The BECH Index 2016 from TBK Consult

World Demand for Information Technology is on the Move - The BECH Index 2016

Whitepaper from TBK Consult OBS: The BECH Index for 2016 is based on a new algorithm.

The data presented in this whitepaper cannot be compared with data from previous BECH Index reports!

Author Hans Peter Bech, M.Sc. (econ) TBK-WIPA-031

Š Hans Peter Bech, 2016 First edition Unless otherwise indicated, Hans Peter Bech copyrights all materials on these pages. All rights reserved. No part of these pages, either text or images may be used for any purpose other than personal use. Therefore, reproduction, modification, storage in a retrieval system or retransmission, in any form or by any means, electronic, mechanical or otherwise, for reasons other than personal use, is strictly prohibited without prior written permission.

The business model framework is distributed under a Creative Commons license from Strategyzer AG and can be used without any restrictions for modeling businesses.

Published by TBK PublishingÂŽ (a division of TBK Consult Holding ApS) Denmark CVR: DK31935741 www.tbkpublishing.com ISBN: 978-87-93116-27-6 TBK-WIPA-031

World Demand for Information Technology is on the Move - The BECH Index 2016

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Table of contents:

3

Table of Contents

3

Target audience

4

Abstract

4

Author

4

Acknowledgements

4

The new BECH Index

5

Grow fast or die slow

6

How?

6

Where?

7

Table 1: The BECH Index for the Major Markets 2014-16

7

Table 2: Top 25 Information Technology Countries in the World

8

Table 3: The BECH Index for the Americas 2014-16

9

Table 4: The BECH Index for The European Union 2014-16

10

Table 5: The BECH Index for The Rest of Europe 2014-16

11

Table 6: The BECH Index for The Middle East 2014-16

12

Table 7: The BECH Index for Africa 2014-16

12

Table 8: The BECH Index for Asia Pacific 2014-16

14

About the author

17

World Demand for Information Technology is on the Move - The BECH Index 2016

Targeted audience

The target audience for this whitepaper is the board of directors, the CEO and the sales and marketing executives of B2B information technology companies with ambitions for achieving global market leadership.

Abstract

This whitepaper presents an estimation of the relative demand capacity for B2B information technology and related services worldwide. This estimation is called “The BECH Index.”

TBK Consult calculates the BECH Index annually based on data published by The Central Intelligence Agency (CIA).

The CIA1 is an independent agency responsible for providing national security intelligence to senior US policymakers. The CIA is separated into four basic components: the National Clandestine Service, the Directorate of Intelligence, the Directorate of Science & Technology, and the Directorate of Support. They carry out “the intelligence cycle;” the process of collecting, analyzing, and disseminating intelligence information to top US government officials.

Please observe that the CIA makes revisions to their assessments, which may obsolete the BECH Index assessments for previous years.

OSB: The BECH Index for 2016 uses a new algorithm and the data is therefore not compatible with previous BECH Index reports.

Author

Hans Peter Bech, M.Sc. (econ.)

Acknowledgements

Design and lay-out: Sordako OÜ, Tallinn, Estonia, info@kompot.ee Data collection and proof reading: Emma Crabtree, ecr@tbkconsult.com

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1

4

Source: https://www.cia.gov/about-cia/todays-cia/index.html

World Demand for Information Technology is on the Move - The BECH Index 2016

The new BECH Index

We have changed the algorithm behind the BECH Index for the 2016 version. We still use the Gross Domestic Product2 (GDP) as estimated and published by the CIA in their World Factbook3 and we still use the Purchasing Power Parity version that adjusts for the differences in the costs of living and price levels across the world.

The new BECH Index uses the GDP composition on agriculture, industry and services. We assume that the demand for information technology will grow as a society moves from dependency on agriculture, through being dominated by industry to mainly producing services. We recognize that the productivity improvements that enable a society to survive and prosper with relatively small portions of the GDP coming from agriculture and industry is enabled and supported by information technology (and free international trade). However, we presume that the post-industrial activities are consuming far more information technology products and services than the primary and secondary sectors4.

