Cover Story / Software Industry - KOSA For Korea to head into the era of national income $20,000~$30,000 that it aspires to achieve within the next decade, software has to be nurtured as a priority. In terms of world IT market scale of $1.2 trillion, software accounts for over 62% with a market of roughly $750 billion, whereas hardware is no more than 38%, with a market scale of $450 billion. Korea has cornered about 30% of the world hardware market thanks to the superiority of its semiconductors, LCDs, digital TVs and other IT products, whereas its software global market share is no more than a mere 2.6%. Executive Deputy Chairman Lee Jang-hun, KOSA (Korea Software Industry Association: www.s-250w.or.kr) pointed out that software is too stagnated for Korea despite software's relatively greater importance. He noted that Korea's circumstances are optimal for nurturing software as Korea's reality is that it has virtually no natural resources and brainpower is thus its main resource. Nevertheless, the government has been slow in nurturing software, Mr. Lee remarked on the indifference of the government. The Executive Deputy Chairman pointed out that that software was not even included in the IT839 Strategy during the two years tenure of the former Minister of Information & Communication, Chin Dae-je. Lee insisted that a software headquarters has to be forged in a revamp of MIC's organization along with other Informatization Planning Office Headquarters, Korea Post Headquarters and so on, adding that there was not even any bureau in charge of software development in the meanwhile. Continuous follow-up Mr. Lee who assessed that the CeBIT 2006 Hannover Exhibition was a good opportunity for Korea's SW firms to have gained great results, explains that 20 firms in the SW Korean pavilion accomplished business performances to conclude contracts of $8 million plus business promises amounting to $200 million during its exhibition period. In addition to this, it is said that Korean SW firms concluded 10 MOUs and 4 NDAs. Lee said that since continuous business discussions and on-the-spot customizing are necessary after MOU conclusion in the case of SW export, at the minimum one year's negotiation period is needed, adding that particularly on-the-spot MOU conclusion is important since large-scale export can result from such negotiations. The SW industry, for which small and medium enterprises (SMEs) account for the great majority, is relatively fragile in terms of funding as well as human resources in comparison with other industry groups. In particular, he pointed out that information collection for exports, construction of overseas marketing human networks as well as active support for its utilization is urgent. In this regard, he stressed that KOSA is planning to continuously follow-up its successes, since software export needs continuous business negotiations, and on-the-spot customizing after MOU agreement. As part of such support activities, KOSA plans to kick off its export support center in the course of April, this year. Still not too late to nurture software Explaining that Korea's software industry is too fragile and had missed opportunities, Lee emphasized that even from now on, the government and associated industry business circles have to actively promote it, referring to the fact that software is a high value-added industry and Oracle, MS & IBM make great profits by selling software. He reiterated his view that it is still not too late to achieve the era of national income of $20,000~$30,000 within the envisaged timescale, providing that the government and associated industry business circles are united in nurturing software. Some of the challenges facing Korea's software industry, according to Lee, included complications between larger companies and smaller companies, encouragement of home software production, the betterment of a contract price by the lowest price, and nurturing superior SW manpower. Referring to the conflicts between larger companies and smaller companies, he elaborated, "Software business circles are the most difficult in terms of complications between larger companies and smaller companies in that smaller companies or larger companies all complain about each other." In that regard, the Executive Deputy Chairman stressed that it is desirable to restore confidence between larger companies and smaller companies and to seek coexistence methods henceforth. To the contrary, he assessed positively in regard to the fact that the SW industry is gradually growing and is becoming better as for instance, illegal SW use rate lowers gradually. Urgent globalization of SW firms needed Given these realities, Lee said that software can't develop, adding that he urges more corporations to use home software products rather than foreign-made software, bearing in mind that the domestic package software does not lag behind in terms of global technology. Second, he points out that selling SW at a fixed price is the biggest problem for the SW industry, along with nurturing SW excellent manpower. He added that in the case of China, whose software industry is in a growth phase, always the best elites are doing software and IT graduates receive double the income of other science and engineering graduates, allowing the income gap to widen with a 10-fold income difference after 10 years. Thirdly, he spoke fervently, saying that Korea's software industry is too fragile and in that respect, the government needs to nurture superior SW firms with technology power and must promote globalization. In actual fact, the present situation regarding Korea's SW is so serious that there are no domestic package SW specialty firms whose revenue exceeds 100 billion won (approx. $102 million).