Size And Structure Of The Information And Communication Technologies Sector In Spain

The development and inclusion of new technologies in all economic activities is an essential part of the value creation process and entails a significant shift in production methods, organization, and other company activities. The information and communication technologies (ICT) sector is a key part of a country's economy, and studying it should help assess the economic changes brought about by adopting these new technologies, as well as their impact on economic activities as a whole.Thus, the goal of this study was to research the evolutionary trends characterizing the ICT sector, to assess their importance, and to measure the real weight of their contribution to knowledge and the creation of wealth in the Spanish economy.This study focuses especially on the status of innovation in the ICT sector in terms of its structure and employment, as well as on the trade balance and the weight of the sector in the GDP.Innovation in ICTsThe behavior of innovation in the ICT sector during the period from 1995 to 2004 dovetailed with investment in R&D in Spain as a whole. In 1995, R&D expenditures only accounted for 0.81% of the GDP. Although this had risen to 1.1% by 2004, it still lagged far behind the EU average, which was 2%. The figures for innovation in the Spanish ICT sector were somewhat similar, at 21% of the total Spanish R&D expenditures and 0.12% of the GDP. Thus, this investment was weaker than the investment in ICT in the other OECD countries, especially the ones on the cutting edge, such as Finland (64.3 and 1.27%, respectively) and South Korea (55.1 and 0.98% respectively).However, there was a noteworthy exception: the efforts made in the ICT services sub-sector, which during this same period experienced a high growth rate, only exceeded by its counterpart sector in Ireland. The good results in this sector mainly came from the telecommunications services segment, in which operators such as Telefónica invested heavily in R&D. On the other extreme was the Spanish ICT manufacturing sector, which in 2003 only devoted around 0.047% of the GDP to R&D, while the average for this sector in the EU as a whole was 0.38%. And what was worse, from 1995 to 2003 the growth in R&D in this subsector was negative.Structure of the companiesThe 16,924 companies registered in 1999 rose to 36,149 in 2005. This growth was due mainly to the proliferation of small companies, many of them just one person. Fifty-six percent of the total number of companies was freelance professionals with no employees, and the remaining 38% had between one and ten employees. This phenomenon predominated mainly in the computing sub-sector, which encompassed the largest number of ICT companies. Once again, the exception was the ICT services sub-sector, where there were a relatively small number of operators, mainly due to the existence of significant hurdles to entering the market.Employment in ICTsThe composition of the ICT workforce underwent a significant shift, especially due to the increasing demand for qualified human capital. Specifically, in the ICT manufacturing sub-sector, the demand for professionals with higher education rose from 3.9% in 1992 to 8.73% in 2002. In the ICT services sub-sector, this proportion was even higher, shifting from 6.51% to 14.64%. Meanwhile, the hiring of unskilled employees fell in both sub-sectors.During this period, the majority of jobs in the computing services segment were held by freelancers; on the other extreme, 90% of employment in the telecommunications services segment was concentrated in 3% of the companies, mainly large operators.The real salaries earned by Spanish ICT professionals steadily rose after 1998, shifting from an average of 25,543€ per year to 29,900€ in 2003. This rise can mainly be explained by the salary trends in the telecommunications segment, where the averages were 30,370 and 43,300€, respectively, the highest real salaries in the entire ICT sector. However, professionals in the computing sub-sector earned 20,450 and 22,400€, respectively.Deficits in the balance of paymentsWith regard to information technologies, with the exception of telecommunications (IT), Spain gave the impression of being a country that heavily imported goods and services, leading to a negative trade balance in the IT sector. The Spanish goods and services available were aimed more at the domestic than the external market, with exports accounting for only a small part of total turnover in the IT market. This phenomenon became more pronounced from 2001 to 2004, as Spanish ICT exports fell 40%, driven mainly by weakness in the external demand for hardware, which plunged an astonishing 60%.This phenomenon was aggravated in recent years by rising competition from countries with lower costs and better technological performance. Eastern European countries and China were capturing a strong share of offshore computer assembly, an activity performed by many companies in the Spanish manufacturing sector.ICT's contribution to economic developmentEven when added to production in the telecommunications sector (ICT), the production of goods and services in the information technologies sector still accounted for a small percentage of the Spanish economy as a whole, namely 6.4%. Nonetheless, this figure was on the rise, with a 62% increase between 1995 and 2003, mainly coming from ICT services, most notably telecommunications. Telecommunications' share in the Spanish economy was 4.38%, while computing services rose to 1.31%, and manufacturing was a mere 0.72%.By studying these data, it can be seen that, although the importance of the Spanish ICT sector was lower than the average of other OECD countries, its growth in this period was more dynamic than in the other sectors of the Spanish economy, mainly due to the solid performance of telecommunications services. This study also reveals that, to increase Spanish companies' competitiveness and converge with the other OECD countries, innovation efforts must be encouraged, especially in the ICT manufacturing sector, which was competitively the weakest.The document is organized as follows: (1) Introduction; (2) the main concepts and definitions in the ICT sector and sources of information used; (3) the status of innovation in the ICT sector in Spain; (4) an analysis of the structure of companies and employment levels and compensation; (5) a study of the domestic and external market; (6) the weight of the sector within the Spanish economy; and (7) conclusions.