Canada’s tech sector fuels growth across the economy: BDC study

Key findings:

1. The momentum in the technology services sector shows no sign of slowing down, as one in three (30%) small and medium-sized businesses (SMEs) are planning to invest in software over the next 12 months.
2. Growth in the tech sector is expected to be 5.3% in 2022, and growth for the 2021-24 period is expected to be 22.4%.
3. Tech companies that have made acquisitions in the past 10 years are three times more likely than their peers to have experienced annual sales growth of 5% or more over the past year.
4. Over half (55%) of tech entrepreneurs are struggling to hire employees they need. They also face increased threats from cybercriminals.

January 31, 2022, Montreal — Canada’s tech sector is driving growth across the economy, with one in three (30%) small and medium-sized businesses planning to invest in software in the next 12 months, says a new BDC study released today.

Entitled “Tech Industry Outlook: What’s Next for the Technology Sector in Canada”, the tech sector is a key pillar of Canada’s economy, driving growth across sectors and helping make other industries more productive. Products and services from the tech sector will fuel much of the innovation and productivity that will power economic growth in the next decades. Over the next 12 months, 52% of Canadian businesses plan to buy intangible assets, such as software, intellectual property (IP) protection, R&D and marketing and employee training.

“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,” says Pierre Cléroux, BDC’s Vice President, Research and Chief Economist.

Cléroux notes that mergers and acquisitions (M&As) have rebounded quickly following the waves of the COVID-19 pandemic, especially in the tech sector where deal-making has been happening at a record pace since the beginning of the year. The main reason for purchasing a business (70%) is to acquire technology and intellectual property (IP). “Tech companies that have made acquisitions in the previous 10 years are three times more likely than their peers to have experienced annual sales growth of 5% or more over the past year,” he says.

Along with a growing need for skilled workers, the study notes three key trends to watch for: 1-a booming market for mergers and acquisitions, 2- a focus on cybersecurity to secure online contracts and data and 3- transitioning to a “X-as-a-service” model (XaaS), delivering technology products and tools as services to users over the Internet.

BDC’s Tech outlook provides insights into the industry’s prospects for 2022 and addresses how to navigate a rapidly changing environment. Entrepreneurs can find advice on how to effectively complete a tech acquisition, alleviate the ongoing labour shortage, obtain their security certification, or implement a disruptive business model for high growth.

To identify the trends that influence the technology industry, BDC used data from four BDC surveys conducted in 2021 and supplemented by a series of interviews with experts in the field. The data used in this study is based on four BDC surveys conducted in 2021, as well as from an econometric analysis of growth from M&A in the tech sector.

About BDC

BDC is the bank for Canadian entrepreneurs. It provides access to financing, as well as advisory services to help Canadian businesses grow and succeed. Its investment arm, BDC Capital, offers a wide range of risk capital solutions. For more information, visit bdc.ca.

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