Software Development and Computer Services

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Service bulletin

Software Development and Computer Services

2011

. Highlights

• Operating revenue in the Canadian software development and computer services industry group increased by 9.5% to $45.6 billion in 2011. Total operating expenses were $40.5 billion, up 9.7%. The operating profit margin stood at 11.2%.

• This group is comprised of three industries: computer systems design, software publishing, and data processing, hosting and related services. The largest of these, computer systems design, accounted for 78.5% of the 2011 total operating revenue for the entire industry group.

• Operating revenue for the computer systems design industry grew by 9.8% in 2011. Within this industry, Ontario and Quebec increased their operating revenue by 10.6% and 5.1%, respectively. Combined, these two provinces accounted for the bulk of the revenues (74.3%).

• Operating revenue growth rates for the other two industries, software publishers and data processing, hosting and related services, were somewhat lower at 8.9% and 8.4%, respectively.

• In the computer systems design industry, the largest single activity was information technology (IT) technical consulting services, representing 31.3% of total operating revenue. Revenue generated from the sales of application software accounted for the largest share (43.1%) for the software publishing industry. In the data processing, hosting and related services industry, the majority of revenue (63.4%) was generated by the hosting and information technology (IT) infrastructure provisioning services.

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Statistical tables

Table 1

Summary statistics for computer systems design and related services, by province and territory, 2009 to 2011

Operating Revenue

Operating expenses

Salaries, wages and benefits

Operating profit margin

millions of dollars percent

2011^p

Newfoundland and Labrador 133.5 127.2 47.3 4.7

Prince Edward Island 56.3 52.0 28.8 7.7

Nova Scotia 389.3 336.3 176.4 13.6

New Brunswick x x x x

Quebec 7,636.2 6,610.8 3,262.0 13.4

Ontario 18,904.4 16,935.6 7,815.6 10.4

Manitoba 516.3 459.6 219.4 11.0

Saskatchewan 329.6 271.0 132.7 17.8

Alberta 3,941.5 3,426.9 1,469.6 13.1

British Columbia 3,426.1 3,018.6 1,366.5 11.9

Yukon x x x x

Northwest Territories x x x x

Nunavut x x x x

Canada 35,737.4 31,618.9 14,691.3 11.5

2010^r

Nova Scotia 478.3 410.8 192.6 14.1

Quebec 7,262.6 6,290.5 2,979.3 13.4

Ontario 17,090.9 15,220.2 6,879.7 10.9

Manitoba 459.8 409.6 180.3 10.9

Saskatchewan 292.9 247.6 112.8 15.5

Alberta 3,413.6 2,968.9 1,306.7 13.0

Yukon x x x x

Nunavut x x x x

Canada 32,554.5 28,722.2 13,099.2 11.8

2009^r

Nova Scotia 432.6 335.1 167.6 22.6

Quebec 7,177.8 6,362.5 2,804.3 11.4

Ontario 17,141.8 15,234.0 6,643.2 11.1

Manitoba 437.8 388.0 177.4 11.4

Saskatchewan 271.1 234.7 110.3 13.4

Alberta 3,454.2 3,072.8 1,356.4 11.0

Yukon x x x x

Nunavut x x x x

Canada 32,344.9 28,722.0 12,720.8 11.2

Note(s): The results in this table are for firms classified under the North American Industry Classification System (NAICS) category 54151. See “Data sources, definitions and methodology” at the end of tables for definition of terms. Due to rounding, components may not add to total. Scaling may also affect the calculation of ratios. With the release of reference year 2011 preliminary estimates, revisions have been applied to estimates from reference years 2007 to 2010 to reflect updates in industry classification and respondent information.

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Table 2

Summary statistics for software publishers, by province and territory, 2009 to 2011

