Software development and computer services, 2020
The need for technology boosted the operating revenue of software development and computer service industries in 2020
The total operating revenue of the software development and computer service industries reached $95.5 billion in 2020, up 7.5% from 2019. The operating revenue of these industries has been growing significantly faster than the Canadian economy since 2013, and these industries were the largest professional services employer in 2020.
The software development and computer service industries include businesses in the computer systems design and related services industry; the software publishers industry; and the data processing, hosting and related services industry.
These industries serve a wide market and an expanding customer base that operates in a quickly evolving, technology-driven economy in Canada and abroad.
Computer systems design and related services
Businesses in the computer systems design and related services industry reported total operating revenue of $68.9 billion in 2020, up 5.4% from 2019. The largest share of operating revenue came from Ontario (50.1%), followed by Quebec (25.5%).
Similar to previous years, 35.0% of the industry's sales came from information technology technical consulting services.
The operating revenue of this industry has grown by more than 30% since 2017. In 2020, the industry's client base consisted mostly of businesses in Canada (61.5%), but clients outside Canada (27.8%) also made up a fair share.
Operating expenses increased by 4.4% to $61.0 billion in 2020. Salaries, wages, commissions and benefits continued to be the largest expense, making up 45.1% of total expenses. This was followed by the cost of goods sold, at 11.9%.
The operating profit margin (11.4%) was up marginally in 2020 compared with the previous year (10.5%).
Software publishers saw their operating revenue increase by 9.7% to $16.7 billion in 2020. Application software (34.7%) generated the largest share of sales. Outside their main lines of business, the largest source of revenue was website design and development services, which accounted for 12.0% of total revenue.
There were significant changes in this industry as the market continued to expand and technologies became more integrated. Consumers also used e-commerce more than in previous years, with e-commerce sales accounting for 53.9% of all sales in 2020.
A significant portion of sales in 2020 were made to clients outside Canada (53.3%) and by businesses in Canada (40.5%).
Operating expenses grew by 21.2% to $16.6 billion in 2020. Salaries, wages, commissions and benefits (46.4%) contributed the most to operating expenses. This increase caused the operating profit margin to decline significantly to 0.3% in 2020, from 9.8% in 2019.
Data processing, hosting and related services
The data processing, hosting and related services industry generated $10.0 billion in operating revenue in 2020, up 19.2% from 2019.
In 2020, hosting and information technology infrastructure provisioning services (63.6%) accounted for the largest share of sales revenue, followed by information and document transformation services (27.0%). The main clients were businesses in Canada, which accounted for 61.2% of total sales, while exports increased to 32.8% of total sales.
E-commerce represented 62.4% of total sales in 2020, up from 58.6% in 2019 as a result of increasing growth from cloud-based companies throughout Canada.
Operating expenses grew more quickly than operating revenue, reaching $9.1 billion in 2020. As a result, the industry's operating profit margin decreased to 8.8%, compared with 10.2% in 2019.
A look at 2021
The ongoing COVID-19 pandemic and the continued movement towards more permanent work-from-home arrangements, as well as remote learning, suggest that the growth experienced in 2020 will not abate. In fact, the computer systems design and related services industry is one of the few professional services industries in Canada that consistently added workers to payrolls from July 2020 to December 2021. However, the resumption of normal activities (e.g., in-person shopping and dining) and the fact that many technological changes may have already been implemented suggest that the growth will be more tempered.
Note to readers
Data for 2018 and 2019 have been revised.
Information on professional service providers' employment was taken from table 14-10-0201-01.
Based on the North American Industry Classification System (NAICS) 2017, the Annual Survey of Service Industries: Software Development and Computer Services includes businesses in computer systems design and related services (NAICS 54151); software publishers (NAICS 51121); and data processing, hosting and related services (NAICS 51821).
Data are collected for the 12-month fiscal period that ends from April 1, 2020, to March 31, 2021. For some businesses, this means reporting mostly on pre-pandemic operations. As a result, the effects of the pandemic are not fully reflected in the estimates for this reference year and will extend to the estimates for the 2021 reference year.
These and other data related to business and consumer services can be found at the Business and consumer services and culture statistics portal.
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