Written by Darren Anderson
The Canadian Information and Communication Technology (ICT) industry’s elite continued to push forward in 2008, capping off another year of combined growth. While the national and global economy dominated headlines and industries lined up to state their case for aid, companies appearing on the 2008 Branham300 surged on to set a new record for combined revenue, reaching $75.97 billion, an 18 per cent increase over 2007, although exchange rate fluctuations in the U.S. played a role for some.
After remaining on par with the U.S. dollar for the first half of 2008, the Canadian dollar steadily retreated over the final six months to close more than 20 cents lower than in 2007. With this dramatic shift and more recent stabilization of the currency, Canadian ICT firms may well benefit from increased exports and new opportunities going into 2009. Further, with a favourable exchange rate lowering the overall cost of Canadian labour to foreign companies, Canada’s attractiveness as a preferred ICT outsourcing destination to the U.S. and those abroad is likely to increase.
Merger and acquisition (M&A) activity slowed in 2008; 13 companies from last year’s Branham300 were purchased, as compared to 16 in 2007. As companies adjust and prepare for the period of economic uncertainty that continues to unfold in 2009, it remains to be seen whether they will wait out and weather the storm or take a more aggressive stance and capitalize on deals that may become abundant.
Over the course of 2008, the Branham300 experienced significant change, as more than 40 new companies made their way onto this year’s listing. Public companies hold a slight majority, accounting for 52 per cent of those listed, while private companies make up the remaining 48 per cent. This is in slight contrast to the 56 per cent public and 44 per cent private split from a year ago.
The average growth rate for companies appearing on this year’s listing is 22 per cent, compared to 44 per cent in 2007. While a noticeable decline, it is clear that the Canadian ICT industry displayed its resiliency in 2008 by maintaining positive growth in the face of a struggling economy when many other industries failed to do the same.
The revenue threshold for the 2008 Top 250 increased to $5.88 million, a $1.3 million increase over 2007. As the Canadian ICT industry continues to grow, so does the Branham300, and we were proud to introduce a new listing in 2008, The Next 50. For additional details, including the list of companies recognized in 2008, please visit www.branham300.com.
Results by region
The geographical breakdown of this year’s Top 250 ICT companies illustrates a shift in representation among Canada’s provinces. Ontario was the only province that saw a significant increase in 2008 (five per cent), accounting for 58 per cent of those listed in the Top 250. This increase is largely due to the fact that 26 of the 45 companies (58 per cent) that were new to this year’s listing are headquartered in Ontario. While Alberta’s representation (10 per cent) remained relatively static in 2008, B.C. and Quebec fell in their representation by two per cent each, coming in at 14 and 13 per cent, respectively.
Alberta led all provinces with 21 per cent year-over-year revenue growth in 2008, representing three per cent of the list’s total revenues. Companies headquartered in Ontario and B.C. contributed 60 per cent and 12 per cent, respectively, of the Top 250’s total revenues, with both provinces experiencing revenue growth of 11 per cent compared to 2007. Quebec brought in the remaining 20 per cent of the listings’ total revenue this year, realizing seven per cent revenue growth in 2008.
Performance by Category
The Top 250 is comprised of the following four major categories: Software (86 companies), IT Professional Services (73 companies), IT Hardware and Infrastructure (57 companies) and xSPs (34 companies). (xSP refers to various types of Service Providers, including Internet, managed, application, storage, etc.) Three of the four categories experienced increased representation in 2008, led by the IT Professional Services Category, which saw six additional companies appear on this year’s Top 250.
Two categories propelled the Canadian ICT industry forward in 2008. The IT Hardware and Infrastructure category, representing 48 per cent of the Top 250’s revenues, generated $36.6 billion in 2008, a 32 per cent increase over 2007. The xSP category maintained positive revenue growth despite a 4 per cent decline compared to 2007, increasing revenue by nine per cent in 2008 to reach $26.86 billion. The big players in both categories were the drivers of growth this year, as they experienced significant combined revenue increases over the course of 2008. The Top 25 IT Hardware and Infrastructure companies exhibited year-over-year growth of 12 per cent in 2008, and 33 per cent growth compared to last year’s category leaders. Further, the Top 10 xSPs generated 98 per cent of the category’s total revenues. The group increased revenues by nine per cent year-over-year and 13 per cent compared to those listed in 2007.
The Top Performers
Last year’s Top 10 companies dominate the list again this year, solidifying their status as clear leaders in the Canadian ICT industry. In 2008, these companies increased their share of the Top 250’s total revenues, contributing a combined 77 per cent, while the other 240 companies represent the remaining 23 per cent.
