Internet is the motor engine of global growth in the 21st century – OECD

4 Oct 2012

The top 250 ICT firms by revenue boosted employment by 4pc in 2010 and 6pc in 2011, with hiring growing the fastest among internet firms which grew employment by 29pc, according to the OECD Internet Economy Outlook 2012.

Google and Amazon added 50pc more employees between 2010 and 2011.

According to the OECD study, the internet economy now accounts for 13pc of American business output. This underlines the importance of the internet as an important source of growth in a period of economic downturn and a core component of the broader economy.

The report claims that if the internet grows 1pc faster in one of two otherwise identical countries, GDP growth in the country with more internet growth will be up to 0.025pc higher.

ICT sector employment is highest in the US, accounting for more than 30pc of the OECD total, followed by Japan (16pc) and Germany (9pc).

Electronics and communications equipment firms accounted for the largest share of R&D investment in 2011 by the top 250 firms, with almost 50pc (US$46bn and US$28bn, respectively). Semiconductors accounted for 16pc (US$26bn), followed by software and IT equipment firms with an average of around 13pc each (US$22bn).

Weathering the downturn

The IT services industry weathered the 2009 downturn better than manufacturing, quickly rebounding to positive growth in early 2010. This is likely due to increasing specialisation in ICT services across OECD countries, while manufacturing has shifted to lower-cost production areas, according to the report.

The strength of the services sector is partially the result of the increasing role ICTs play in helping businesses become more efficient. Firms may look to ICTs to cut costs during downturns, creating a continued demand for ICT services as other budgets are cut. The same is true for the telecoms sector, which continued to perform strongly during the crisis, as households and individuals today consider them essential services and prefer to cut back on other expenses.

Total worldwide ICT spending is estimated to reach US$4.40bn in 2012, of which 58pc (US$2.57bn) is on communications services and equipment, 21pc (US$910bn) on computer services, 12pc (US$539bn) on computer hardware and 9pc (US$385bn) on software.

Estimates suggest that in 2012, software spending will increase more rapidly (by 7.6pc a year) than computer hardware (6.1pc a year), as hardware prices continue to fall.

Spending on communications, both services and equipment, will also increase rapidly (by 7.6pc), reflecting the uptake of more advanced services and the rapid spread of mobile services in developing countries.

The structure of ICT spending is slowly shifting, says the report, with consumer spending now making up one-third of the total ICT market. This is mainly driven by increasing demand for mobile devices (smartphones, netbooks, tablets).

ICT spending is also growing faster in the natural resources sector, followed by the construction and the energy and utilities sector, possibly owing to the commodities boom and the shift to “smart” infrastructures.

Virtual business image via Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years