matthew@ittimes.co.kr
Korea is well-known for its information technology hardware expertise. Memory chips, semiconductors, and display panels manufactured in the country are known to be the best in the world. Korea is also known to have very high levels of mobile handset use and broadband internet penetration, both indices of a tech-savvy country. The country has sometimes been called a technological republic.
However, one area of the computer revolution that Korea does not dominate is software. Korean software is nothing to write home about. Many people wonder why. On business directories and indexes online, there are very few Korean software companies listed.
Mr. Cho Si-haeng works for one of the most successful and well-known software companies in Korea, AhnLab. AhnLab makes security software for end users and corporate clients in Korea. He works as the External Relations Executive, and commented on the phenomenon by saying: "The market prefers hardware solutions to software." He went on to say that while hardware manufacturers sell products above costs and make a profit, it is a struggle for software developers to sell their products and make a profit. "Companies are finding it difficult to meet sales targets by only selling software," he continued.
One reason for this may be Korea's rapid growth and industrialization. Korea's economy has historically largely been based on the manufacturing industry, and so computer hardware manufacturing is a logical next step. The Korean government has been heavily involved in such rapid growth and industrialization, and they have also focused their efforts toward tangible hardware manufacturing.
Mr. Cho brought up another point as well, by saying: "In addition, our society doesn't yet understand the value of knowledge and information industries like software, resulting in a distorted market, with people refusing to pay fair prices for software because it isn't tangible."
This misunderstanding of the intangible value of software has created a poor market, but it is possible to change this. If public institutions in Korea would support the software industry by buying local solutions and using them, it would create a much larger market. Mr. Cho drove this point home succinctly: "While we do need support for development, the important thing is that the software is actually used."
But not is all bad news for the Korean software industry, because at the end of 2006 the Korean government shifted its focus to developing and expanding the software industry.
There are some who say that the software industry is the solution to the next growth engine of the Korean economy, if the market changes. Cho is one of them. He said: "Korea is a leader in new IT technology and environments, and we are creative and open to new technologies. If we concentrate on developing the software industry, I think it can become a new growth engine for the Korean economy in a few years."
But this cannot happen overnight. Software in Korea is also freely pirated, with even corporate clients using un-paid for free versions of many popular software titles. "The legal system for promoting the software industry should be improved," said Cho, "and the industry's value needs to be better understood." He also thinks that incentives for technological innovation in software design and enhanced competitiveness need to be offered by interested companies.
There are a few important differences that Korea, a hardware dependent economy, should take into consideration when contemplating its future. The software industry has greater long-term possibilities than the hardware industry, and can be more effective in penetrating the global market due to its ease of transportation and low overhead costs.
Technology is the key to success in software, according to Cho. The companies that have managed to succeed in the domestic software market all had strong foundations in technology. Marketing and sales should merely support this technical basis. In the Korean software industry however, many companies rely too much on marketing and sales. If a certain type of product becomes popular, these companies haphazardly develop similar products, bring them to the market, and engage in cutthroat competition.
This kind of behavior disturbs the market. Technology is the most important thing in software, and to improve technology we need continued investment in research personnel. In addition, because markets do not exist from the beginning, the government should provide some support for new markets.
We also need to ensure that companies receive adequate prices for products, prohibit illegal copying, and improve public awareness of software. We need a society-wide shift in awareness and efforts from each sector of society.
