Key Findings

Maintaining investment levels during an economic downturn is no easy feat, but business leaders know the benefit: the ability to compete at a higher level when markets recover. The same may be said of the information technology (IT) industry and national governments, as continued attention to factors such as education, research and development (R&D), high-speed communications networks, and access to finance is needed to ensure the sector's global competitiveness in the longer term.

The virtue of sustained investment in the enablers of sector competitiveness is borne out in the 2011 IT Industry Competitiveness Index. The two years since the last study have been the leanest financial times IT producers have known in a decade, and for many governments—in at least a generation. But countries that have seen continued investment in key competitiveness enablers such as the R&D environment, talent and skills are notable gainers in the 2011 Index.

For example, despite its obvious economic problems, or perhaps because of them, Ireland appears to have redoubled efforts to cultivate one of the world's most competitive environments for IT producers. Private-sector R&D spending was up in the early part of the downturn (as was enrolment in science programs). With IT patent generation also increasing, the effect is to boost Ireland's score for the R&D environment and advance the country to joint 8th position this year from 11th in 2009. A similar improvement in the R&D environment, with higher private-sector spending along with increased patent activity, lifts Israel from 13th to joint 10th. And significant improvement across all R&D environment indicators, as well as in higher education enrolment, has boosted India ten places to joint 34th this year.

Index Top 20 in 2011

Country Score 2011 rank Rank change vs 2009
Flag of United StatesUnited States 80.5 1 -
Flag of FinlandFinland 72.0 2 -
Flag of SingaporeSingapore 69.8 3 +6
Flag of SwedenSweden 69.4 4 -1
Flag of United KingdomUnited Kingdom 68.1 5 +1
Flag of DenmarkDenmark 67.9 6 +2
Flag of CanadaCanada 67.6 7 -3
Flag of AustraliaAustralia 67.5 8 -1
Flag of IrelandIreland 67.5 8 +3
Flag of NetherlandsNetherlands 65.8 10 -5
Flag of IsraelIsrael 65.8 10 +3
Flag of SwitzerlandSwitzerland 65.4 12 +2
Flag of TaiwanTaiwan 64.4 13 +2
Flag of NorwayNorway 64.3 14 -4
Flag of GermanyGermany 64.1 15 +5
Flag of JapanJapan 63.4 16 -4
Flag of AustriaAustria 61.4 17 +5
Flag of New ZealandNew Zealand 61.3 18 +1
Flag of South KoreaSouth Korea 60.8 19 -3
Flag of Hong KongHong Kong 60.8 19 +2

There are other noteworthy upward shifts in 2011. Singapore, advancing to 3rd position in the table, has benefited from a vastly improved score in the human capital environment. Its northern neighbour Malaysia has jumped to 31st place thanks to much improved performance in its R&D indicators—and especially in IT patent activity. Germany, Austria, Poland and Turkey are other countries registering significant gains due to improvement in one or both of these Index categories. Conversely, Lithuania (41st) and Russia (46th) have fallen back several places due mainly to a decline in scores in the key R&D category.

The US is probably the world's best example of the virtues of long-term investment in the enablers of IT sector competitiveness. The US tops the Index once again, its high scores across all categories reflecting 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.

Many Centers of Competitiveness

For the US and other nations that continue to perform strongly in our Index, the benefits of long-term vision and sustained investment are clearly bearing fruit. The long-standing US reputation for innovation, academic excellence, business acumen and political stability have produced an environment in which, to quote one expert interviewed for this study, "advantage begets advantage". For the IT industries of other countries, struggling to raise capital or against government bureaucracy, the US might sometimes appear to be disappearing even further into the distance.

Even so, big changes are taking place that could ultimately lead to a reshaping of the global market. Although India and China currently lie mid-rankings, both countries have gained ground in the Index since its inception, and it would not be surprising to see further gains in the years ahead. Having built competitive IT industries in the services and manufacturing sectors, both countries face a threat to their low-cost-labor advantage as wages rise and commoditizing businesses move to other emerging markets. Yet several industry experts interviewed for this study noted improvements in the quality of IT talent in these markets. With the emergence of a more business-savvy managerial class, and the impetus provided by recent economic developments, China and India are being taken more seriously from an entrepreneurial perspective. As innovation gathers pace, the enforcement of intellectual property rights—which has always been viewed as a problem in this part of the world—is likely to improve as well.

Europe, meanwhile, still looks attractive in terms of IT infrastructure and the legal environment, among other factors. But the continent is arguably failing to keep pace with other regions when it comes to human capital, while rigid labor-market regulations and a poor climate for investment in next-generation broadband networks could stymie the development of the IT sector in the future. Maintaining their high rankings in the Index may be a tough challenge for these countries in years to come.