Operating Revenue

Operating expenses

2011^p

Newfoundland and Labrador x x x x

Prince Edward Island x x x x

Nova Scotia 40.4 36.8 17.6 8.8

New Brunswick 63.4 63.1 20.1 0.5

Quebec 1,484.2 1,366.4 712.7 7.9

Ontario 2,787.0 2,606.1 1,035.2 6.5

Manitoba 101.6 86.6 46.1 14.8

Saskatchewan x x x x

Alberta 726.5 647.3 285.0 10.9

British Columbia 1,353.9 1,305.1 672.0 3.6

Yukon x x x x

Nunavut x x x x

Canada 6,597.0 6,156.1 2,816.4 6.7

2010^r

Nova Scotia 30.8 27.9 14.5 9.3

New Brunswick 65.3 55.8 19.0 14.6

Quebec 1,348.9 1,205.2 592.0 10.7

Ontario 2,519.2 2,240.9 1,000.6 11.0

Manitoba 87.6 75.8 43.5 13.4

Alberta 662.6 569.6 245.5 14.0

Yukon x x x x

Nunavut x x x x

Canada 6,060.1 5,466.7 2,589.4 9.8

2009^r

Nova Scotia 27.4 21.3 10.3 22.1

New Brunswick 67.8 58.0 21.3 14.5

Quebec 1,189.2 1,008.5 395.2 15.2

Ontario 2,611.4 2,397.1 996.4 8.2

Manitoba 76.5 63.8 45.8 16.6

Alberta 593.7 534.2 225.2 10.0

Yukon x x x x

Nunavut x x x x

Canada 5,825.8 5,253.9 2,317.3 9.8

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Table 3

Summary statistics for data processing, hosting and related services, by province and territory, 2009 to 2011

Operating Revenue

Operating expenses

2011^p

Nova Scotia x x x x

Quebec 230.2 208.7 90.0 9.3

Ontario 2,165.7 1,734.4 728.6 19.9

Manitoba x x x x

Alberta 321.6 277.7 139.9 13.6

British Columbia 367.8 333.1 125.8 9.4

Yukon x x x x

Nunavut x x x x

Canada 3,219.9 2,681.8 1,149.9 16.7

2010^r

Nova Scotia x x x x

Quebec 241.6 221.5 101.6 8.3

Ontario 1,945.3 1,729.4 705.5 11.1

Manitoba x x x x

Alberta 298.8 268.2 132.0 10.2

Yukon x x x x

Nunavut x x x x

Canada 2,970.0 2,683.3 1,128.4 9.7

2009^r

Nova Scotia x x x x

Quebec 243.9 217.4 84.3 10.9

Ontario 1,770.7 1,414.1 603.4 20.1

Manitoba x x x x

Alberta 254.1 235.9 121.9 7.2

Yukon x x x x

Nunavut x x x x

Canada 2,745.6 2,294.4 962.3 16.4

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Table 4

Operating expenses for computer systems design and related services, Canada, 2009 to 2011

2009 ^r 2010^r 2011^p

percent

Total labour remuneration 44.6 46.0 46.7

Commissions paid to non-employees F F F

Professional and business service fees 5.5 5.2 5.5

Subcontract expenses 8.1 8.5 9.3

Charges for services provided by head offices 2.0 2.0 1.2

Cost of goods sold 17.0 15.4 15.5

Office supplies 1.3 1.6 1.1

Rental and leasing 2.5 2.4 2.3

Repair and maintenance expenses 2.0 2.5 2.2

Insurance F F F

Advertising, marketing and promotions 1.1 1.1 1.0

Travel, meals and entertainment 1.8 1.7 1.8

Utilities and telecommunications 1.9 1.9 2.0

Property and business taxes, licences and permits F F F

Royalties, rights, licensing and franchise fees F F F

Delivery, warehousing, postage and courier F F F

Financial services fees F F F

Amortization and depreciation of tangible and intangible assets 3.1 3.0 2.7

Bad debts F F F

All other expenses 7.0 6.6 6.7

Note(s): The results in this table are for firms classified under the North American Industry Classification System (NAICS) category 54151. Data presented in this table are from the surveyed portion only. The survey portion excludes the smallest firms in terms of revenues earned. These firms account for a relatively small portion of total industry revenues and are not included in the estimates of this table. See “Data sources, definitions and methodology” at the end of tables for definition of terms. Due to rounding, components may not add to total. Scaling may also affect the calculation of ratios. With the release of reference year 2011 preliminary estimates, revisions have been applied to estimates from reference years 2007 to 2010 to reflect updates in industry classification and respondent information.

Table 5

Operating expenses for software publishers, Canada, 2009 to 2011

2009 ^r 2010^r 2011^p

percent

Charges for services provided head offices F F F

Office supplies 1.0 F F

Insurance F F F

Travel, meals and entertainment 2.1 2.1 2.1

Utilities and telecommunications 1.7 F F

Royalties, rights, licensing and franchise fees 2.7 4.6 3.8

Delivery, warehousing, postage and courier F F F

Bad debts F F F

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Table 6

Operating expenses for data processing, hosting and related services, Canada, 2009 to 2011

2009 ^r 2010^r 2011^p

percent

Charges for services provided by head offices x F x

Office supplies F 1.1 1.8

Insurance F F F

Travel, meals and entertainment 1.3 1.1 F

Utilities and telecommunications 1.2 1.2 2.1

Royalties, rights, licensing and franchise fees 3.4 2.7 2.9

Delivery, warehousing, postage and courier x F x

Bad debts F F F

Note(s): The results in this table are for firms classified under the North American Industry Classification System (NAICS) category 51821. Data presented in this table are from the surveyed portion only. The survey portion excludes the smallest firms in terms of revenues earned. These firms account for a relatively small portion of total industry revenues and are not included in the estimates of this table. See “Data sources, definitions and methodology” at the end of tables for definition of terms. Due to rounding, components may not add to total. Scaling may also affect the calculation of ratios. With the release of reference year 2011 preliminary estimates, revisions have been applied to estimates from reference years 2007 to 2010 to reflect updates in industry classification and respondent information.

