Canadian businesses grappling with stretched resources on technology programs

Canadian organizations say their digital transformation efforts over the last two years have been paying off, but they’re still lagging their global counterparts in implementing digital technologies, potentially creating risks to their competitiveness and profitability. And while they’re prioritizing technologies such as artificial intelligence (AI) and machine learning (ML) in order to catch up to competitors, they’re grappling with fewer resources, underscoring the need for more strategic investments. Those are some of the key Canadian findings from KPMG’s Global Tech Report 2023.

The survey asked business and technology leaders at 2,100 global organizations about their digital transformation strategies and the role of technology in achieving their business goals. Data from the 150 Canadian respondents shows a majority of organizations are behind their global peers in implementing solutions such as AI, ML, robotics, cloud, 5G, augmented reality, virtual reality, edge computing, cybersecurity and web3 technologies, but most are working on a strategy to adopt them in the next three years.

However, economic headwinds are posing a challenge for Canadian organizations, with more than three- quarters of respondents (76 per cent) saying they’re “expected to do more with less budget” compared to last year (vs. 67 per cent globally). In the financial services sector in particular – which accounts for more than half of Canadian survey respondents – 84 per cent of respondents said they’re facing stretched resources this year.

Kathy Penner, partner and national leader in Technology Enterprise Solutions at KPMG in Canada says many organizations are looking for ways to increase stakeholder value amid continuing concerns of a recession, so technology investments need to be laser-focused on achieving specific outcomes such as competitive advantage opportunities, cost containment, improving efficiency, advancing environmental, social and governance (ESG) agendas and improving cybersecurity, for example.

“Organizations looking at their technology spending over the next few years need to clearly define what they want their investments to achieve, and how those outcomes will improve productivity and profitability. Not every organization will need to implement generative AI or automation solutions for instance, but for those that do, they’ll need to solve a specific business problem such as cutting down customer wait times at call centres, for example,” Ms. Penner says.

“Our survey found the main reason Canadian organizations are prioritizing certain technologies is to keep pace with market leaders that have already adopted them, but technology investments should never be made ‘because others are doing it’ – they need to be intentional and strategic, especially in an uncertain economic climate,” she adds.

One of the ways Canadian organizations are planning to save on costs is with better use of XaaS (“anything as a service”) solutions, which leverage cloud computing to provide various services to businesses, including software, platform, infrastructure and analytics, among other things. Seventy-nine per cent of Canadian businesses plan to grow their use of XaaS solutions as part of their cost-reduction efforts in the next two years, and that number is higher (84 per cent) in financial services. Globally, 68 per cent of businesses are planning to use XaaS solutions.

The growth of generative artificial intelligence since late 2022 has propelled it – and AI more broadly – to the top of Canadian and global organizations’ priority lists when it comes to technology. More than half (55 per cent) of Canadian respondents cited artificial intelligence and machine learning as the most important technology to help them achieve their short-term business goals, with robotics ranking second (48 per cent) and edge computing third (42 per cent), mirroring similar trends among global respondents.

For Canadian financial services companies however, quantum computing is nearly as important as artificial intelligence and machine learning. While 47 per cent of financial institutions said AI and ML will be key to achieving short-term success, 46 per cent cited quantum computing as the second most important technology, nearly 10 per cent higher than the Canadian average, highlighting quantum’s importance to the financial services sector. Quantum computing refers to supercomputers capable of solving problems exponentially faster than ordinary computers. In financial services, quantum computing could be used for faster and more advanced financial modelling, fraud detection and payment systems, among other uses. A previous KPMG survey found nearly six in 10 Canadian organizations said they expect quantum computers to become mainstream by 2030.

When the pandemic shifted a majority of activities online, many Canadian organizations responded by pushing their digital transformation efforts into high gear – and in some cases, kickstarting them altogether. The result of those efforts is paying off, according to survey respondents. On average, nearly half (47 per cent)of Canadian organizations reported an increase in profitability of six per cent or more after two years of digital transformation efforts in areas like data and analytics, AI and automation, cybersecurity, VR/AR and cloud technologies, with 36 per cent saying profitability climbed by 11 per cent or more.

“Those results show the significant impact these technologies can have on your bottom line when effectively deployed,” says Sanjay Pathak, partner and national leader of KPMG’s Technology Strategy and Digital Transformation Services. “But the fact that more than a third (36 per cent) of Canadian organizations have not yet realized any gains from their digital transformation efforts suggests they need to rethink their strategies to ensure they are taking full advantage of their technology capabilities after the implementation stage.

“Many organizations spend a lot of time, money and energy implementing digital technologies, but they often struggle with how to optimize those technologies after adoption – we see this a lot with cloud or multi-cloud adoption, for example. To be successful, technology programs should always take a holistic view: understand the real return on investment, make sure it’s well-integrated throughout the organization, make sure the right risk control frameworks are in place, and upskill employees on the new technology so they know how to use it most effectively – that includes building a more ‘digital culture’,” Mr. Pathak adds.