New IT Competitiveness Rankings Reflect Importance of R&D Investment

Rankings don't always indicate final outcomes. Most anyone who follows U.S. major league baseball would've bet, on the basis of their respective rankings, that there was no way the Boston Red Sox were going to lose what turned out to be their most important game of the year to the hapless, scorned, ranked-dead-last Baltimore Orioles. But hey, things happen.

Rankings of a non-baseball sort were in the spotlight this week when the Business Software Alliance released its newest IT Industry Competitiveness Index.

The BSA study — done in collaboration with the Economist Intelligence Unit — measures the capability of each country (66 in all) to support "a strong IT production sector." The researchers analyze six factors they see as key to a healthy IT situation: business environment, IT infrastructure, human capital, research and development, legal environment, and public support for industry development.

The element that carries the most weight in the final score is R&D. What the analysts look for when judging a country's research environment include public and private expenditures, number of new IT patents filed by residents, and money from royalty and licensing fees.

The Nearshore country with the best overall rank turned out to be Chile, with a score of 32. Congratulations, Chile. Not to be a Debbie Downer, but that score actually represents a drop of five notches by Chile since the last Index (in 2009). One thing working against Chile's evaluation is its R&D environment, graded at 1.4 by the BSA analysts. That's where another Nearshore neighbor, Brazil, really boosted its ranking. In terms of R&D, the country has the best atmosphere for research in all of Latin America, the report says, giving a score of 21.2.

Mexico, given a 16.2, was also recognized for improvements in this area during the past two years. Mexico's overall ranking is 44, putting it smack dab in the middle of the regional rankings.

What's important about the R&D scores is that R&D drives much of what makes a country competitive in information technology. These scores could be interpreted as an indicator of a country's readiness and willingness to be a successful IT partner. Countries — their governments and their businesses — that want to become global tech players, that want to be leaders in IT outsourcing and BPO — need to invest in R&D, in new tools and new processes. Without that investment, innovation struggles and stagnates, and without innovation, it's a dreary road ahead.

As BSA president Robert Holleyman says in the report accompanying the new Index: "Technology innovation boosts productivity and spurs economic growth, economists have long understood, because it allows companies to get more out of the investments they make in labor and capital."

We'll look at other criteria for IT competitiveness in subsequent posts. Meanwhile, for fellow rankings junkies and observers of the Nearshore IT outsourcing scene, here's how the region's countries placed, followed by their cumulative scores:

1. United States   80.5
7. Canada   67.6
32. Chile   43.2
39. Brazil   39.5
44. Mexico   37.0
45. Argentina   36.2
49. Colombia   33.7
55. Peru   25.5
58. Venezuela   24.5
59. Ecuador   23.1

Final note: Never get too comfortable with a high ranking, especially up there at the top. That's the perch the Red Sox occupied until a month or so ago, and then from there it was a slide into infamy.