Li / Moitra China and India

Opportunities and Threats for the Global Software Industry
1. Auflage 2007
ISBN: 978-1-78063-234-6
Verlag: Elsevier Science & Techn.
Format: EPUB
Kopierschutz: Adobe DRM (»Systemvoraussetzungen)

E-Book, Englisch, 188 Seiten

Reihe: Chandos Asian Studies Series

In the last 30 years, the world's software industry has been developing rapidly and the landscape has also been changing dramatically. It is no longer predominately controlled by the developed countries such as the United States and the United Kingdom. This book examines the competitive and strategic issues faced by China and India through a political, economic, social, technological, environmental and legal analysis. The book reviews their competitive strengths and weaknesses and the potential risks for organisations looking to expand or invest resources in these two countries. The book also looks at the market strategies of both countries in a global context and identifies the critical success factors that have enabled China and India to gain competitive advantage in their respective markets. Importantly, the book examines the threats that these two countries pose to other countries looking to expand their presence in the global software markets. This book helps practitioners and business managers who are responsible for a firm's strategy or investment resources to grasp and understand the complexities and challenges faced by those organisations looking to expand their operations in these countries. - Written from a highly knowledgeable and well-respected practitioner in the field of global strategy and software engineering - Draws on the authors wide-ranging practical experience of working with some of the worlds leading global service providers on major strategy development and service provision - Provides practical guidance to real-world problems in the global software industry

John McManus, PhD is based at the University of Lincoln (UK).

Autoren/Hrsg.