For the sixth consecutive year, Nortel Networks held its position as the top ranked company by gross revenue in the Canadian ICT industry. Despite well-documented struggles throughout 2008, which eventually led to its January 2009 bankruptcy protection announcement, Nortel generated $12.7 billion in revenue. Celestica ranked second, maintaining its 2007 position despite experiencing a four per cent decline in revenues in 2008. BCE rounded out the top three for the fifth consecutive year, achieving year-over-year growth of seven per cent in 2008. Research In Motion made the biggest move among the Top 10, experiencing revenue growth of 98 per cent, allowing it to jump three spots to land in this year’s fourth position.
2008 Trends, and What to Expect in 2009
Major M&A deals took a backseat to acquisition activity in the SMB segment of the Canadian ICT industry in 2008. Companies striving to cut upfront infrastructure investment and manage recurring costs turned to cloud computing and virtualization in 2008, while Software-as-a-Service (SaaS) and Web 2.0 continued to evolve and become more highly adopted technologies. The wireless industry is expected to see increased activity in 2009, as the competitive landscape changed following the conclusion of the Advanced Wireless Services spectrum auction. Social networking and green IT remained top of mind in 2008, and will continue to remain so as companies try to manage their brand and limit their environmental impact in 2009 and beyond.
The economic pressures that became apparent in mid-2008 will continue to impact the Canadian ICT industry throughout 2009. Companies will look for new ways to insulate themselves from the economic shock while continuing to innovate and produce goods that will foster spending, all in an effort to survive and emerge successfully from market forces that are not yet fully understood. It is important to note that it was not long ago that the Canadian ICT industry overcame adversity to emerge stronger and more innovative than ever before; 2009 will similarly be a survival of the fittest.
The Top 25 IT Multinational Companies listing highlights the leading foreign-owned IT organizations that maintain operations within Canada. Established leaders in the global marketplace, these firms make a significant contribution to the Canadian economy, and more specifically the Canadian ICT industry, by creating employment, encouraging innovation and stimulating growth. The revenue figures used to rank these companies consist of only domestic and/or export revenue generated by the organizations’ Canadian entity.
Hewlett-Packard (Canada) closed in on perennial number one company IBM Canada by generating an estimated $5.2 billion in revenue in 2008, a 19 per cent increase compared to 2007. Hewlett-Packard made headlines in mid-2008 with the announcement that it would acquire EDS, a global technology services company and last year’s number 10 ranked IT Multinational operating in Canada. The deal was valued at US$13.9 billion, one of the largest ever in the technology industry. Microsoft Canada achieved 18 per cent estimated revenue growth in 2008, surpassing fourth-ranked Siemens Canada, and reclaiming its position in the top three in 2008.
Three companies made their first appearances on the Top 25 IT Multinational Companies listing in 2008. General Dynamics Canada, an arm of the company’s Information Systems and Technology unit, debuted at number 12, generating over $575 million in 2008. Sapphire/Randstad Canada made the transition from the Top 250 listing in 2008, landing in the number 14 spot this year by achieving 58 per cent revenue growth compared to 2007. IT security software company McAfee cracked the Top 25 for the first time in 2008, achieving an estimated 24 per revenue growth to land in the number 25 position.
The Top 25 Up and Comers category recognizes the leaders of tomorrow within the Canadian ICT industry. The companies appearing on this year’s list were established no earlier than Jan. 1, 2005 and were selected (not ranked) for their innovation, uniqueness and long-term potential.
Their offerings represent some of the leading trends in the industry. From mobile broadcasting and corporate community collaboration, to social media monitoring and green automation solutions, these companies are leading the progression of technology within Canada.
Although all areas of Canada are represented in the 2008 listings, a significant number of companies are headquartered in Ontario (60 per cent) and B.C. (20 per cent). The Prairie provinces and Quebec each house eight per cent of the companies, with the remaining four per cent located in Atlantic Canada.
The landscape of the Top 25 Canadian Software Companies changed significantly in 2008. For example, 2007 was the final year DataMirror and Workbrain could appear on the list, due to acquisitions. Further, two remarkable deals, which closed in early 2008, claimed the number one and number five ranked software companies in 2007, as IBM purchased Cognos and Telus acquired Emergis. The loss of these four companies had a considerable impact on the 2008 list, as they combined for almost $1.2 billion or 36 per cent of the 2007 Top 25 Canadian Software Companies’ revenues.
Remarkably, the Top 25 Canadian Software Companies in 2008 generated combined revenues of $3 billion, only a nine per cent decrease compared to last year’s list. Total revenue for software companies appearing on this year’s Top 250 was $3.96 billion, a decrease of seven per cent compared to 2007.
Waterloo, Ont.-based Open Text followed up a solid 2007 campaign with more growth in 2008, increasing revenue by 22 per cent in order to claim this year’s top spot. Constellation Software finalized more than 15 acquisitions in 2008, contributing to 30 per cent revenue growth, allowing it to pass third-place Corel. Rounding out this year’s top five are Algorithmics and Optimal Payments, which both moved up two spots to land fourth and fifth, respectively.