Table 7

Distribution of operating revenue by type of client, for software development and computer services, Canada, 2009 to 2011

Clients in Canada

Businesses Individuals

and households

Governments and public institutions

Clients outside Canada percent

Computer systems design and related services

2011^p 78.7 58.5 F F 21.3

2010^r 79.8 61.1 F F 20.2

2009^r 82.0 60.2 F F 18.0

Software publishers

2011^p 54.8 48.9 x x 45.2

2010^r 55.0 47.1 x x 45.0

2009^r 55.7 48.1 x x 44.3

Data processing, hosting and related services

2011^p 81.6 71.1 F F 18.4

2010^r 82.3 71.9 F F 17.7

2009^r 83.6 71.3 F F 16.4

Note(s): The results in this table are for firms classified under the North American Industry Classification System (NAICS) categories 54151, 51121 and 51821.

Data presented in this table are from the surveyed portion only. The survey portion excludes the smallest firms in terms of revenues earned. These firms account for a relatively small portion of total industry revenues and are not included in the estimates of this table. See “Data sources, definitions and methodology” at the end of tables for definition of terms. Due to rounding, components may not add to total. Scaling may also affect the calculation of ratios. With the release of reference year 2011 preliminary estimates, revisions have been applied to estimates from reference years 2007 to 2010 to reflect updates in industry classification and respondent information.

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Table 8

Breakdown of sales, software development and computer services, Canada, 2009 to 2011

2009 ^r 2010^r 2011^p

percent Computer systems design and related services (NAICS 54151)

Information technology (IT) technical consulting services 31.2 31.6 31.3

Website design and development services 3.0 3.6 3.1

Database design and development services 3.4 3.3 2.3

Customization and integration of packaged software 5.4 5.9 5.8

Other custom software development services 10.7 11.1 11.8

Network design and development services 2.7 4.9 6.4

Computer systems design, development and integration services 8.6 6.8 6.6

IT technical support services 9.0 9.9 7.4

Software publishers 4.9 3.0 3.5

Data processing, hosting and related services 8.8 7.4 9.6

Other sales 12.4 12.5 12.2

Total 100.0 100.0 100.0

Software publishers (NAICS 51121)

System software 16.7 18.2 15.4

Application software 36.1 44.5 43.1

Computer systems design and related services 30.1 22.4 25.3

Other sales 12.9 12.1 12.7

Total 100.0 100.0 100.0

Data processing, hosting and related services (NAICS 51821)

Hosting and information technology infrastructure provisioning services 59.3 68.6 63.4

Network management services F F F

Computer systems management services 1.9 1.8 2.4

Information and document transformation services 16.4 15.2 12.4

Computer systems design and related services 13.8 9.1 12.1

Software publishing F F F

Other sales 6.0 4.0 8.1

Total 100.0 100.0 100.0

Data presented in this table are from the surveyed portion only. The survey portion excludes the smallest firms in terms of revenues earned. These firms account for a relatively small portion of total industry revenues and are not included in the estimates of this table. See “Data sources, definitions and methodology” at the end of tables for definition of terms. Due to rounding, components may not add to total. Scaling may also affect the calculation of ratios. With the release of reference year 2011 preliminary estimates, revisions have been applied to estimates from reference years 2007 to 2010 to reflect updates in industry classification and respondent information.

Table 9

Exports by industry, software development and computer services, Canada, 2009 to 2011

2009^r 2010^r 2011^p

millions of dollars Exports by industry

Total exports, all industries 7,810.2 8,717.3 9,827.7

Computer systems design and related services 5,342.4 5,964.4 6,754.9

Software publishers 2,089.9 2,269.4 2,527.5

Data presented in this table are from the surveyed portion only. The survey portion excludes the smallest firms in terms of revenues earned. These firms

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Data sources, definitions and methodology

Description

This annual sample survey collects data required to produce economic statistics for the software development and computer services industry in Canada.

Data collected from businesses are aggregated with information from other sources to produce official estimates of national and provincial economic production for this industry.

Survey estimates are made available to businesses, governments, investors, associations, and the public. The data are used to monitor industry growth, measure performance, and make comparisons to other data sources to better understand this industry.

