An ocean apart
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No one will be very surprised to hear that, according to a new report from the European Commission (EC), European businesses still trail behind their US counterparts when it comes to IT investment.
No one will be very surprised to hear that, according to a new report from the European Commission (EC), European businesses still trail behind their US counterparts when it comes to IT investment. However, everyone on this side of the Atlantic should be alarmed to hear how wide the gap has become, and how very far Europe appears to be from making it any narrower.
The bad news, contained in 2010: Achieving the Lisbon Agenda, a report produced for the Commission by Indepen Consulting and Ovum, is that Europe is 20 years behind the US in its exploitation of information and communications technology (ICT).
The gap is not immediately obvious. In 2003, EU ICT investment accounted for 5.8% of GDP, whereas in the US the same figure was only marginally higher - 6.3%. But the devil, as ever, is in the detail. ICT accounts for 18% of total spending in Europe, compared to 29% of all investment in the US. Worse still, the EC report found that whilst ICT contributed 42% of all labour productivity growth in the EU between 1996 and 2000, in the US, ICT's contribution was 80%. Somehow, it seems, US ICT investment is roughly twice as effective as the EU's.
What is the problem? In per capita terms, European ICT investment levels are today about where US ICT investment was 20 years ago. This is obviously a contributing factor, but the real root is that, dollar for dollar, Americans manage to squeeze more value from their ICT investment than Europeans do.
Are Americans simply better at computing than Europeans? According to the report, regulatory factors such as employment protection laws make it more difficult for European businesses to translate ICT investments into business change; inappropriate educational and skill levels in Europe make it more difficult and expensive for businesses here to find the right staff; whilst product market regulation and low levels of service market integration also contribute to higher IT costs.
These are all macro-economic issues that are largely beyond the control of Europe's IT practitioners, but that is no reason for them to be complacent. Something that the 2010 Report does not consider, but which few market observers will dispute, is that US ICT culture is firmly grounded in the belief that technology exists to serve business needs. In Europe's still relatively highly regulated economy, this belief is diluted by the perception that IT investment is often a function of regulatory compliance.
Can such compliance-driven investment be relied upon to fuel the innovation Europe's needs to close the trans-Atlantic productivity gap? There are some who believe it can, but recent evidence does not seem to support them.