The consequence of the new algorithm is a significant adjustment of the shares of global demand between countries and regions. The most significant change is the downgrading of the US market from 29,37% to 19,1% of global demand and the upgrading of China from 8,02% to 14,42%. As the basic GDP for the US accounts for 15.7% and China accounts for 17,2% we believe that the new BECH Index gives a more accurate picture of each country’s share of global demand for information technology products and services.

We have also decided to rename the annual report so that the current version is based on GDP data from the previous year. GDP data are published by the national statistical departments, but not all countries publish at the same time and some do not publish the data each year.

We therefore wait for the CIA to gather and assess the data before we calculate and publish the BECH Index.

2

The GDP is a monetary measure of the market value of all final goods and services produced in a period (quarterly or annually). Nominal GDP estimates are commonly used to determine the economic performance of a whole country or region, and to make international comparisons.

3

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4

https://www.cia.gov/library/publications/resources/the-world-factbook/

The new BECH Index is based on the three-sector theory: https://en.wikipedia. org/wiki/Three-sector_theory

5

World Demand for Information Technology is on the Move - The BECH Index 2016

Grow fast or die slow

The information technology industry is by nature a global industry.

As the information technology industry is blessed with low cost of entry and simple supply chains, international growth comes much easier in the information technology industry than in most other industries.

Embarking on the global growth journey is also a necessity in the information technology industry.

The combination of simple supply chains, economy of scale advantages and “crossing the chasm”5 characteristics make the information technology industry a “winner takes all” game.

Information technology companies either grow fast or die slowly6.

How? As information technology companies prepare for global growth the first question to answer is “how?”

We discuss these issues in the first three whitepapers in this series named “Entering a Foreign Market in the Information Technology Industry7.”

We recommend that B2B information technology companies verify the viability of their business models in their domestic market first.

When growing revenue has been proven profitable, predictable and scalable then it is time to conquer foreign markets.

5

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See ” Crossing the Chasm, 3rd Edition: Marketing and Selling Disruptive Products to Mainstream Customers” by Geoffrey A. Moore.

6 “Grow fast or die slow” April 2014 by Eric Kutcher, Olivia Nottebohm and Kara Sprague, McKinsey&Company 7

6

These whitepapers are available for download from www.tbkconsult.com

World Demand for Information Technology is on the Move - The BECH Index 2016

Where?

The second question asked before jumping to foreign markets is “where should we go next?”

To help information technology executives making this decision based on facts rather than emotions, TBK Consult calculates and publishes the BECH Index annually.

The BECH Index for a country reflects the demand capacity of the country and thus also reflects the share of global demand for information technology related products and services.

Table 1: The BECH Index for the Major Markets 2014-168 Region

2014

2015

2016

North America

20,89%

20,85%

20,69%

South America

9,13%

8,97%

8,69%

Americas

30,02%

29,82%

29,38%

EU

19,06%

18,65%

18,65%

Rest of Europe (incl. Switzerland)

6,71%

6,35%

6,31%

Middle East

5,08%

5,05%

5,01%

Africa

3,76%

3,77%

3,80%

34,62%

33,82%

33,77%

Australia/NZ

1,23%

1,66%

1,22%

Japan

4,87%

4,73%

4,62%

China

13,32%

13,85%

14,42%

South Korea

1,53%

1,53%

1,53%

Taiwan

0,94%

0,95%

0,93%

India

5,28%

5,53%

5,74%

Rest of Asia

8,18%

8,11%

8,38%

35,36%

36,36%

36,85%

100,00%

100,00%

100,00%

EMEA

Asia The World

The world market is divided into 229 countries of which some of the bigger countries must be considered as several markets. Talking about the US as one market when you haven’t won the first customer or independent channel partner there yet may seem overly self-confident. For most information technology companies, the US is at least 50 geographical markets, Germany is 14 markets (Bundesländer), France is at least 4 markets, the UK is 4 markets, the Nordics are 4 markets and so on. www.tbkconsult.com

8

Please note that the numbers in this whitepaper are due to the application of a new algorithm which

will differ from previous BECH Index whitepapers:

7

World Demand for Information Technology is on the Move - The BECH Index 2016

As can be seen from Table 1, world demand is on the move. The Americas have experienced a decline in the period due to a drop in demand from all countries in North, Central and South America. Europe continues to lose its share of global demand although the decline is somewhat slower than in the Americas. Nevertheless, North America and Europe continue to be very interesting areas with some of the biggest markets in the world and because of increasing labor cost and public expenditure there is a growing need for information analytics, process and cost optimization information technology based solutions. The slight decline in the Middle East has most likely been affected by the changes in the oil prices experienced lately and we should expect some further decline here in the 2017 figures. Future growth in the Middle East will require a restructuring of the economies away from the dependency on oil and gas. China continues its growth and has consolidated its position as the second largest information technology market in the world.

