IT Competitiveness Index Shifts, but U.S. Remains on Top

Published: September 28, 2009

by Dan Burger

Competitiveness in the global marketplace is a topic that gets pummeled like the loser of a full contact fighting match. And conversations about global competitiveness almost require talking about information technology. The link between key factors such as productivity and financial sophistication--across the business spectrum regardless of specific industry or size of the operation--and IT is a strong one.

The United States sits on top of the world by providing the most competitive conditions for information technology, and that statement is backed up by the IT Industry Competitiveness Index, an annual ranking that assesses and compares the IT industry environments of 66 economies to determine competitiveness.

That's the good news.

The troubling part of this report is that it also shows cracks in the once solid foundation that the United States built. The haunting feeling of losing global competitiveness in a number of areas--the IT industry is just one of them--has rattled the nerves of many citizens in this country. The common, underlying thought is that it took hard work to climb to the top and it will take harder work to remain there. No country can afford to rest on its laurels.

"We need to improve our IT infrastructure by invigorating broadband deployment, develop technology-neutral IT policies, avoid the siren call of protectionist market practices, and expand access to highly qualified, technically proficient employees to invent, design, and produce complex and innovative products," says Robert Holleyman, president and CEO of the Business Software Alliance, the organization that sponsors the report and makes the greatest use of its findings. BSA membership includes almost all the major IT companies, including IBM, Microsoft, Hewlett-Packard, and SAP.

The IT Industry Competitiveness Index for 2009 ranked the following countries in its top 10: the United States, Finland, Sweden, Canada, the Netherlands, the United Kingdom, Australia, Denmark, Singapore, and Norway.

Any surprises since the last report was released?

Finland, which jumped from position 13 to 2, and the Netherlands, which leaped from 10 to 5, benefited greatly from infrastructure improvements tied primarily to large scale broadband deployment. The importance of broadband continues to grow and is seen as an important engine of economic growth by many governments that are using broadband investments to stimulate economic recovery. Take note of the presence of Western Europe. The United States is feeling the heat and Western Europe is the fire.

(Editor's Note: Of course, it is a lot easier and less costly to bring broadband Internet to relatively smaller countries. And those who brag about countries like Singapore usually neglect to mention that you could wallpaper and carpet that small and technically innovative island nation with one day's worth of the distribution of the New York Times in the five boroughs. Scale always presents issues, and geographically speaking, the United States is more like 50 countries than one. That's no excuse for not having universal broadband Internet, but it is a reason why it is a challenge. --TPM)

The report that accompanies the IT Industry Competitiveness Index identified key challenges that face the United States.

At the top of the list is an expanded broadband deployment, which is critical to many infrastructure improvements. The BSA's Holleyman also points to developing technology-neutral IT policies and avoiding protectionist "buy local" market practices that slow the global marketplace. Security, not surprisingly, is noted as a major challenge. The recommended strategy supported by the BSA is that it can be best handled through a public-private partnership that does not place mandates on technology.

While pushing for programs that will benefit IT competitiveness, Holleyman diplomatically notes that even amidst the current economic turmoil, the strength of the IT industry in the U.S. and abroad remains strong. "Even in today's uncertain economic climate, the long term prospects of the IT industry remain competitive," Holleyman said. "The fact that the U.S. tech sector is helping to lead the way to recovery is a testament to the importance of technology to both industry and consumers and a telling indication of what will drive our economic growth in the long term, making it even more important for our policymakers to create the right environment for competition and innovation."

"Globally, the IT sector has ridden out the crisis reasonably well, despite reduced technology spending," says Denis McCauley, director of global technology research with the Economist Intelligence Unit, the business information arm of The Economist Group, publisher of The Economist. "Rather than pushing short-term measures designed to boost sector output or support ailing IT producers, policymakers need to remain focused on strengthening the fundamental enablers of long-term sector competitiveness."

The report, Resilience amid turmoil: Benchmarking IT industry competitiveness 2009, is available free of charge at www.bsa.org/globalindex.

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