What are the best countries for Net business?

A study of 60 countries from across the world says the US is the nation most ready to benefit from the e-commerce revolution. But watch out for Scandinavia, Australia and Singapore.

In an in-depth study of 60 countries from across the world, the US has emerged as the nation most ready to benefit from the e-commerce revolution.

The Global e-Readiness report, conducted by The Economist Intelligence Unit and its Pyramid Research subsidiary, assesses 60 countries' "e-readiness" using a mix of six key categories: Internet connectivity, business environment, e-commerce adoption, regulations and laws, supporting e-services, and the social and cultural infrastructure.

There are some surprises. Japan, despite its high-tech economy, languishes in 18th place, categorized as only a "contender" rather than an e-commerce leader. Australia outstripped all the European countries to rank as the second most e-ready country behind the US. Meanwhile, the world's other major global powers, Russia and China, are way off the leadership scale in 42nd and 49th places respectively.

The study, released last month, is designed to give both national policy makers and information technology (IT) executives of multinational firms insight into the true market conditions for new Net services around the world.

"What's useful about these readiness assessments is that they let a country look at itself and say, 'You know, if we really do want to seize this opportunity, we are going to have to make some changes,' " says Alan P. Larson, US undersecretary of state for economic, business and agricultural affairs.

For multinational companies, the benefits of entering the most e-ready markets can be more immediate. The technological experience that exists in a target market is only part of the equation, experts say: Local business and social conditions often make the most difference to strategic success.

"The first thing multinationals must look at is where the international e-focus of their strategies should be. These results are not just about technology, and are not always consistent with other analyses," says Denis McCauley, Pyramid's director of Europe, Middle East and Africa research. "Multinationals may well be the driving force behind the new global economy, but they are still subject to local regulatory issues."

Not everyone agrees with the EIU's findings that the US has the pre-eminent position in the global e-sector. IDC, a research firm based in Framingham, Mass., worked with publisher World Times on its own 2001 worldwide e-readiness rankings, which showed the US coming in at fourth place in the global list--behind a Scandinavian trinity of Sweden, Norway and Finland.

IDC uses a set of key criteria for its assessments with more of a technology bent. Its rankings are based on four infrastructure categories: computer, information, Internet and social factors. The US falls foul on most counts. It ranks only 10th in the Internet category, well behind the leaders Sweden, Singapore and Australia. It manages only ninth place in information infrastructure, behind Taiwan and the Netherlands, and it's back in 17th place in the social category, well behind Denmark, Norway, Hong Kong and Japan. Where the US stands out is in computer infrastructure, though Australia and Singapore are hot on its heels.

"Many people in the United States still don't have Internet access, and this is dragging down the country's total rating," says John Gantz, chief research officer at IDC. "It adds to its modest score in the information sector, and relatively low score in the social sector."

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While the exact positions of various countries may differ, the general conclusions of both the EIU and IDC reports come through clearly. North America, Northern European countries, Australia and Singapore are becoming the true leaders of the global e-commerce economy, and they are potentially the most valuable e-services markets.

Economic size and technological traditions are not the critical issue. Japan's technological and economic progress is legion, yet it suffers from some underlying obstacles, Pyramid's McCauley reckons. "Japan has some serious problems with connectivity, especially delivering broadband services and global content," he says. "And there are serious impediments to allowing new competitors to get involved in developing these broadband services for the future."

Germany also finds itself with an uphill climb. Although it is Europe's largest economy and also its largest IT market, Germany ranks only 12th on the EIU e-readiness list. The country's business environment is not as conducive to Internet-based commercial opportunities as its northern counterparts, the study's authors say.

These shortfalls in potential may be partly the result of the dominance of the English language among the EIU rankings. Each of the top four places is an English-speaking country. "It reinforces the view that the language of the global Internet is English," McCauley says. "Look at any Web site. If there are two languages, one of them is English."

The EIU report has three other key conclusions: Liberal national policies on e-development and competition are paramount, especially in telecommunications. Business agility trumps economic size and wealth. And diversity is the global rule. Furthermore, the EIU report found that neighboring countries may have very different positions on the globally--for example, Australia is second but New Zealand is No. 20--which underscores the need for highly targeted corporate e-commerce strategies in many regions.

Although the Internet may eventually produce the Holy Grail of a truly global economy, the world isn't there yet, McCauley says. "The Internet is indeed a global phenomenon," he says, "but portals still exist within national boundaries, and it would be wrong for any multinational corporation to ignore the continuing importance of local conditions."

Arguably, predicting which country will ultimately win the global battle for e-commerce supremacy may be an impossible--or pointless--task. But global e-readiness rankings can at least help point the way for corporate executives keen on using the Internet to expand into new markets. The challenge now is to focus international e-commerce investments where they will make the most difference as the world struggles to get its online act together.