By John Power
Korea may be known as an IT powerhouse, but its place in the global software industry remains decidedly modest. Korean software took up less than 2 percent of the global market last year. Even in the domestic market, more than 80 percent of software originates from abroad. In the view of the government, the monopolization of the market by chaebol affiliates, crowding out smaller players, is one of the main reasons for the relatively weak position of the local industry.
“We do not have a very healthy ecosystem in the domestic market,” Kwon Hyouk-woo, senior deputy director of the software division of the Ministry of Knowledge Economy, told Voice. “We do need a very healthy and clean ecosystem where both large and small companies could exist together, but I think in Korea we do not have that, because (of) system integration affiliates of large conglomerates, such as Samsung SDS, LG CNS and SK C&C.”
To address this, the National Assembly in May amended the Software Industry Promotion Act to disqualify large affiliates from procuring government contracts. The change will come into effect in January. The government also initiated the three-year World Best Software project in 2010, committing 160 billion won ($147 million) to supporting local businesses.
“We have changed the law so those big companies like Samsung SDS, LG CNS and SK C&C will not be allowed to participate in most state-initiated projects on the establishment of infrastructure and software,” said Kwon, adding that embedded software, such as in cars, is among the most promising areas for Korea in the ministry’s opinion.
But not everyone in the field is on board with the revision.
Kim Jin-hyung is a professor at the department of computer science at Korea Advanced Institute of Science and Technology. He was behind the establishment of AppCenter Supporters, a KAIST initiative to support software start-ups. The initiative, which receives support from NHN and the ministries of culture and knowledge economy, provides four incubation spaces for prospective entrepreneurs for three-month periods at a time.
Kim said that one of the biggest problems is the low pay and status of Korean software developers. In this context, he said, the revision makes little sense, as small start-ups are currently failing to attract graduates for employment.
“Most of the youngsters want to be paid well and want to work in big industry,” said Kim. “Samsung Electronics needs many engineers. They hire almost all the good engineers. So why would an engineer not want to go to Samsung Electronics, (but) go to a small company working for the government? It makes no sense.”
Compounding the pay issue is the way the government assesses developers’ work experience, added Kim. If a programmer’s company goes under, his experience is seen to die with it, he said.
“When you register with the government, a developer may lose (the value of) some experience because the company he used to work for is bankrupt … So, he cannot get enough pay,” said Kim.
Kim suggested more “subtle” government policies to support struggling start-ups than last summer’s law revision, such as widening the period of the year when government contracts are given out. Currently, the government only assigns projects in the second half of the year due to the way the state budget is handled, a situation Kim described as “ridiculous.”
“(In) the first part of the year, there is no project at all for the company … So they don’t hire, they just hire a developer as a freelancer, a contract for a short period. So there is no way to get trained. They have no chance to get experience in the same area.”
Kim also indentified software piracy, including by government ministries; a work environment in companies such as Samsung Electronics that discourages the exchange of ideas and creativity; and ministry officials’ bias toward grand-scale projects as impediments to the industry.
Other experts see a problem of education and focus. Lee Jae-jin, a professor at the school of computer science and engineering at Seoul National University, said that the industry has too often been regarded as labor intensive rather than creative. At the same time, he said, the fundamentals of good programming have been ignored in favor of buzzwords such as “fusion technology.”
“We need to educate more high-level architects, not just people for coding,” said Lee. “Most government offices, most high-level offices think software is a labor-intensive industry. But, actually, it’s not. We need to change the view of how to see the Korean software industry.
“First we need to focus on the classical items and we need to do well in those classical areas and then we will move on to those fusion items naturally.”
There are also too few small companies producing new technology compared to Japan, Taiwan and the U.S., according to Lee.
“They just rely on the government funding, instead of focusing on developing technology or selling their product. I think 70 percent of those small companies rely on government funding.”
It is not just the government or industry that needs to rethink its attitude to software, but the public as well, according to some observers.
“The public is equally oblivious to the key role that software plays in the modern age and made little investment,” said Chung In-jeong, a professor at the department of computer and information science at Korea University.
“Most people prefer to download pirated versions of software instead of buying them. This leads to a low volume of sales, and software developers have little incentive to come up with new products when they make so little money.
“The public, for its part, should recognize that software is just as valuable as other tangible goods and they must pay for what software they are using.”
Yet, there remains cause for optimism about the future of the industry.
KAIST’s Kim, whose former students include the founder of KakaoTalk, said that students he sees are now releasing their own mobile applications and games straight from the classroom onto the market.
“They had no way to demonstrate their system (in the past). Teachers said ‘that’s good,’ but that’s all. But now they are putting their software developed in the school directly on the market. Some professors grade by the number of downloads for their project!” said Kim.
Mobile applications, he added, are among the most promising areas for Korean software developers.
“I am always arguing with officials in the Ministry of Knowledge Economy that software is different. You should think about small things. But it should be the best product in the world. Winner takes all. We don’t have to compete in all places, we should give up some places. But if we can be No. 1 in a small section, that’s enough.”