Tremendous revenue growth contributed to two companies jumping up a combined 16 spots on this year’s list, and allowed two others to crack the Top 25 for the first time in 2008. Logibec Groupe Informatique attained year-over-year revenue growth of 49 per cent, causing it to climb six spots, while Gemcom Software increased revenues by almost $20 million or 51 per cent, due to both organic and inorganic growth, to slide into thirteenth spot on this year’s list. Mxi Technologies and Absolute Software, two newcomers this year, increased revenues by 52 per cent and 88 per cent respectively, to land in the number 22 and 25 positions in 2008.
Reaching new heights in 2008, the Top 10 Wireless Solutions Companies realized consolidated revenues of $8.64 billion, a remarkable increase of 82 per cent compared to 2007, as the average firm on this year’s list increased revenues by 30 per cent year-over-year. Illustrating their tremendous potential, wireless solutions companies continued to increase their Top 250 revenue share, accounting for five, six and 12 per cent in 2006, 2007 and 2008, respectively.
Maintaining its number one position for the eighth consecutive year, Research In Motion (RIM) distanced itself from the rest of the pack in 2008 by nearly doubling its revenues, with 98 per cent year-over-year growth. Contributing 85 per cent of the Top 10 revenues and 83 per cent of the category revenues, RIM is the undeniable leader in the wireless solutions category.
Analyzing the Top 10 list without RIM confirms that it is not the only catalyst of growth. Revenue growth among the nine remaining companies was 25 per cent, with five firms achieving more than 30 per cent growth in 2008. DragonWave, the lone newcomer this year, led with 67 per cent growth, followed by SiGe Semiconductor and Hemisphere GPS, which increased revenue by 42 per cent and 35 per cent, respectively, in 2008. Even with such vigorous growth throughout the list, only two companies were able to ascend more than one position; Hemisphere GPS and Redknee both climbed two spots in 2008.
The Canadian x Service Provider (xSP) category is composed of application, managed, wireless and Internet service provider companies. Consistently the least represented of the four major categories, the 34 companies appearing on this year’s Top 250 contributed 35 per cent of the list’s total revenue, reaching $26.86 billion in 2008, a 12 per cent increase over last year’s companies. The Top 10 xSP companies make up the significant majority of the category’s total revenue at 98 per cent or $26.28 billion, illustrating that a few very large players continue to dominate the xSP sector in Canada.
Eight of the top 10 players made repeat appearances in 2008, with the top seven maintaining their 2007 positions. BCE, Telus and Rogers Wireless Communications represent the top three xSP companies for the fifth consecutive year. These three companies truly are the giants in the xSP category as they represent 79 per cent of the Top 10 xSP categories revenues. Every company appearing on this year’s list experienced positive revenue growth, with Shaw Communications leading the category with a 22 per cent increase in revenues in 2008. Peer 1 Network Enterprises and Vidéotron, two newcomers appearing in the eighth and tenth spots, followed with 21 per cent and 18 per cent year-over-year revenue growth in 2008.
The Top 10 IT Security Companies experienced stable growth in 2008, as eight companies listed in 2007 returned in 2008 with a combined eight per cent revenue growth compared to the 2007 list. This year’s IT Security elite surpassed the $300 million mark for the first time in the category’s history. Exclusive of the Top 10, IT Security Companies appearing on this year’s Top 250 also enjoyed a great year, as they achieved an increase in combined revenues of 10 per cent compared to those companies listed in 2007.
Memory Experts International and Radial Point held on to the top two positions for the second consecutive year, while Absolute Software, exhibiting the highest growth on the list in 2008, soared five spots to round out the top three. Two companies were able to crack the 2008 Top 10 for the first time, following fantastic year-over-year growth. The Herjavec Group, a network security solutions provider, debuted in the fifth spot, achieving 59 per cent growth this year, while ParetoLogic, a computer security and optimization firm, increased revenue by 50 per cent, allowing it to land in the seventh spot.
The geographical breakdown of the Top 10 IT Security Companies illustrates that this segment of the industry is highly consolidated in two Canadian regions. The majority of the firms are headquartered in Central Canada, with 40 per cent located in Ontario and 20 per cent in Quebec; the remaining companies are housed in Western Canada, with 30 per cent in B.C. and 10 per cent in Alberta.
The Movers and Shakers are companies that experienced remarkable revenue growth over the course of 2008, resulting in substantial upward movement among the Top 250 rankings. In order to be eligible, firms must have appeared on the 2007 Branham300. This year’s group generated a combined $564 million in revenue, achieving year-over-year revenue growth of 65 per cent in 2008.
