S T P I

Snapshot of the Global Networking and Information Technology (NIT)

Ecosystem

Briefing Computing Leadership Summit 2007

February 26, 2007

Bhavya Lal, Core Staff MemberMetrics and Evaluation Practice

Science and Technology Policy Institute1899 Pennsylvania Avenue, N.W., Suite 520

Washington DC 20006Ph: 703 292 3724, E-Mail: blal@ida.org

2

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Introduction

• Charged with compiling a data-driven snapshot of the global NIT ecosystem -- US vis-à-vis current and emerging competitor countries*

• Short turnaround -- July 2006-October 2006– Single pass-through– Using publicly available data sources

• Today’s briefing – highlights/extracts from the data collected

* China, France, Germany, India, Ireland, Japan, Netherlands, Singapore, South Korea, United Kingdom, and European Union as an emerging cluster competitor

3

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Data Sources and Definition

Data• Authoritative public sources (e.g., NSF, OECD, World Bank)

– Tend to have older data

– Complemented by others for more recent information (e.g., National Venture Capital Association, EU governments)

Key definitions • Networking and Information Technology (NIT) • Information and Communication Technology (ICT) = NIT +

– Telecommunications services

– Select telecommunications equipment

… but a lot of flux due to evolving nature of the space (e.g., media, publishing, online retailing, emerging services)

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NIT Ecosystem Components and Sub-Components

Research andDevelopment

InvestmentPerformersOutputs

Enabling Infrastructurefor R&D

NITInfrastructure

Technology Penetration

e-Government

Skilled Workforce

PopulationWorkforceEducation

NIT Producers and Consumers

Enabling Factors

Access to Capital Economic Stability

Socio-Cultural Influences

Legal Regulatory

EnvironmentTax Structure

IP/Other RegulationsCorruption

5

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NIT Ecosystem Components and Sub-Components

Research andDevelopment

InvestmentPerformersOutputs

Enabling Infrastructurefor R&D

NITInfrastructure

Technology Penetration

e-Government

Skilled Workforce

PopulationWorkforceEducation

NIT Producersand Consumers

Enabling Factors

Access to Capital Economic Stability

Socio-Cultural Influences

Legal Regulatory

EnvironmentTax Structure

IP/Other RegulationsCorruption

S T P I

R&D Investments and Outputs

7

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Overall, U.S. firms in NIT sectors spend much more on R&D than firms in other nations, with strong growth…

Notes: Firms among the top 1,250 R&D spending firms in the world. Software and services: 225 firms. Technology hardware and equipment: 268 firms.Source: UK Department of Trade and Industry R&D Scoreboard, 2006

8%

-9%

15%

-3%

22%

49%

-14%-18%

52%

-9%

10%

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Finl

and

Fra

nce

Ger

man

y Ja

pan

Nethe

rland

sSing

apor

eSou

th K

orea

Swed

enTaiw

an

United

King

don

United

Sta

tes

R&

D In

vest

men

t 200

4-05

(m

illio

ns o

f US

dol

lars

)

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Per

cent

Gro

wth

Sin

ce 2

000-

01

Software/Services Technology/Hardware Growth since 2000-01

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…but R&D spending in some sub-sectorshas declined

0

2,000

4,000

6,000

8,000

10,000

12,000

2000 2001 2002 2003

Year

R&

D E

xpen

ditu

res

in C

ompu

ter

Man

ufac

turin

g (M

illio

ns o

f U

S D

olla

rs,

Cur

rent

PP

P)

European Union Japan United States

Source: OECD ANBERD Database, 2006

Notes: ISIC Category 30 Computer Manufacturing

Classification is according to the International Standard Industrial Classification (ISIC Rev.3) or nearest national classification.

PPP stands for Purchasing Power Parity, which standardized purchasing power across international currencies. Conversion rates from OECD Statistics Directorate, April 2006.

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Public funding of ICT R&D – including defense - in the United States is well ahead of other economies of interest

Source: Research And Development In Information Science and Technology In Large Industrialised Countries, Commissioned By The Ministère Délégué À L’enseignement Supérieur Et À La Recherche, Summary Report April 2006

Notes: PPP stands for Purchasing Power Parity, which standardized purchasing power across international currencies. Conversion rates from OECD Statistics Directorate, April 2006.There are varying estimates of public sector R&D ac ross sources and no recent authoritative source.

