Study Ranks IT Competitiveness By Country

Published: July 19, 2007

by Timothy Prickett Morgan

The market research unit of The Economist magazine has worked with the Business Software Alliance to gauge the competitiveness of the IT industry on a geographical basis. The goal of the study is to figure out which countries and regions around the globe have the best business, social, and skills factors to foster a productive and indigenous IT industrial sector.

The report, which is called The Means to Compete: Benchmarking IT Industry Competitiveness and which you can download at this link, looked at 64 different countries with a sizeable IT industry within their borders, and found that where IT software, hardware, or services were significant parts of the economy, the IT sector contributed as much as 5 percent of a country's gross domestic product, and in many countries, it is the IT sector itself that is raising overall worker productivity metrics.

It will come as no surprise that the United States ranked number one in the composite ranking created by the Economist Business Unit and the BSA, with a score of 77.4.

That score is based on a ranking of 25 different factors and the composite is based on a scale of 100. So the U.S. was by no means the perfect environment for the IT industry, just the best one that Planet Earth has to offer. In general, the categories weighed the overall business environment (10 percent of the composite), IT infrastructure in the country (20 percent), human capital (which in plain English means a skilled workforce and an educational system to keep it that way, 20 percent), legal environment (meaning a strong patent system and copyright laws and a respect for the law, 10 percent), a tendency to invest in research and development by governments, academia, and corporations (25 percent), and support for IT industry development by government (15 percent).

The U.S. ranked among the top five in all of these categories, which is why its composite score was so high. Japan, with a ranking of 72.7, was not too far behind, and South Korea, at 67.2, and the United Kingdom, at 67.1, were in a dead heat for the third place position. According to the report, all of the East Asian economies were prolific in generating patents and, like the U.S., investing in research and development. Japan's score was high in the innovation area and for having close ties between industry, government, and academia. Australia, Taiwan, Sweden, Denmark, Canada, and Switzerland rounded out the top 10 positions in the list and were clustered around a rating range 63 to 66.

It is interesting to note that China, India, and Russia, the big-growth economies that are driving a lot of IT sales growth these days, did not rate very highly in the IT competitiveness ranking. (Which, if you think about it, explains why these economies are buying goods from North American and European IT producers.) India was ranked at 46th on the list, with a score of 29.1, Russia was ranked 48th with a score of 28, and China was ranked 49th with a score of 27.9. The report actually predicts that Malaysia, Brazil, Vietnam, Russia, Hungary, and Poland will start competing with China and India in IT because they can provide low-cost, high-skilled labor. So it is not just China and India taking over IT--not by a long shot.

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