Table 2: Top 25 Information Technology Countries in the World

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Rank 2016

8

Rank 2015 Country

BECH Share 2014

1

1

USA

19,14%

2

2

China

14,42%

3

3

India

5,74%

4

4

Japan

4,62%

5

5

Germany

3,59%

6↑

7

Russia

3,20%

7↓

6

Brazil

3,13%

8↑

9

UK

2,86%

9↓

8

France

2,80%

10

10

Italy

2,16%

11

11

Mexico

1,95%

12 ↓

11

Indonesia

1,94%

13

13

Spain

1,63%

14

14

Canada

1,55%

15 ↓

14

South Korea

1,53%

16 ↑

17

Turkey

1,50%

17 ↑

18

Saudi Arabia

1,24%

18 ↓

16

Australia

1,07%

19

19

Iran

1,04%

20 ↑

21

Nigeria

0,95%

21 ↓

19

Taiwan

0,93%

22 ↑

23

Thailand

0,88%

23 ↓

22

Egypt

0,80%

24

24

Netherlands

0,80%

25

25

Poland

0,78%

Accumulated

47,5% 61,7% 70,3% 76,1% 80,3%

World Demand for Information Technology is on the Move - The BECH Index 2016

The ranking has very few movements. Russia, Turkey, the UK, Saudi Arabia, and Thailand have moved one position up, while Brazil, France, Indonesia, South Korea, Australia, Taiwan and Egypt have lost positions.

On the following pages, we will list the BECH Index for each country in the world.

