Europe closes the gap to challenge US as top Internet economy

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The United States has the world’s most advanced digital economy, but Europe is starting to close the gap as the Internet creates new jobs, according to a study released by Andersen Consulting.

The study projects that by 2002, the Internet economy will employ more than 10 million people across a variety of industries in the United States, the five largest European economies and Ireland.

The report examines the impact of the Internet on the economies of the United States, France, Germany, Ireland, Italy, Spain and the UK. Brazil, which has the largest Internet economy in Latin America and attracts significant US and European investment, was also included in the research.

Viewed as a line of business itself, the Internet will have directly created 5.8 million jobs in the United States and three million jobs in the six European countries surveyed by 2002. These are defined as jobs created by Internet – pure play companies, portals, software consultants, web designers, and telecoms and Internet service providers offering access.

When Internet-related jobs in other industries are factored into the forecasts, however, the number of jobs created in the US and European countries jumps from 8.8 million to more than 10 million.

“The good news is that the Internet is creating more jobs than it is destroying, even when you look at traditional business models,” said Steve Freeman, partner, Andersen Consulting, who advises communications companies on e-commerce. “This peripheral job creation is likely to be significant in the short term as established businesses invest in building up new Internet operations alongside their existing businesses.”

The report also indicates that growth of the Internet economy is accelerating in Europe, which has begun to narrow the gap that keeps it behind the United States.

In 1998, the Internet economy employed four times as many people in the US as in Germany, France, Ireland Italy, Spain and UK (2.1 million Internet economy employees in the US compared to 517,000). By 2002, this ratio will be lower than two-to-one, the report projects. (5.8 million Internet economy employees in the US compared to 3 million in the European countries surveyed.)

In 1999, the Internet economies in the European countries studied generated $132 billion in revenues – or roughly one quarter the $507 billion in Internet economy revenues generated in the US, the study says. But by 2002, the Internet sector will be worth $597 billion in the European countries – or roughly one half the $1.23 trillion forecast for the U.S., according to the study.

Areas of job creation result from greater geographic reach, the development of new marketing channels, broader product and services lines, expanded customer service through call centers and customer service agents, and increased marketing and advertising.

The Internet is expanding markets geographically, particularly for banks and retailers whose products can be delivered online or by mail.

But business leaders on both sides of the Atlantic see the lack of suitably skilled workers as the single greatest constraint on future economic growth.
The overwhelming majority of those interviewed felt that demand for employees with Internet skills and experience easily outstrips supply. Many pointed to the lack of computers in schools and the lack of government-financed or government-led initiatives to change the situation.

The US certainly leads the way in terms both of courses offered at university level and the numbers of students enrolled in them, according to the report. But educational institutions at every level are still not doing enough to arm the next generation of workers with the appropriate skills.

“While the growth of the Internet has played a major role in creating the current skills shortage, it is also becoming part of the solution at many companies,” said Freeman. “Skills needed for Internet-related jobs often lend themselves to new forms of training that are accessible via the Internet and can be rolled out quickly to large numbers of employees across geographies.”

Andersen Consulting recently designed a distance learning program to train more than 20,000 employees of British Telecommunications. BT used the program to train its UK sales force, as well as professionals throughout the UK, Continental Europe, Asia and the United States.

Employees who accessed training programs from their desktops via the Internet, became Internet and eCommerce savvy within six months, an impossibility using traditional training techniques.

The report is based on analysis of publicly available economic data, surveys of companies, government agencies and opinion makers, as well as interviews with 160 CEOs, senior executives, government officials and industry experts. It was prepared by Spectrum Strategy Consultants for Andersen Consulting.

Andersen Consulting

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