02 Apr, 2014

[Future Forum] Three solutions to save SW ecosystem

The government believes that Software (SW) industry’s problem stems from SW Ecosystem’s vicious circle. Many agree with that judgment.

SW Ecosystem’s vicious circle repeats the following process: Lack of qualified human resource and low market value recognition (service, subcontract-based market structure) →weakened corporate profit (undermined value, insufficient global market expansion) → low re-investment (Fragile SW basic technology) → qualified human resource avoiding IT industry (seen as 4Ds industry– dirty, difficult, dangerous and damaging).

Knowing that many experts are working on how to break out of this vicious circle, I would like to suggest three possible solutions, based on my 20 year-experience in the Korean SW market.

First solution to save SW ecosystem is to grant to the buyer (the ordering part) unlimited right of use only.
The vicious circle’s starting point is the service and subcontracting-based market structure, In other words, SW represents to the consumer not an ‘object of purchase’ but an object of free service.

License purchase provides the right of use, while customized development service allows buyer to secure the source code, copyright, the right of use, the right of adaptation- SW consumer comes to think that it is better to take advantage of the market structure (service delivery and subcontracting system) and a master-servant relationship than purchasing a quality software.

When the President Geun-Hye PARK was candidate, she said: “For SW industry revitalization, we have to buy the software and not the SW service”. In order to realize the plan, it is necessary to implement policies that accord to the buyers the unlimited right of use.

Second solution is to turn the actual contract with SW developer from Man/Month (Monthly contract) into Man/Hour (Hourly work contract). The best way to resolve the problem of ‘qualified human resource avoiding IT industry (seen as 4Ds industry)’ would be establishing a similar environment to the USA, where SW developers are highly appreciated. But it’s very difficult to change the situation given the situation.

However, providing the unlimited right of use to the ordering body and turning Man/Month system to Man/Hour will help relieve partly problems of night work, weekend working, overwork, subcontracting and SW service.

Man/Month contract system is understood by the SW buyer that ‘SW developer’s one month-time is purchased’ and misinterpreted as ‘SW developer is busy for the month and if needed, he can do overwork on the night and weekend’.

Our society experienced the compressed growth. Thus, monthly contract is often seen as related to labor, subcontracting and service. In the contrary, hourly contract recalls ‘lawyers, doctors and knowledge expert’. Therefore, hourly contract will help to change perception and treatment toward SW developers.

The third solution is setting clearly the statistics standard.

Recently Software Policy and Research Institute (SPRI) opened. One of the major role expected is establishing SW industry’s accurate statistics and figures.

The most pressing issues are SW sales revenue and IT budget standard. Enterprises and Public organizations should not resort to imprecise standard as today, but set up segmented and exact criteria, such as SW license, SW service, consulting, planning and designing in order to verify if revenue and budget are well executed.

In the USA, leading SW companies are already thoroughly applying standards to financial audit and stock market report and SW buyers are also using standards for budgeting.

For instance, companies deploying package software strategy could generate most income from SW service. Even if big corporate and public organizations’ IT budget increases, SW service income or budget increase only doesn’t indicate SW industry development. Without data and standards, it will be hard to evaluate the SW industry’s growth.

Clear standards establishment of SW sales and IT budgeting can lead to accurate evaluation of SW policies effects and problems. Also, by eradicating the problem of difficult understanding and relatively low credibility compared to SW advanced countries, it could raise investment.

Jaecheol OH, CEO, I-ON Communications,