Table 3: The BECH Index for the Americas 2014-16 Country

2014

2015

2016

19,31%

19,28%

19,14%

1,58%

1,57%

1,55%

20,89%

20,85%

20,69%

Argentina

0,80%

0,86%

0,75%

Belize

0,00%

0,00%

0,00%

Bolivia

0,05%

0,05%

0,05%

Brazil

3,45%

3,34%

3,13%

Chile

0,38%

0,37%

0,37%

Colombia

0,55%

0,56%

0,56%

Costa Rica

0,08%

0,08%

0,08%

Cuba

0,18%

0,13%

0,12%

Dominican Republic

0,12%

0,12%

0,13%

Ecuador

0,16%

0,16%

0,15%

El Salvador

0,05%

0,05%

0,05%

Falkland Islands

0,00%

0,00%

0,07%

Guatemala

0,11%

0,11%

0,11%

Grenada

0,00%

0,00%

0,00%

Honduras

0,03%

0,03%

0,04%

Jamaica

0,03%

0,02%

0,02%

Mexico

1,97%

1,95%

1,95%

Nicaragua

0,03%

0,03%

0,03%

Panama

0,09%

0,08%

0,09%

Paraguay

0,05%

0,05%

0,05%

Peru

0,32%

0,32%

0,32%

Puerto Rico

0,10%

0,10%

0,09%

Uruguay

0,07%

0,07%

0,07%

Venezuela

0,53%

0,49%

0,45%

South America

9,13%

8,97%

8,69%

30,02%

29,82%

29,38%

USA Canada

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North America

Americas

9

World Demand for Information Technology is on the Move - The BECH Index 2016

Table 4: The BECH Index for The European Union 2014-16 Country

2014

2015

2016

Iceland

0,02%

0,01%

0,02%

Sweden

0,42%

0,41%

0,42%

Norway

0,32%

0,31%

0,31%

Finland

0,23%

0,22%

0,21%

Denmark

0,27%

0,26%

0,26%

Germany

3,69%

3,61%

3,59%

Netherlands

0,82%

0,79%

0,80%

Belgium

0,53%

0,52%

0,51%

Luxemburg

0,06%

0,06%

0,06%

France

2,91%

2,82%

2,80%

Austria

0,40%

0,39%

0,38%

Liechtenstein

0,00%

0,00%

0,00%

Italy

2,28%

2,21%

2,16%

Spain

1,65%

1,64%

1,63%

Portugal

0,31%

0,30%

0,30%

UK

2,88%

2,82%

2,86%

Ireland

0,19%

0,19%

0,24%

Gibraltar

0,00%

0,00%

0,00%

Poland

0,78%

0,78%

0,78%

Estonia

0,04%

0,03%

0,04%

Lithuania

0,08%

0,08%

0,08%

Latvia

0,05%

0,05%

0,05%

Czech Republic

0,28%

0,27%

0,28%

Slovakia

0,14%

0,14%

0,14%

Hungary

0,23%

0,23%

0,23%

Bulgaria

0,13%

0,12%

0,13%

Slovenia

0,06%

0,06%

0,06%

Greece

0,33%

0,32%

0,31%

19,06%

18,65%

18,65%

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The European Union

10

World Demand for Information Technology is on the Move - The BECH Index 2016

Table 5: The BECH Index for The Rest of Europe 2014-16

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Country

2014

2015

2016

Switzerland

0,49%

0,49%

0,48%

Cyprus, Republic

0,03%

0,03%

0,03%

Greenland

0,00%

0,00%

0,00%

Faroe Islands

0,00%

0,00%

0,00%

Monaco

0,01%

0,01%

0,01%

Isle of Man

0,01%

0,01%

0,01%

Jersey

0,01%

0,01%

0,01%

Georgia

0,03%

0,03%

0,03%

Andorra

0,00%

0,00%

0,00%

Guernsey

0,00%

0,00%

0,00%

Malta

0,02%

0,02%

0,02%

Croatia

0,09%

0,09%

0,09%

Russia

3,50%

3,20%

3,20%

Ukraine

0,37%

0,33%

0,29%

Belarus

0,13%

0,13%

0,12%

Romania

0,31%

0,31%

0,32%

Serbia

0,07%

0,07%

0,07%

Moldova

0,02%

0,02%

0,02%

Bosnia and Herzegovina

0,04%

0,04%

0,04%

Montenegro

0,01%

0,01%

0,01%

Albania

0,03%

0,03%

0,03%

Macedonia

0,03%

0,03%

0,03%

Kosovo

0,02%

0,02%

0,02%

Turkey

1,48%

1,48%

1,50%

Rest of Europe

6,71%

6,35%

6,31%

11

World Demand for Information Technology is on the Move - The BECH Index 2016

Table 6: The BECH Index for The Middle East 2014-16 Country

2014

2015

2016

Bahrain

0,05%

0,05%

0,05%

Egypt

0,80%

0,75%

0,80%

Iran

1,05%

1,05%

1,04%

Iraq

0,39%

0,37%

0,36%

Kuwait

0,18%

0,17%

0,17%

Lebanon

0,08%

0,08%

0,08%

Israel

0,27%

0,26%

0,27%

West Bank

0,02%

0,02%

0,02%

Jordan

0,08%

0,08%

0,08%

Oman

0,11%

0,11%

0,11%

Qatar

0,20%

0,21%

0,20%

Saudi Arabia

1,22%

1,23%

1,24%

Syria

0,06%

0,10%

0,05%

U.A.E.

0,47%

0,46%

0,47%

Yemen

0,11%

0,10%

0,07%

The Middle East

5,08%

5,05%

5,01%

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Table 7: The BECH Index for Africa 2014-16 Country

