Better Understanding the Role of
Software in the Information Economy:
A Preliminary Overview of Research, Policy
and Measurement Challenges
“Transforming Enterprise and Beyond:
Connecting Research and Policy in the Digital Economy”
Post Conference Workshop
National Science Foundation, 29 January 2003
Andrew W. Wyckoff and Nadim Ahmad
OECD, Paris France
1
ICT an important factor of Growth
during the 1990s

Jorgenson, Oliner & Sichel, vanArk,
Stiroh, Gordon...OECD

growing part of investment

growing contribution to output growth /
productivity
2
Recent ICT Investment: US
Contributions to % change in US private fixed investment
20
15
10
5
0
-5
S tructure s
Non-ICT e quipm e nt
Inform a tion proce s s ing e quipm e nt + s oftwa re
-10
95
-II
I
19
96
-I
19
96
-II
I
19
97
-I
19
97
-II
I
19
98
-I
19
98
-II
I
19
99
-I
19
99
-II
I
20
00
-I
20
00
-II
I
20
01
-I
20
01
-II
I
20
02
-I
20
02
-II
I
19
19
95
-I
-15
Source:
US Bureau of Economic Analysis (BEA), NIPA tables.
3
Recent Investment in Software
As a % of total private fixed investment
14
12
10
8
6
4
C o m p u te rs
2
S o ftwa re
Oth e r
0
1 9 9 2 -I
Source:
1 9 9 3 -I
1 9 9 4 -I
1 9 9 5 -I
1 9 9 6 -I
1 9 9 7 -I
1 9 9 8 -I
US Bureau of Economic Analysis (BEA), NIPA tables.
1 9 9 9 -I
2 0 0 0 -I
2 0 0 1 -I
2 0 0 2 -I
4
Recent ICT Investment: NLD
As a % of total private fixed investment
9
8
7
6
5
4
3
2
Com pute rs
1
S oftwa re
0
1995Q1
Source:
1996Q1
1997Q1
1998Q1
1999Q1
2000Q1
OECD Quarterly National Accounts (QNA) database.
2001Q1
2002Q1
5
Why the jump after 1995?

Myriad of explanations

software / protocol innovations tend to be
overlooked

need better resolution in general,
software as a case study
6
Policy Importance of Software

Use Policies
• Services
• ICT literacy

Supply Policies
• Competition
• Human capital
• Integrity
• S&T
7
Software as Investment in the
National Accounts
“Computer software that an enterprise
expects to use in production for more than
one year is treated as an intangible fixed
asset.” ¶ 10.92 and 10.93 of the 1993 edition of SNA
8
Measuring Software in the SNA
Pre-packaged / reproduced
 own account (in-house)
 customised (made-to-order)

9
Software investment % of GDP
Figure 1: SOFTWARE INVESTMENT
% of GDP
2.50
2.00
Ratio
1.50
1.00
0.50
99
Ja
pa
n
96
ai
n
ec
re
Sp
e9
8
97
SA
G
tr
A
us
U
98
/9
al
ia
en
ed
Sw
m
en
D
m
er
G
99
97
ar
k
95
an
y
98
rl
an
et
he
N
C
an
ad
a
ds
98
99
C
ze
ch
It
R
al
y
ep
98
8
e9
nc
Fr
a
U
K
99
0.00
Country
Source: OECD/Eurostat Questionnaire (Germany from OECD Input-Output database 2002)
10
Practical and Conceptual Problems

Supply =/ Demand
11
Practical and Conceptual Problems

Differentiating between:
– intermediate expenditures (- 1 year)
and
– capital expenditures (+ 1 year).
12
Investment to Expenditure Ratios
Figure 2 : INVESTMENT RATIOS
Software Investment as a proportion of total business and government expenditure on computer services
(excluding intra computer industry sales)
1.0
0.9
0.8
0.7
0.5
0.4
0.3
0.2
0.1
Ja
p
an
99
96
n
Sp
ai
G
re
e
ce
98
97
U
SA
9
us
tr
A
Sw
ed
al
ia
en
98
/
99
97
m
D
en
G
er
m
an
y
ar
k
95
8
ds
9
an
et
he
rl
N
C
an
ad
a
98
99
ch
R
ep
98
C
ze
It
al
y
e9
8
an
c
Fr
K
99
0.0
U
Ratio
0.6
Country
Source: OECD/Eurostat Questionnaire, (Germany from OECD IO database)
13
Practical and Conceptual Problems

Measuring Imports of an Intangible
14
Royalties Paid on Imports
as a % of Imports of Software
60
50
40
30
20
Denmark
Greece
US
Australia
Canada
Sweden
Japan
Italy
0
Finland
10
15
Practical and Conceptual Problems

Measuring Own-Account (in-house)
16
Practical and Conceptual Problems

Accounting for changes (quality &
price) over time
17
Software Price Indices
Figure 3: Investment in software. Price indices in recent years. 1995=100
130
SWE
GRC
120
FIN
SPA
Deflator
110
ITA
NDL*
FRA
100
USA *
CAN *
90
DEN
AUS
80
70
1992
1993
1994
1995
1996
1997
1998
1999
2000
Years
Source: OECD/Eurostat Questionnaire
18
Practical 1st Steps

Disaggregate ICT

Need to better differentiate software via
improved investment surveys

Need to get to business accounting
systems & standards
19
Longer-term Conceptual Issues
improved typology
 how to value investments that you paid
for but don’t own
 how to value capital services from an
investment you did not pay for
 how to capture changes in the quality of
a product over time where the objective
measure of utility is difficult to ascertain

20