3.7 3.9 4.2 4.5 4.5 4.6 4.7

2.1 2.2 2.4 2.6 2.7 2.8 2.9

8.1 8.3 8.6

10

11.6

1313.6

1999 2000 2001 2002 2003 2004 2005

Pub

lic fu

ndin

g of

ICT

R&

D in

clud

ing

defe

nse

(in

billi

ons

of d

olla

rs)

PP

P

EU-15 Japan USA

10

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Source: Research And Development In Information Science and Technology In Large Industrialised Countries, Commissioned By The Ministère Délégué À L’enseignement Supérieur Et À La Recherche, Summary Report April 2006

Excluding defense, public U.S. ICT funding may be lower than other economies of interest

Notes: There are varying estimates of public sector R&D ac ross sources and no recent authoritative source.

2.72.9

3.03.3 3.3 3.4 3.5

1.92.1

2.32.5

2.6 2.7 2.7

1.2 1.31.6 1.5

1.71.9 1.8

1999 2000 2001 2002 2003 2004 2005

Pub

lic fu

ndin

g of

civ

ilian

ICT

R&

D (

in b

illio

ns o

f do

llars

) P

PP

EU-15 Japan USA

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U.S. federal funding of unclassified NIT R&D has been growing

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2002 2003 2004 2005 2006 2007 (req)US

Gov

ernm

ent F

undi

ng o

f NIT

RD

(Mill

ions

of

US

Dol

lars

)

High End ComputingResearch & Development

High end ComputingInfrastructure & Applications

Cyber Security & Information Assurance

Human-ComputerInteraction & Information Management

Large Scale Networking

High Confidence Software &Systems

Social Economic & Workforce Implications of IT Software Design & Productivity

Source: NITRD NCO, 2002-2006

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Under half of U.S. federal funding of unclassified NIT R&D supports high end computing

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2002 2003 2004 2005 2006 2007 (req)

Per

cent

Fun

ding

High End ComputingResearch & Development

High end ComputingInfrastructure & Applications

Cyber Security & Information Assurance

Human-ComputerInteraction & Information Management

Large Scale Networking

High Confidence Software &Systems

Social Economic & Workforce Implications of IT Software Design & Productivity

Source: NITRD NCO, 2002-2006

13

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12

1 1

15

France Israel Switzerland United Kingdom United States

Majority of the most-cited computer science researchers and institutions are in the United States

Source: Thomson/ISI, 2006

Most-cited institutions in computer science (1995-2005)

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S T P I

U.S. publications in technology and math have gone up but U.S. share of the world total is down

Source: Science and Engineering Indicators 2006

0

5,000

10,000

15,000

20,000

25,000

China

EU-15

Fran

ceGer

man

yIre

land

Japa

nNet

herla

nds

Singap

ore

South

Kor

ea

United

King

dom

United

Sta

tes

Num

ber

of p

ublic

atio

ns in

eng

inee

ring/

tech

nolo

gy a

nd

mat

hem

atic

s

0%

5%

10%

15%

20%

25%

30%

35%

China

EU-15

Franc

eGer

man

y

Irelan

d

Japa

nNet

herla

nds

Singap

ore

South

Kor

eaUnit

ed K

ingdo

mUnit

ed S

tates

Per

cent

Sha

re o

f the

Wor

ld

1996 2003

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Growth of U.S. citations slightly lower than the growth of U.S. publications

16,144

40,250

22,602

54,682

Papers Citations

1996 2003

+40%

+36%

Source: Science and Engineering Indicators 2006

16

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0

1,000

2,000

3,000

4,000

5,000

6,000

1994 1995 1996 1997 1998 1999 2000

Priority Year

Num

ber o

f Tria

dic

Pat

ent F

am

ilies

in IC

T

Fie

lds

France Germany Japan Korea, SouthNetherlands United Kingdom United States EU-15China Ireland Singapore India

United States leads the world in the number of Triadic Patent Families in ICT fields

Source: OECD Patent Database, 2006

S T P I

Availability of Capital

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More venture capital is available in the United States than any other country in the world

1,100 800 600 1,100 1,200

22,100

China France Germany India UnitedKingdom

United States

Country

Ven

ture

Cap

ital i

n 20

05 (

Mill

ions

of U

S D

olla

rs)