2014

2015

2016

Algeria

0,41%

0,41%

0,42%

Angola

0,09%

0,09%

0,09%

Benin

0,02%

0,02%

0,02%

Botswana

0,03%

0,03%

0,03%

Burkina Faso

0,02%

0,02%

0,02%

Burundi

0,01%

0,01%

0,01%

Cameroon

0,05%

0,05%

0,05%

Central African Republic

0,00%

0,00%

0,00%

Chad

0,02%

0,02%

0,02%

Congo, Republic of the

0,01%

0,01%

0,01%

Cote d'ivoire

0,06%

0,07%

0,07%

Djibouti

0,00%

0,01%

0,00%

Dem. Rep of the Congo

0,04%

0,04%

0,05%

Eq. Guinea

0,01%

0,01%

0,01%

Eritrea

0,01%

0,01%

0,01%

Ethiopia

0,11%

0,11%

0,12% â–¶

12

World Demand for Information Technology is on the Move - The BECH Index 2016

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Country

2014

2015

2016

Gabon

0,02%

0,02%

0,02%

Gambia

0,00%

0,00%

0,00%

Ghana

0,09%

0,09%

0,09%

Guin. Bissau

0,00%

0,00%

0,00%

Guinea

0,01%

0,01%

0,01%

Kenya

0,11%

0,11%

0,11%

Lesotho

0,00%

0,00%

0,00%

Libya

0,11%

0,08%

0,07%

Liberia

0,00%

0,00%

0,00%

Malawi

0,02%

0,01%

0,02%

Mali

0,02%

0,02%

0,03%

Mauritania

0,01%

0,01%

0,01%

Morocco

0,22%

0,22%

0,22%

Mozambique

0,03%

0,03%

0,03%

Namibia

0,02%

0,02%

0,02%

Niger

0,01%

0,01%

0,01%

Nigeria

0,92%

0,95%

0,95%

Rwanda

0,02%

0,02%

0,02%

Senegal

0,03%

0,03%

0,03%

Sierra Leone

0,01%

0,01%

0,01%

Somalia

0,00%

0,00%

0,00%

South Africa

0,70%

0,68%

0,68%

South Sudan

0,01%

0,02%

0,01%

Sudan

0,13%

0,13%

0,13%

Swaziland

0,01%

0,01%

0,01%

Tanzania

0,10%

0,10%

0,10%

Togo

0,01%

0,01%

0,01%

Tunisia

0,11%

0,11%

0,11%

Uganda

0,06%

0,07%

0,07%

Western Sahara

0,00%

0,00%

0,00%

Zambia

0,05%

0,05%

0,05%

Zimbabwe

0,02%

0,02%

0,02%

Africa

3,76%

3,77%

3,80%

13

World Demand for Information Technology is on the Move - The BECH Index 2016

Table 8: The BECH Index for Asia Pacific 2014-16 Country

2014

2015

2016

Australia

1,07%

1,50%

1,07%

New Zealand

0,16%

0,16%

0,16%

Australia/NZ

1,23%

1,66%

1,22%

Japan

4,87%

4,73%

4,62%

China

13,32%

13,85%

14,42%

Korea, South

1,53%

1,53%

1,53%

Taiwan

0,94%

0,95%

0,93%

India

5,28%

5,53%

5,74%

25,95%

26,59%

27,25%

Hong Kong

0,51%

0,50%

0,50%

Thailand

0,90%

0,81%

0,88%

Singapore

0,47%

0,46%

0,46%

Malaysia

0,60%

0,60%

0,63%

Indonesia

1,87%

1,90%

1,94%

Philippines

0,59%

0,61%

0,63%

Kazakhstan

0,40%

0,38%

0,40%

Pakistan

0,76%

0,77%

0,78%

Vietnam

0,35%

0,36%

0,38%

Bangladesh

0,45%

0,46%

0,48%

Sri Lanka

0,18%

0,19%

0,19%

Azerbaijan

0,09%

0,09%

0,09%

Trinidad and Tobago

0,05%

0,05%

0,05%

Turkmenistan

0,05%

0,05%

0,05%

Bermuda

0,01%

0,01%

0,01%

Macau

0,10%

0,06%

0,08%

Mauritius

0,02%

0,02%

0,02%

Brunei

0,02%

0,02%

0,02%

Burma

0,19%

0,19%

0,21%

Bahamas

0,01%

0,01%

0,01%

Uzbekistan

0,12%

0,13%

0,14%

Cambodia

0,03%

0,04%

0,04%

Barbados

0,01%

0,01%

0,01%

Armenia

0,02%

0,02%

0,02%

Cayman Islands

0,00%

0,00%

0,00%

French Polynesia

0,01%

0,01%

