|By Roger Strukhoff||
|October 9, 2010 12:34 AM EDT||
Which countries are the world's most aggressive deployers of Information Technology? How do you measure this?
I came up with an idea called the Tau Index a few days ago, in which countries are compared to one another in terms of their IT expenditures weighed against the size and composition of their local economies.
It produced some surprising results. Bangladesh, Morocco, and Morocco emerged at the top of the heap. Honduras emerged as the most aggressive IT deployer in the Americas. Three of the four BRIC countries did OK; Brazil did not. The US looked stagnant, Western Europe even more so. Eastern Europe looked dynamic. Asia was a house on fire.
The Tau Index has two key elements: 1. it adjusts a nation's IT expenditures for the local cost of living--IT costs the same in absolute terms everywhere, so makes a bigger impact in poorer countries. 2. it rewards countries that have smaller income disparities--IT's advantages should be able to be better distributed in a society with more uniform income distribution.
The idea of the Tau Index is to provide a real-world snapshot of how things look on the ground in a country. How dynamic is the country really? How well arre IT's advantages being shared with everyone? How hard is a country fighting to enjoy IT's rising global tide?
Let's Go to the Polls
I think it's useful to compare the Tau Index with traditional ways of looking at global IT expenditures.
In other words, it's time for a series of rankings, you know, like the BCS college football polls in the US. Let's hope these rankings are more rational than the BCS system!
I am using World Bank statistics for GDP, and United Nations figures for income disparity.
I'll provide five separate "polls" here:
A. Total IT expenditure
B. IT expenditure per capita (per person)
C. IT expenditure as a percentage of total GDP
D. Nominal Tau Index (a number that adjusts IT expenditures for income disparity)
E. Tau Index (the nominal rating adjusted for local cost of living, aka purchasing-power parity, or PPP)
The members and leaders of each poll will differ, but I think we'll see some patterns emerge.
A. Total IT Expenditure by Country (2009)
1. United States
11. South Korea
20. South Africa
22. Saudi Arabia
Note: These are the big dogs of the world. The US spent more than $1 trillion on IT in 2009, Japan almost $350 billion, China $258 billion, Germany $181 billion, down to Austria at $21 billion. This number tells you where the money is, but says nothing about how dynamic (or sleepy) a local IT market feels.
B. IT Expenditure Per Capita
2. United States
6. Hong Kong
22. New Zealand
23. Czech Republic
24. South Korea
Note: This measure how much is spent in each country per person. It ranges from Switzerland's $4,628 and the US's $3,379 per person to Greece's $1,361.
It seems intuitively correct that it favors the wealthier countries of the world. If you have more money, you are able to spend more money. No surprise that small, wealthy Switzerland, with its huge financial services industry, would lead. No surprise that the US is a powerhouse, either.
But you start to see some discordant rumblings; what's going on with Germany, France, and Italy? Especially considering the strength of the Euro versus the US dollar, why aren't they spending more? Why isn't Japan, with its extra-strong currency, in the top five? And look, there's the Czech Republic!
C. IT Expenditures as a Percentage of Total GDP
4. South Africa
5. Hong Kong
9. South Korea
11. Czech Republic
12. United States
15. Saudi Arabia
23. Costa Rica
Note: Switching sports from football to boxing, this is a "pound-for-pound" rating. It shows which countries are punching the hardest for their weight. Morocco spent 13.8% of its GDP on IT in 2009, more than $12 billion in a GDP of only $90 billion. (Compare this to the US GDP of $14 trillion, or even Canada's GDP of $1.3 trillion.) IBM's revenues are about the same as Morocco's entire economy.
Clearly, the ground shifts when you start to look at IT expenditures this way. It's probably not much of a surprise to many people to see Eastern Europe represented well here, or to see Malaysia or South Africa. Egypt is no surprise to people who've been watching this country recently. And the United States continues to hold its own, spending 7.3% of its GDP on IT. But Western Europe has almost completely dropped off the radar screen.
Where are the vaunted BRIC (Brazil, Russia, India, China) countries? Could it be they're not as hot as people have said? And who expected to see the Honduras, Costa Rica, Jordan, the Philippines, or the Ukraine here? Well played, lads!
D. Nominal Tau Index (% of IT Expenditures Adjusted for Income Distribution)
3. Czech Republic
7. South Korea
13. Saudi Arabia
Note: This list adjusts the percentage of IT expenditures to account for income distribution. The idea is that a country with a more uniform income distribution (say Sweden or Canada) will be better able to diffuse the IT to all corners of society than a country that has a larger income disparity (say Brazil or Malaysia).
Japan makes a nice comeback here, as does Western Europe. Eastern Europe shines, and Slovakia doesn't differ that much economically from Czech Republic, despite a prevailing wisdom that this may be the case.
The US has dropped off the list (it actually rates 26th), and the BRIC countries must be out at the racetrack or something; they're nowhere to be found. Meanwhile, Senegal has joined its Northern African neighbor Morocco on the list. Welcome!
Income distribution is weighted equally here with the percentage of IT expenditures, so countries with large income disparities can still make the list. Witness Morocco and Malaysia. One might argue that aggressive IT expenditures help reduce income disparity; one might hope that this is a goal of governments throughout the world, but I can't make a direct connection like this with only one year's worth of data.
E. Tau Index (List D adjusted for local cost of living)
9. Czech Republic
11. South Korea
14. Saudi Arabia
20. South Africa
Note: The final piece in the equation measures local cost of living (purchasing-power parity, or PPP in wonk terms). The US is the benchmark for cost of living, as this is the way the World Bank statistics on this subject are compiled.
The idea is that IT costs the same in absolute terms everywhere, so X amount of IT expenditure represents a bigger commitment, and makes a bigger impact in a country like the Philippines (where cigarettes are 40 cents a pack and a nice shirt can be bought for $10) than it does in a country like Norway (where one can have a stroke looking at the price of anything).
Two of the BRIC companies do make the list, validating their reputation. China ranks 40th, because it doesn't spend as much on IT (5.2% of GDP) as one might think, and its income disparity is growing. Brazil is buried deep into the list, spending just 4.7% of its GDP on IT and retaining a sky high income disparity. The US ranks 48th, by the way.
Western Europe is hurt by its high cost of living. That $400 notebook or multi-million dollar data center is a much bigger deal in Bangladesh or Bulgaria than in the US or Germany. Conversely, many low-income countries are striving to overcome their ingrained poverty and income disparities through the rising tide of information technology.
The Tau Index illustrates all this. The countries on this list represent the most aggressive, dynamic IT deployers in the world, relatively speaking. If you want to visit the true global IT hot spots, check these places out (except for perhaps Iran).
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