Source: Ernst & Young/VentureOne, TS/Media (India) and Zero2IPO (China) as reproduced in Transition: Global Venture Capital Insights Report 2006

19

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In the United States, venture investment in technology sectors is large and stable

0

5,000

10,000

15,000

20,000

25,000

2002 2003 2004 2005

Ven

ture

Cap

ital i

n th

e U

S (

Mill

ions

of

US

Dol

lars

)

Software Computers and Peripherals IT Services Retailing/Distribution Networking and Equipment

Electronics/Instrumentation Semiconductors Telecommunications Biotechnology

Source: PricewaterhouseCoopers/National Venture Capital Association, MoneyTree™ Report, Data: Thomson Financial 2006

All Others

ICT sectors

biotechnology

S T P I

Infrastructure

21

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Broadband penetration in the United States is lower than many other nations

Source: World Development Indicators, 2006

16.5

108.1

83.7

0.6

33.9

145.8

120.8

247.9

102.5

129.0

189.4

China

EU-15

Franc

e

Germ

any

India

Irelan

d

Japa

nNethe

rland

sSing

apor

eSou

th Kor

eaUnite

d King

domUnite

d Stat

es

Bro

adba

nd S

ubsc

riber

s pe

r 10

00 P

opul

atio

n

S T P I

Education

23

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In the United States, number of degrees granted in NIT fields has fluctuated

Source: IPEDS, WebCASPAR, IPEDS Survey by Race, 2006

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2001

2003

Num

ber

of d

egre

es c

onfe

rred

in N

IT-f

ield

s -

Com

pute

r s

cien

ce,

elec

tric

al e

ngin

eerin

g, m

athe

mat

ics/

stat

istic

s

Doctorate Degrees Master's Degrees Bachelor's Degrees Associate's Degrees

24

S T P I

Doctorates granted by U.S. institutions in NIT fields are fairly steady

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1995 1996 1997 1998 2000 2001 2002 2003 2004

Doc

tora

tes

conf

erre

d in

NIT

-fiel

ds

Temporary Residents U.S. Citizens and Permanent Residents

Source: IPEDS, WebCASPAR, IPEDS Survey by Race, 2006

25

S T P I

Degree increases at the doctoral level are entirely attributable to foreign students

1,506

1,789

3,295

1,490

2,115

3,605

U.S. Citizens and Permanent Residents Temporary Residents Total

Doc

tora

l Deg

rees

Gra

nted

in N

IT fi

elds

, by

citiz

ensh

ip

2001 2004

-1.1%

+18%

9.4%

Source: IPEDS, WebCASPAR, IPEDS Survey by Race, 2006

26

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In recent years, enrollments at the freshman level in computer science have been declining

Source: Higher Education Research Institute at the University of California at Los Angeles (HERI/UCLA)

27

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U.S. graduate student enrollments in NIT fields are declining as well

17,000

18,000

19,000

20,000

21,000

22,000

2000 2001 2002 2003 2004

Year

Firs

t-tim

e fu

ll-tim

e gr

adua

te e

nrol

lmen

ts

in N

IT F

ield

s

85,000

90,000

95,000

100,000

105,000

110,000

Firs

t-tim

e fu

ll-tim

e gr

adua

te e

nrol

lmen

ts

in S

&E

Fie

lds

S&E Enrollments

NIT Enrollments

Source: WebCASPAR; NSF-NIH Survey of Graduate Students & Postdoctorates in S&E, 2006

28

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Enrollments at the graduate level declining because of decline of foreign student enrollment

6,636

14,009

20,645

8,7649,879

18,643

U.S. Citizens and PermanentResidents

Temporary Residents Total

Gra

duat

e E

nrol

lmen

ts in

NIT

fiel

ds, b

y ci

tizen

ship

2001 2004

+32%

-29%

-10%

Source: IPEDS, WebCASPAR, IPEDS Survey by Race, 2006

29

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NIT fields at the graduate level have a larger though declining share of enrolled foreign students

68% 68%

60%

53% 53%

35% 36%32%

29% 27%

2000 2001 2002 2003 2004

Year

For

eign

stu

dent

sha

re o

f firs

t-tim

e fu

ll-tim

e gr

adua

te e

nrol

lmen

ts

S&E Share of Foreign Students

NIT Share of Foreign Students

Source: WebCASPAR; NSF-NIH Survey of Graduate Students & Postdoctorates in S&E, 2006

30

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Until 2003, a large fraction of foreign doctorate recipients in math and computer science from U.S. institutions had

definite plans to stay

Source: NSF, Science and Engineering Indicators, 2006.