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The Big Countries

14

0,01% â–ś

World Demand for Information Technology is on the Move - The BECH Index 2016

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Country

2014

2015

2016

Korea, North

0,02%

0,02%

0,02%

Nepal

0,05%

0,06%

0,06%

New Caledonia

0,01%

0,01%

0,01%

Niue

0,00%

0,00%

0,00%

Papua New Guinea

0,02%

0,01%

0,02%

Guam

0,00%

0,00%

0,00%

Fiji

0,01%

0,01%

0,01%

British Virgin Islands

0,00%

0,00%

0,00%

San Marino

0,00%

0,00%

0,00%

Laos

0,02%

0,02%

0,02%

Haiti

0,02%

0,02%

0,02%

Virgin Islands

0,00%

0,00%

0,00%

Suriname

0,01%

0,01%

0,01%

Kyrgyzstan

0,02%

0,02%

0,02%

Cape Verde

0,00%

0,00%

0,00%

Afghanistan

0,05%

0,05%

0,05%

Guyana

0,00%

0,00%

0,00%

Madagascar

0,03%

0,03%

0,03%

Tajikistan

0,02%

0,02%

0,02%

Northern Mariana Islands

0,00%

0,00%

0,00%

Antigua and Barbuda

0,00%

0,00%

0,00%

Aruba

0,00%

0,00%

0,00%

Seychelles

0,00%

0,00%

0,00%

Maldives

0,01%

0,01%

0,01%

Saint Lucia

0,00%

0,00%

0,00%

Bhutan

0,00%

0,00%

0,00%

Saint Pierre and Miquelon

0,00%

0,00%

0,00%

Saint Vincent and the Grenadines

0,00%

0,00%

0,00%

Nauru

0,00%

0,00%

0,00%

Saint Kitts and Nevis

0,00%

0,00%

0,00%

Turks and Caicos Islands

0,00%

0,00%

0,00%

Wallis and Futana

0,00%

0,00%

0,00%

Samoa

0,00%

0,00%

0,00%

Cook Islands

0,00%

0,00%

0,00%

Dominica

0,00%

0,00%

0,00%

American Samoa

0,00%

0,00%

0,00%

Montserrat

0,00%

0,00%

0,00%

15

â–ś

World Demand for Information Technology is on the Move - The BECH Index 2016

Country

2014

2015

2016

Anguilla

0,00%

0,00%

0,00%

Palau

0,00%

0,00%

0,00%

Vanuatu

0,00%

0,00%

0,00%

Micronesia, Federated States of

0,00%

0,00%

0,00%

Kiribati

0,00%

0,00%

0,00%

Solomon Islands

0,00%

0,00%

0,00%

Saint Helena

0,00%

0,00%

0,00%

Tonga

0,00%

0,00%

0,00%

Marshall Islands

0,00%

0,00%

0,00%

East Timor

0,00%

0,00%

0,00%

Comoros

0,00%

0,00%

0,00%

Sao Tome and Principe

0,00%

0,00%

0,00%

Tuvalu

0,00%

0,00%

0,00%

Curacao

0,00%

0,00%

0,00%

Mongolia

0,03%

0,03%

0,03%

Tokelau

0,00%

0,00%

0,00%

Saint Martin

0,00%

0,00%

0,00%

Sint Maarten

0,00%

0,00%

0,00%

Asia Pacific

8,18%

8,11%

8,38%

35,36%

36,36%

36,85%

www.tbkconsult.com

Asia Pacific Total

16

World Demand for Information Technology is on the Move - The BECH Index 2016

About the author Hans Peter Bech is an Amazon bestselling author. He is a frequent blogger on how to make information technology companies global market leaders and has written several books and numerous whitepapers on business development in the IT industry. Hans Peter also facilitates workshops for the TBK AcademyÂŽ and is an advisor for governments and companies. He holds a M.Sc. in macroeconomics and political science from the University of Copenhagen.

Hans Peter Bech

More about Hans Peter Bech

www.tbkconsult.com

Other publications by the author

17

TBK-WIPA-031