Target population

The target population consists of all establishments classified to the Computer Systems Design and Related Services (NAICS 541510), Software Publishers (NAICS 511210) and Data Processing, Hosting and Related Services (NAICS 518210) according to the North American Industry Classification System (NAICS) during the reference year. This industry comprises establishments primarily engaged in software development and computer services.

Sampling

This is a sample survey with a cross-sectional design.

The frame is the list of establishments from which the portion eligible for sampling is determined and the sample is taken. The frame provides basic information about each firm including address, industry classification, and information from administrative data sources. The frame is maintained by Statistics Canada’s Business Register Division and is updated using administrative data.

The basic objective of the survey is to produce estimates for the whole industry - incorporated and unincorporated businesses. The data come from two different sources: a sample of all businesses with revenue above or equal to a certain threshold (note: the threshold varies between surveys and sometimes between industries and provinces in the same survey) for which either survey or administrative data may be used; and administrative data only for businesses with revenue below the specified threshold. It should be noted that only financial information is available from businesses below the threshold; e.g., revenue, and expenses such as depreciation and salaries, wages and benefits. Detailed characteristics are collected only for surveyed establishments.

Prior to the selection of a random sample, establishments are classified into homogeneous groups (i.e., groups with the same NAICS codes and same geography). Quality requirements are targeted, and then each group is divided into sub-groups called strata: take-all, must-take, and take-some.

The take-all stratum represents the largest firms in terms of performance (based on revenue) in an industry. The must-take stratum is comprised of units selected based on complex structural characteristics (multi-establishment, multi-legal, multi-NAICS, or multi-province enterprises). All take-all and must-take firms are selected to the sample.

Units in the take-some strata are subject to simple random sampling.

The effective sample size for reference year 2011 was 1,470 collection entities.

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Operating expenses exclude write-offs, capital losses, extraordinary losses, interest on borrowing, and other non-recurring items.

Operating profit margin is derived as follows: operating revenue minus operating expenses, expressed as a percentage of operating revenue. The derived figure excludes corporation income tax paid by incorporated businesses and individual income tax paid by unincorporated businesses. For unincorporated businesses, operating profit margin includes unpaid remuneration to partners and proprietors, which is not recorded as salaries, wages and benefits. Therefore the profit estimate will be higher in industries where unincorporated proprietorships and partnerships are significant contributors.

Salaries, wages and benefits include vacation pay and commissions for all employees for whom a T4 slip was completed. This category also includes the employer portion of employee benefits for items such as Canada/Quebec Pension Plan or Employment Insurance premiums. Salaries and wages do not include working owners’ dividends nor do they include the remuneration of owners of unincorporated business. Therefore the relative level of salaries, wages and benefits will be lower in industries where unincorporated businesses are significant contributors.

An active statistical establishment is one production entity or the smallest grouping of production entities which produces as homogeneous a set of goods and/or services as possible; which does not cross provincial boundaries;

and for which records provide data on the value of output together with the cost of principal intermediate inputs used and cost and quantity of labour resources used to produce the output.

Quality evaluation

Prior to dissemination, combined survey results are analyzed for overall quality; in general, this includes a detailed review of individual responses (especially for the largest companies), an assessment of the general economic conditions portrayed by the data, historic trends, and comparisons with other data sources.

Disclosure control

Statistics Canada is prohibited by law from releasing any data which would divulge information obtained under the Statistics Act that relates to any identifiable person, business or organization without the prior knowledge or the consent in writing of that person, business or organization. Various confidentiality rules are applied to all data that are released or published to prevent the publication or disclosure of any information deemed confidential. If necessary, data are suppressed to prevent direct or residual disclosure of identifiable data.

Data accuracy

Of the units contributing to the estimate, the weighted response rate was 87.6%. CVs were calculated for each estimate and are available upon request.

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Related products

Selected CANSIM tables for Statistics Canada

354-0005 Software development and computer services, summary statistics, by North American Industry Classification System (NAICS), annual (225 series)

354-0007 Software development and computer services, operating expenses, by North American Industry Classification System (NAICS), annual (percent)m(63 series)

354-0008 Software development and computer services, sales by type of client based on the North American Industry Classification System (NAICS), annual (percent) (15 series)

Survey(s)

Definitions, data sources and methods: 2410 - Annual Survey of Service Industries: Software Development and Computer Services

Release date: March 2013 Symbols

The following standard symbols are used in Statistics Canada publications:

. not available for any reference period .. not available for a specific reference period ... not applicable

0 true zero or a value rounded to zero

0^s value rounded to 0 (zero) where there is a meaningful distinction between true zero and the value that was rounded

p preliminary

r revised

x suppressed to meet the confidentiality requirements of the Statistics Act

E use with caution

F too unreliable to be published

* significantly different from reference category (p < 0.05) To access this product

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