0100200300400500600700800900

China

Franc

e

German

y

India

Japa

n

South

KoreaUnite

d King

domN

umbe

r of

Stu

dent

s -

2000

-200

3

Definite Plans to Stay Other

67%

44% 53%

72%

51%52% 60%

Notes: Data based on the NSF Division of Science Resource Statistics’ Survey of Earned Doctorates, 2004. Surveyed individuals are “all individuals receiving a first research doctorate (second doctorates are not included) from a U.S. academic institution in the 12-month period ending on June 30, 2004.” Surveys are given to graduates by their home university, which also collects them and submits them to NORC (survey contractor). Definite plans to stay defined as “returning to, or continuing in, predoctoral employment” or “have signed contract or made definite commitment for other work or study”.

S T P I

Workforce

32

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Source: Occupational Employment Statistics Survey (2005)

Software and service-oriented NIT occupations have seen greatest employment growth

1%

-22%

26% 23%

1%10%

-5%

19%

47%

0

100,000

200,000

300,000

400,000

500,000

600,000

Com

pute

r an

d in

form

atio

n sc

ient

ists

,re

sear

ch

Com

pute

rpr

ogra

mm

ers

Com

pute

r so

ftwar

e en

gine

ers,

appl

icat

ions

Com

pute

r so

ftwar

een

gine

ers,

sys

tem

sso

ftwar

e

Com

pute

r su

ppor

tsp

ecia

list

Com

pute

r sy

stem

s an

alys

ts

Dat

abas

ead

min

istr

ator

s

Net

wor

k an

d co

mpu

ter

syst

ems

Net

wor

k sy

stem

s an

dda

taco

mm

unic

atio

ns

occupation

Num

ber

of p

erso

ns in

U.S

. co

mpu

ter

spec

ialis

t oc

cupa

tions

-30%-20%-10%0%10%20%30%40%50%60%

chan

ge in

em

ploy

men

t (p

erce

nt)

Number of Jobs (May 2005) Percentage change in employment (2001-May 2005)

33

S T P I

NIT occupations experienced slower wage growth compared to all U.S. occupations between 2001 and 2005

11%

22%

7%

10%

13%

4%

11%12% 12%

8%

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

All

U.S

. occ

upat

ions

Com

pute

r an

d in

form

atio

n sc

ient

ists

,re

sear

ch

Com

pute

rpr

ogra

mm

ers

Com

pute

r so

ftwar

e en

gine

ers,

app

licat

ions

Com

pute

r so

ftwar

een

gine

ers,

sys

tem

sso

ftwar

e

Com

pute

r su

ppor

tsp

ecia

list

Com

pute

r sy

stem

s an

alys

ts

Dat

abas

ead

min

istr

ator

s

Net

wor

k an

d co

mpu

ter

syst

ems

adm

inis

trat

ors

Net

wor

k sy

stem

s an

dda

taco

mm

unic

atio

nsan

alys

ts

occupation

Hou

rly w

ages

for

com

pute

r sp

ecia

list

occu

patio

ns (

in U

S

Dol

lars

)

0%

5%

10%

15%

20%

25%

Cha

nge

in h

ourly

wag

e (p

erce

nt)

Hourly wage (May 2005)

Percentage change in wage (2001-May2005)

Source: Occupational Employment Statistics Survey (2005)

S T P I

Firm Strength

35

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30%21%

49%

10%13%

28%

70%

132%

42%

13%

0

200,000

400,000

600,000

800,000

1,000,000

China France Germany India Ireland Japan South Korea Netherlands Singapore UnitedKingdom

United States

Country of Registration

Rev

enue

by

Eco

nom

y of

Reg

istr

atio

n (T

op 2

50 F

irm

s)

(Mill

ions

of

US

Dol

lars

)

0%

50%

100%

150%

200%

250%

Pe

rcen

t Ch

ange

in R

even

ue

fro

m 2

000

Revenue 2000 Revenue 2005

683%

Firms with United States and Japan as the home economies dominate top 250 ICT firms

