U.S. IT Leadership Slips, Taiwan Gains

An Economist Intelligence Unit's findings prompted the Business Software Alliances to warn U.S. policymakers against indifference and complacency.

Antone Gonsalves, Contributor

September 17, 2008

3 Min Read

The United States remains the world's IT leader, but its standing is slipping as other countries close the gap, an annual report released Wednesday showed.

The United States' overall score in this year's Economist Intelligence Unit's IT industry competitiveness index fell nearly three points from last year to 74.6 out of a possible 100. Even though the United States placed in the top five in all six index categories, the drop is an indication that other countries are catching up.

Those countries include Taiwan, Sweden, and Denmark, which moved into the top five this year and are quickly closing in on the United States, according to the study, which compares the IT industry environments of 66 economies to determine the extent to which they enable IT sector competitiveness. The EIU is the business information arm of The Economist Group, and the study is sponsored by the Business Software Alliance.

The top 10 IT economies, in order, are the United States, Taiwan, United Kingdom, Sweden, Denmark, Canada, Australia, South Korea, Singapore, and the Netherlands. Although the top 20 on the list remained the same from last year, nine moved up and 11 moved down in the rankings.

Taiwan made the biggest jump, moving from sixth to second place. Other big gains were Denmark, from eighth to fifth; Canada, from ninth to sixth; and Singapore, from 11th to ninth.

The study findings prompted the Business Software Alliances to warn U.S. policymakers against indifference and complacency.

"The gap between the U.S. and other nations is narrowing as many economies are becoming more competitive and nipping at our heels," Robert Holleyman, president and chief executive of the BSA, said in a statement. "Strong leadership and sound policies will be needed for the U.S. to remain the innovation leader."

The six factors that the study considers essential for a sound IT environment are an ample supply of highly skilled workers, an innovation-friendly culture, world-class technology infrastructure, a legal system that protects patents, copyright and other intellectual property; an open, competitive environment; and a government that "strikes the right balance between promoting technology and allowing market forces to work."

The United States is particularly strong in the quality of its legal system, business environment and university graduates. The nation, however, falls short in infrastructure, workforce, openness in its competitive environment and R&D, the study found.

In infrastructure, the United States' broadband penetration remains well below countries in Western Europe and East Asia, the study found. While large corporations generally enjoy high levels of reliable, secure connectivity, smaller IT firms and individual entrepreneurs often fail in getting the same level of service.

In its workforce, the United States is suffering from a shortage of skilled talent due to slower increases in the number of science and engineering graduates from the nation's educational institutions. The BSA favors an easing, or at least avoiding further tightening, of immigration restrictions on skilled workers.

In terms of openness to its domestic market, the United States must resist intensified political pressure to restrict access during the U.S. economy's current period of slow growth.

Finally, the United States lags far behind in resources dedicated to research and development in IT. The nation's score fell 40% from last year to 23.7 from 39.8. Asia, on the other hand, had the strongest R&D environments, with Taiwan scoring 74.3.

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