AS WE ROLL INTO A NEW YEAR, I'LL BE sticking with my outlook of "cautious optimism" for the Canadian IT industry, which I've held through most of . I may change that stance once I see the revenue numbers from Canadian IT companies, but it's too early to make year-over-year comparisons.

On the other hand, I've always argued that stock prices are a leading indicator of revenues and earnings, and we do have January to December data readily available now.

How does +80 per cent sound? That's the mean percentage gain in Canadian IT stock prices from January to mid-December, based on 220 companies.

Seem impossible? It is to the extent arithmetic averages are skewed to the upside in this context. Consider these share price gains: Telesystem Wireless, up 1,875 per cent and Cedara Software, up 645 per cent. And these weren't the only standouts. Another 50 companies had stock price gains in the 100 per cent to 350 per cent range. On the other hand, a company can't lose more than 100 per cent of its stock price, and a few came close to that.

Because of the upward bias, a more realistic average to use is the median price gain of 26 per cent, which is still comfortably above the median gain of 16 per cent for the broad base of companies in the TSX Composite. This all bodes well for anticipated IT revenues and profits in .

Two economic factors that have some people worried about the IT industry are the increasing value of the Canadian dollar and the employment situation.

The media has grossly overstated the negative impact of a rising Canadian dollar on exports. Our dollar isn't rising; the U.S. dollar is shrinking--against all major currencies. That's an important difference. Canadian exports to the U.S. may be affected to some degree, but currency conversions between Canada and Europe, Asia and just about everywhere else haven't changed all that much this past year.

As for employment, things are looking up as we move into . As I write this, on a per capita basis, Canada is creating almost 10 times more jobs per month than the U.S. (based on a December 5 StatsCan report). Technology jobs don't contribute a lot to that figure, but that could change at least modestly as the year unfolds. It's important to remember that productivity enhancements due to the implementation of IT solutions contributed to mass layoffs in the first place--including those among IT workers.

Against this backdrop, I suspect the "hot technologies" this year will be pretty much the same as those we saw last year: Wireless everything, bigger and better networked storage, innovations in CRM, plus anything that will help consume the glut of broadband capacity built up during the late 90s.

One recent U.S.-based buyers' intentions survey tells us that CIOs will increase their tech spending by about four per cent in . Investments in security and the expansion of e-businesses will be priorities.

All in all, it looks to be an interesting year ahead.

Charles Whaley, PhD, is a Toronto-based IT consultant and market analyst with Information Technology Enterprises.

COPYRIGHT Transcontinental Media IT Business Group

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