by Bernard Golden

Does the world spend 6% of GDP on IT?

Oct 11, 20072 mins
Enterprise Applications

I noted a story that Gartner Group reported that worldwide IT spending is on a pace to reach $3.1 trillion in 2007, with a forecast of $3.3 trillion next year. Even more interesting is that IT spend in developing countries is rapidly rising, with one-third of all IT spending (i.e., $1 trillion) being done by nations other than North America, Western Europe, and Japan.

Wow! That sounds impressive, eh? But then I got to thinking about it. We live in an IT-centric world, no doubt. The benefits of IT are spreading everywhere, without  question. But $3 trillion? That’s a lot of dollars — or yuan, pesos, reals, etc.

In fact, the more I thought about it, the more the numbers seemed a bit … high. So I decided to do some poking around. The World Bank reports total global GDP for 2006 as $48 trillion, with individual countries ranging from the US at $13.2 trillion all the way down to Kiribati at $50 million (I’m ashamed to say that I had never heard of Kiribati before, although I had heard of by the name its pre-independence name, the Gilbert Islands).

If you round Gartner’s number to $3 trillion, it represents 6.25% of total global GDP. If you look at the US numbers, you can just about see 6.25% of GDP being devoted to IT spend of all types — software, hardware, services, and internal IT spend; in fact, it might be a little higher than 6.25% all in. The US, after all, is by far the most IT-intensive economy in the world.

But I have a hard time seeing the rest of the world at 6.25%. And, if you look at the bottom of the World Bank numbers, you can see its summaries of GDP. The Low and Middle Income countries of the world have, in total, around $11.6 trillion GDP. For them to spend $1 trillion, they would have to devote 8.6% of GDP to IT. I know that these economies are rapidly developing, and many of them are focusing on IT (particularly the BRIC countries), but … 8.6%? That would be 1 out of 12 dollars out of their entire economies devoted to IT. I think the 8.6% is particularly implausible given the rampant software piracy and use of open source characteristic of these nations.

I’m not saying Gartner Group is wrong, but I’d sure like to see their calculations to understand how they concluded the world is spending $3 trillion on IT, because that seems way high to me.