for businesses and governments to continually upgrade their ICT systems in order to keep up with the most recent technologies and remain competitive. Indeed, computer services benefit from the constant development of innovative computer and communications products that are designed and serviced by the industry. Cloud-based platforms, the Internet of Things (IoT), big data and open source software continue to gain in popularity, while the implementation of 5G networks and further developments in advanced manufacturing, autonomous transport, virtual and augmented reality, artificial intelligence, machine learning, language processing and biometric security represent a multitude of growth opportunities. Consumers and businesses own multiple electronic devices and are increasingly asking for compatibility, transferability and access to their content from any of those devices.

The industry will also continue to benefit from the growing number of firms across the economy that choose to outsource IT work in order to remain focused on their core activities. In many areas, IT investment cannot be delayed, particularly in the area of cybersecurity where threats to private and public targets continue to emerge, warranting significant new investment by any that has information to safeguard. Fintech and insurtech applications will keep opening doors to new start-ups, representing niche opportunities within the industry to compete directly with the traditional players in the delivery of finance and insurance services. Increased competition will continue to encourage the incumbent finance and insurance companies to transform their business models and improve their ICT infrastructure, resulting in additional demand for computer services. Simultaneously, the growing amount of data being made publicly available by all government levels through open data initiatives is expected to encourage the private sector to innovate and develop various applications to leverage this large pool of information, leading to the creation of new products and business models in the industry. Finally, a positive outlook for exports, partly supported by price competitiveness due to a relatively low Canadian dollar, is expected to bring more business opportunities to Canadian computer services firms. That said, the industry also faces increased competition on the global market, particularly from emerging economies.

The resulting pace of growth in the industry’s real GDP and employment is projected to average 3.0% and 2.4% per year respectively over the period 2022-2031. Although this represents a notable slowdown relative to the previous decade, computer services are expected to keep posting among the strongest growth rates in output and employment across the 42 industries covered by COPS. In addition to the slowdown projected in output growth, the weaker pace of growth in employment reflects difficulties to recruit highly skilled workers in the industry. Professionals in computer and information systems (NOC 217) had an average ratio of 0.4 unemployed worker for every vacant position in 2021, compared to an average of 1.0 for all occupations (when excluding unclassified unemployed). Computer engineers (NOC 2147) are also expected to keep showing signs of shortages over the next ten years. In a context where it will be increasingly challenging to hire additional workers, the industry is expected to use its resources in a more efficient way and adopt the most cutting-edge technologies available in order to boost productivity. As a result, productivity growth is expected to resume over the projection period and average 0.6% annually.

Real GDP and Employment Growth Rates in Computer Systems Design and Related Services

Sources: Statistics Canada (historical) and ESDC 2022 COPS industrial projections.

Sources: Statistics Canada (historical) and ESDC 2022 COPS industrial projections.