Li, Mingzhi

Moitra, Deependra

Leseproben

1 The global software industry
Publisher Summary
This chapter explores the present scenario of the global software industry. The global software industry began to grow significantly in the 1970s, largely due to the efforts of IBM. As the software industry grew in economic importance, the industry became the subject of several investigations in the 1980s; all of them were motivated by anxiety over individual competitiveness. The U.S. dominance of the software industry is attributed to its early advantages in research and development, and the investment made in emerging technologies. The rise of China and India as potential high-technology software competitors and important participants in the world’s software industry has come as a big surprise to many foreign observers. China’s accession to the World Trade Organization (WTO) provides an important challenge for India’s global competitiveness. India’s strategy should be to avail itself of the opportunities that are offered by China’s domestic market. This would require a long-term economic investment strategy. The mechanism for Indian firms would be to partner Chinese firms in their domestic markets, particularly in software, wherein the Indian firms have already established a comparative advantage. Such a partnership would help the Indian firms to draw lessons from their Chinese counterparts and improve upon their capabilities. Therefore, besides attracting inward Foreign Direct Investment (FDI) for the development of domestic market capabilities, India would need to encourage further outward FDI as well, in order to compete more effectively in the global market. Introduction
For the last three decades, the United States of America (US) has maintained a dominant position within the global software industry at all levels, however, the increasing attractiveness and importance of the global software industry to developing economies such as China and India cannot be denied. Irrespective of country of origin, all firms have to start their business somewhere and it takes only a single company, as Microsoft proved, to jumpstart an entire industry. Looking back in time, the global software industry began to grow significantly in the 1970s largely due to the efforts of IBM. As the software industry grew in economic importance, the industry became the subject of several investigations in the 1980s, all of them motivated by anxiety over individual competitiveness. For example, the (US) Department of Commerce report A Competitive Assessment of the United States Software Industry in 1984 acknowledged the supremacy of the US in the international software industry and made a number of recommendations to ensure that the nation maintained its position. The recommendations primarily concerned improved intellectual property legislation, efforts to combat restrictive policy, and the elimination of tariff barriers against US software exports. No recommendations were made regarding the international competitiveness of the industry. The US dominance of the software industry is attributed to its early advantages in research and development, and the investment made in emerging technologies. One of the hidden lessons from the many studies on international business is that investment does not happen by accident. Investment activities are organised and managed by firms and often by multinational firms. The multinational firm exists because it is able to carry out trade and investment at lower cost than its competitors and because it is able to exploit better the differential capabilities of nations (see Table 1.1). Table 1.1 Top 10 multinational software firms by revenue per employee Rank 2005 Company Software services revenue per employee ($) 368 Innovative Software Technologies 2,883,333 15 SYNNEX Corporation 1,985,796 129 iBasis Incorporated 1,220,833 29 Google Incorporated 1,054,663 23 CSK Corporation 751,049 109 ePlus 644,444 17 QUALCOMM Incorporated 642,105 2 Microsoft 595,050 227 LookSmart Limited 534,722 37 Adobe Systems Incorporated 530,426 Source: Softwaremag.com, The Software 500, 2005. A perspective on growth
In broad terms three market classifications may be noted within the global software industry. These are: suppliers of professional services (e.g. EDS and Fujitsu), software products (e.g. Microsoft, Oracle and Sybase), and integrated systems (e.g. IBM and SAP). This broad structure has profoundly affected the shape of the software industry over the last 20 years. In terms of software sales Microsoft is the leading player. The information technology sector directly employs nine million people in high-wage, skilled jobs in more than 4,000 firms around the world. It also supports 21 million more professional information technology workers in a range of industries such as consultancy and systems integration. The information technology sector contributes over a trillion dollars a year to the global economy that includes: $420 billion from the information technology services sector, $330 billion from the hardware sector, $180 billion from packaged software sector1 and a further $80 billion in software security and peripheral services (see Figure 1.1).
Figure 1.1 Global ICT sectors This rapid growth has created problems for the industry. The industry remains chronically short of skilled manpower. In Europe alone, it is estimated that the industry is short of some 500,000 skilled workers. Japan and the US are also severely short of computer service personnel. This shortage continues to provide good opportunities for countries to take up this slack and provide skilled people to fill the gap. The international spread of the industry has not only resulted in the capturing of new markets, but also in providing opportunities to draw upon untapped pools of skilled workers. Although ninety per cent of the world’s exports of software are from the US and Europe, evidence would also suggest that outside the US, UK, and Japan, the new and emerging countries within the software industry are China, India, and to a lesser extent Singapore and Malaysia1,2. The emerging presence of China and India
The rise of both China and India as potential high-technology software competitors and important participants in the world’s software industry has seemingly come as a big surprise to many foreign observers. The surprise is often accompanied either by overestimations or underestimations of the actual capabilities of these countries, rather like foreign reactions to the industrial success of Japan in the 1980s. While there are many important distinctions to be made between the Indian and Chinese cases, they are similar in that the development of software and technological capabilities in both countries has long been a goal of political, administrative, and industrial elites, and both countries have records of policy intent, planning, and making resource commitments for meeting that goal. This book examines some of their competitive strengths and weaknesses and the future market challenges faced by China and India in the next decade. Although figures vary, these emerging markets currently account for around six per cent of global export markets. While ‘lower cost’ is the most commonly cited export reason, intense global competition in an environment of slower growth and low inflation demands constant vigilance over costs. Due to the low costs and high quality, using offshore resources in selected countries appears to have given the US an economic advantage. Beyond the cost incentive, global sourcing provides several other practical benefits, including the ability of multinational organisations to efficiently stage 24×7 operations, the opportunity to customise products and services to meet local needs, and the means of geographically deploying workers and facilities to succeed in globally dispersed, highly competitive markets. A key driver in the US pursuit of foreign direct investment is cost savings; for example, Global Insight predicts that total savings from the use of offshoring are estimated to grow from $6.7 billion (this represents an assumed 40 per cent saving against what would have been spent if domestic resources had been used instead of offshore resource) to $20.9 billion between 2003 and 2008. In firms with annual turnovers in excess of $100 million dollars, the decision to use internal or external resources is determined by a mixture of both the hard dollar (quantitative) and the soft dollar (qualitative) costs.3 Key reasons for perusing such arrangements include:  the ability to leverage value from its IT operations and add dollars to the bottom line;  the ability to gain access to technology, skills, and knowledge not...