ID21 - Insights Issue 25

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		Net Gains or net dreams?

		Gender agenda: women cast wary eye on ICTs

		Is the Information Society heading South?

		Teleworking: configuring the virtual marketplace

		Access - it takes more than technology

		Knowledge as capital: a World Bank view

		Sites for sore eyes: websites under 'Development'

March 1998 Insights Issue #25

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Flying software: is the Information Society heading South?

In 1998, developing countries will export around US$3bn-worth of computer software to Western markets, making use of telecommunication networks - a conspicuous signal that Information Society benefits can be global. However, such 'headline images' are deceptive. Software production reflects output, location and skill skews that provide limited benefits for developing countries. These skews will be hard to eliminate, but government action is needed to correct them.

Over the past five years, all developing country software exporters worth their salt have invested in telecommunication links and many are Internet-connected. The new image projected is one of 'virtual development' in which clients sitting in the West interact with software professionals developing packages overseas. The reality is somewhat different with most software export contracts involving:

A skewed output profile: software packages represent a tiny proportion of total developing country exports. Thus, the Microsoft of the next century is not currently being born in the back streets of Bangalore. Instead producers in the `South` provide software services for individual customers.

A skewed location profile: large amounts of development work take place at the client's site. `Southern` software developers often have to fly over to work with the client.

A skewed skills profile: most work undertaken by developers in the 'South' is relatively low-skill software construction and testing, leaving the high-skill tasks of analysis and design in Western hands.

As a result, much of the US$3bn earned leaves developing countries to pay for travel and living allowances of the developers who work at the client site, marketing expenses, information and communication technology imports used for developing country-based contract components, and profit repatriation by the many multinationals involved in this trade. Almost insuperable barriers of cost, skills, and information that exist in the package sector can explain the dominance of service over package exports. But why do the other skews persist? Three factors stand out:

The 'Information Superhighway' is not a reality for most developing country users. Fax and e-mail correspondence, not videoconferencing, remain the backbone of communication. These mechanisms cannot provide the depth of interaction that software development requires.

Client uncertainty about developing country firms' skills, capabilities and credibility. To reduce risk, clients choose to retain as much control as they can over production. This means only contracting out relatively simple, low-skill tasks, and having work carried out under their noses.

A 'programmer-heavy' skills profile in developing countries, with no shortage of raw recruits but very few experienced project managers, analysts and designers.

How can developing countries break out of this 'body shopping' prison? The spread of global networks will help, but only addresses the first factor, not the second two. Time will also help, as individual client-developer relationships move slowly up a 'trust curve' and uncertainties diminish. Finally, there is a role for the state.

The Department of Defense was a key driver in the creation of the US software industry, and all subsequent development in other countries has been state-initiated, state-led or state-promoted. Selective policy liberalisation - such as removal of software import tariffs - has a role. However, elimination of all state interventions and free play of market forces encourage the atrophy of local software-related technological capabilities. From South Africa to Egypt to India to Singapore, the story is the same: building a viable software industry requires government promotional interventions in financing and marketing, in skills and infrastructure development, in procurement, and in the diffusion of best practice.

In February 1997 IBM announced the launch of a 'round-the-clock' software development relay using teams of programmers in Beijing, Bangalore, Minsk and Riga, run from Seattle.
Source: Financial Times, 18 February 1997

Richard Heeks,
Institute for Development Policy and Management,
Precinct Centre,
University of Manchester,
Manchester, M13 9GH, UK

T: +44-161-275-2870
F: +44-161-273-8829
e-mail:richard.heeks@man.ac.uk

An IDPM Working Paper on Building Software Industries in Africa is forthcoming. See also: India`s Software Industry (Sage Publications, 1996). The IDPM website is at http://www.man.ac.uk/idpm/

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