Source: OECD, Information Technology Outlook, 2006

36

S T P I

Among top firms by sector, U.S. firms dominate services and software sectors

0

100,000

200,000

300,000

400,000

500,000

600,000

Communicationsequipment andsystems firms

Electronics andcomponents firms

Equipment andsystems firms

Services firms Software firms

ICT sector

Rev

enue

s by

Cou

ntry

for

Firm

s am

ong

the

top

10

in v

ario

us IC

T S

ecto

rs (

mill

ions

of U

.S. d

olla

rs)

United States Netherlands Korea Japan Germany France Other

Source: OECD, Information Technology Outlook, 2006

37

S T P I

Looking to the Future

• R&D. R&D business investments in the U.S. higher than in most countries

– Are we getting a higher “bang for the buck?” Are we investing in the right areas?

• Venture capital. Access in technology fields steady with an acceleration toward international investments

– Will VC’s increasing globalization dilute the US economic dynamic?

• Infrastructure. U.S. lags behind other nations in consumer broadband access – Will competitor nations leapfrog the U.S. with respect to new business

models and technology innovations?

• Education. Fewer students in the pipeline

– Will we have enough of a highly-skilled workforce to meet demand? Will the U.S. continue to attract the best and brightest students and workers from around the world?

• Firm strength . U.S. firms dominate most sectors– Are we losing our pre-eminence in potentially strategic sectors?

38

S T P IProject Team

(in alphabetical order)

• John Bailey, Ph.D., Reviewer• Allison Hodges • Colleen Horin• Bhavya Lal• Jamie Link, Ph.D.• Vivek Mohta, Ph.D.• Christina Viola Srivastava• Robert Winner, Ph.D., Consultant• Brian Zuckerman, Ph.D., Reviewer

S T P I

Feedback and Questions

Bhavya Lal, Core Staff MemberMetrics and Evaluation Practice

Science and Technology Policy Institute1899 Pennsylvania Avenue, N.W., Suite 520

Washington DC 20006Ph: 703 292 3724, E-Mail: blal@ida.org

S T P I

Some Backup Slides

41

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R&D Expenditures by Sector – Firm-Level Aggregation

Source: UK Department of Trade and Industry R&D Scoreboard, 2006

42

S T P IOffshoring

Total U.S. software and NIT services spending offshore is increasing rapidly

• “Spending for global sourcing of computer software and services represented 2.3% of IT software and services spending by US corporations in 2003; expected to be 6.2% of the spending by 2008”[2]

The value of IT offshoring and business process offshoring totaled $34 billion in 2005[3]

• “To date, the annual job loss attributable to offshoring is approximately 2 to 3 percent of the IT workforce. But this number is small compared with the much higher level of job loss and creation that occurs every year in the United States.”[4]

• Growth not expected to reverse the large and growing trade surplus in software and services

While NIT service offshoring displaces some NIT workers, many experts believe there is a positive net impact on U.S. economic activity

Source: (graphic) salon.com, 2006, offshoring data – GAO, Ernst & Young, Global Insight and ACM

43

S T P IForeign Students and Professionals

Foreign Students in NIT• The US has over half a million foreign students, over a quarter come from China and

India alone. They form a miniscule fraction of the total student population of the United States. 12% are at the top 25 institutions.

• Four Asian nations comprise 45% of the foreign students in the US. Over the years, the percent of students that make up the foreign student pool in the US from China has decreased and of those from India has increased.

• US is the largest destination of students from Korea, Japan and India. Although it appears (at least in 2004), as many Chinese students head to Japan as to the United States.

Immigrants in the NIT workforce are important as we ll – more so than many other fields.

• Immigrants have started a larger percent of firms in the ICT industry than in most other sectors

• 24 percent of venture-backed U.S. public companies in the ICT industry were founded by immigrants (40 percent in high tech manufacturing industry)

– Temporary residents have started 25 percent of all venture-backed public U.S. firms• These firms have a market capitalization of over $500 billion, and employ over 220,000 U.S.

– (as comparison, legal immigrants comprise less than 9% of the population of the US)– legal immigrants comprise less than 9% of the population of the US

• Leading home countries of founders were India, Israel, and Taiwan• The worker distinction is intimately linked with students

– One quarter of all temporary work visas are converted from student visas– Half of permanent visas come from adjustment of temporary visas