Continued U.S. Investments In IT Pay Off
October 3, 2011 Dan Burger
If you have noticed that short-term business planning and financial performance is replacing long-term value creation, then you might well have some concerns when the topic of U.S. competitiveness in the global markets is debated. Pocketing short-term profits while manipulating earnings and blaming a lack of investments on the wobbly economy has been known to happen within individual companies. You might even know some examples in the IBM i community. However, entire industry segments, such as the information technology sector, seem to be built for the long haul–at least that’s true in nations interested in revving their economic engines with this fuel.
No one expects innovation and success to blossom without risk, right? Either you can manage risk or you can’t, but there’s no substitute for investment. A highly competitive marketplace will devour those that attempt to coast. In the IT sector, investment and innovation sleep in the same bed. Risk sleeps under the bed.
Investments in IT infrastructure often cited as a key contributor to business success, makes an interesting example. Fortunately for those of us who follow IT news and analysis, the Business Software Alliance makes a habit of collecting and analyzing data that compares IT investment categories on a nation-to-nation basis. It takes into consideration factors such as the business and legal environments, investments in research and development, availability to a skilled workforce, emphasis on training and education, and public support for IT industry development.
The United States is accustomed to the top overall ranking in the BSA’s IT Industry Competitiveness Index. Its confidence may be shaken, but it has too many advantages for the time being to drop from the top spot. Innovation and productivity are its hallmarks. It has a huge domestic market, regardless of its chronic economic belly ache, and its access to diverse global markets continues to fuel slow but steady prosperity. Factor in that good old Yankee entrepreneurial culture that offers great financial rewards to companies that out compete their rivals. To out compete means to out invest (although the short-term thinkers might say it only means out earning the competition for a few financial reporting periods). The U.S. has an impressive history of IT investments and its research and development environment is comfortably ahead of just about every other country, Israel being the closest competitor in this category.
As the SBA report notes, the U.S. scores high in all the measured categories, which reflects “not only the historical strength of its IT industry but also the high quality of its education and talent environments, its strong encouragement of innovation and entrepreneurialism, and its well-developed legal system. Recent economic and fiscal problems have not dented its clear IT industry strengths.”
Strength today can be attributed to strength in the past, but it does not guarantee future success. Global competition will have something to say about that. In the Competitive Index, let’s appreciate India, which climbed 10 rungs on the ladder since the last index was released in 2009. The gains made by that emerging IT powerhouse are directly attributable to abundant human capital and considerable investments in research and development. Quality IT talent is improving and increasingly business-savvy management were highlighted as factors in India’s rise in the rankings.
Ireland also stands out for its efforts in building a competitive IT environment. Private-sector R&D spending and science education enrollment both showed increases. IT patent generation also increased. Overall, Ireland’s ranking rose from 11 to eight.
A similar improvement in the R&D environment, with higher private-sector spending along with increased patent activity, lifted Israel from 13 to a joint 10 ranking with India.
Singapore, Mexico, and Poland also distinguished themselves by noteworthy gains in the rankings. Mexico and Poland, by the way, accomplished this with improvements in their business environments, but without substantial investments in R&D.
Overall, Finland ranked number two, while sitting atop the Western European region. The business environment in Finland was credited with being the best in the world. Singapore, which jumped six positions, was ranked third overall and tops in the Asia-Pacific region. Sweden and the United Kingdom rounded out the top five in the overall category.
Countries that are on the downward slide include a couple of surprises.
China has lost some luster from its rising star status. Its nasty habit of abusing intellectual property rights was one factor, but lagging IT infrastructure and a poor R&D environment also are detrimental.
Canada, which ranks number seven overall, tumbled from the number four ranking after the Competitive Index dinged it for diminished IP standards. Canada’s R&D environment score is well below the U.S., Finland, and Singapore.
The full BSA IT Industry Competitiveness Index 2011 report can be downloaded in pdf format by clicking here.