The Software and IT Hardware and Infrastructure categories comprise the highest percentage of the 2008 Movers and Shakers, accounting for 43 per cent and 29 per cent, respectively. Companies appearing on this year’s list are headquartered across Canada, with the highest concentration located in Ontario (52 per cent), followed by B.C. and Quebec, each of which houses 19 per cent of those highlighted in 2008.
Montreal-based Averna headlines the 2008 Movers and Shakers, increasing revenues by 250 per cent this year, to climb an amazing 103 positions on the 2008 Top 250. Early in 2008, the test engineering software and solutions company strengthened its management team, broadened its product portfolio and expanded its geographical market with the acquisition of Mindready Solutions, contributing significantly to its growth in 2008.
Two companies appearing on the 2007 Movers and Shakers list were able to return in 2008. Moving up 61 positions in 2007, Cyberplex climbed 65 additional spots in 2008 after achieving triple-digit growth (127 per cent in 2008) for the second consecutive year. Nstein Technologies bettered its positional increase of 16 spots in 2007 by jumping 27 positions in 2008 to rank 129 on this year’s Top 250.
OmniGlobe Networks, not appearing on the Movers and Shakers list because it was not on the Top 250 in 2007, was able to achieve the highest year-over-year growth of any company appearing on the 2008 Top 250, generating $15 million in 2008, a 400 per cent increase over 2007. Leveraging its appearance on the 2007 Up and Comers listing, the company was able to debut in the 164 position on the Top 250 in 2008.
The Top 25 IT Professional Services Companies welcomed seven newcomers to the list in 2008. These additional companies realized a combined 62 per cent revenue growth compared to 2007, with Cyberplex leading the pack at 127 per cent year-over-year growth in 2008. Long View Systems, an IT solutions and services provider, debuted highest this year in tenth position, reaching $144 million, a 38 per cent increase over 2007.
Combined revenues for the 2008 Top 25 IT Professional Services Companies increased five per cent year-over-year, reaching $7.82 billion, with the average company experiencing 26 per cent growth over the course of 2008. The 73 companies representing the category on the Top 250 generated revenues of $8.5 billion, a year-over-year increase of six per cent.
Nine of the top 10 players returned in 2008, with CGI Group and MacDonald, Detwiller and Associates reclaiming the top two spots for an extraordinary seventh consecutive year. PROCOM and xwave climbed one and two spots respectively, to reach the third and fourth positions, while Compugen experienced 26 per cent growth, maintaining its fifth position from a year ago.
In their second year on the Branham300, the Top 10 Healthcare IT Companies further solidified themselves as an emerging group by achieving a combined $7.27 billion in revenue in 2008, an eight per cent increase over the 2007 representatives. Seven of the companies listed in 2007 return in 2008, with nine of the 10 experiencing positive revenue growth. As health care organizations are increasingly integrating IT solutions into their day-to-day operations, new niches continue to present themselves, leading to opportunities for robust growth in future years.
Following its acquisition of Emergis in early 2008, Telus enhanced its position as the number one Health care IT Company in Canada, increasing revenue by 11 per cent to reach $6.7 billion. Nova Scotia-based xwave experienced year-over-year growth of seven per cent to maintain its number two position in 2008, while newcomer Logibec Group Informatique increased revenues by 49 per cent, largely attributed to acquisitions it made in the American eldercare software market, allowing it to round out this year’s top three.
Analyzing the geographical breakdown of this year’s Top 10 illustrates that the majority of the companies appearing on the list are located in Central Canada, with 30 per cent headquartered in each Ontario and Quebec. Alberta follows with 20 per cent, while B.C. and Nova Scotia house 10 per cent each.
The Top 25 IT Hardware and Infrastructure Companies experienced incredible growth in 2008, with a combined $35.88 billion in revenues, a 33 per cent increase compared to the Top 25 in 2007.
After another tumultuous year, Nortel Networks remained the top-ranked IT Hardware and Infrastructure Company in 2008. Uncertainty continues to circle the telecom-giant and it remains to be seen whether it will return in its accustomed form in future years. After increasing hardware sales by 115 per cent, contributing to a 98 per cent boost in revenues, Research In Motion closed in on second-ranked Celestica in 2008, reducing its 2007 gap by $2.8 billion. CAE and Mitel Networks maintained their fourth and fifth positions this year after reporting revenue growth of 14 per cent and 80 per cent in 2008.Significant revenue growth helped two companies make considerable moves on this year’s list, and propelled another to its first appearance in 2008. SiGe Semiconductor increased revenues by 42 per cent as it jumped eight spots to number 17 in 2008, while Rutter ascended four spots to rank number 19 this year, a result of its 40 per cent growth, attributed to increased revenue from its controls and automation segment. Hemisphere GPS, one of three companies making a debut this year, increased revenues by 35 per cent in 2008, landing in the category’s number 20 position.
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