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The Changing Global Economic Order and the Tall Re-Order of the Global Software Industry
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The Changing Global Economic Order and the Tall Re-Order of the Global Software Industry

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Frost & Sullivan analyst discusses the global software industry.

Frost & Sullivan analyst discusses the global software industry.

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  • Still, the cloud seem to be segmenting into infrastructure as a service (IaaS) providers, and platform as a service (PaaS) providers.  IaaS (like Amazon Web Services) is basically virtual machines in the sky, and this differs from traditional hosting because with a cloud provider, you should be able to start and stop dozens or hundreds of VMs through an API, and pay only for the CPU hours you use.  PaaS (like Google App Engine) gives you a framework to code against, and it's a much more restrictive environment (moving to PaaS is usually a rewrite), but you never worry about individual machines, patching, or all that Jazz.
  • With shrinking or paltering IT budgets, CIOs are challenged to innovate quickly and adapt to “do more with less” challenge. “IT-on-demand” is no longer just a hype, whereby users access the necessary application for a specific task. Traditionally, customers need to install and operate software on-premises, taking responsibility for operations, maintenance, upgrades, and user support, which gives a considerable control and flexibility to end-users. The adoption of the on-demand services model allows companies to scale when needed. As such, the flexible, service-based consumption model puts less strain on the business by minimizing capital expenditures and truly scaling costs. The model provides both advantages and disadvantages to end-users. The advantages include better clarity of costs, absence or reduction of substantial up-front investment, increased efficiency due to economics of scale, faster development cycles and incremental delivery of new of improved functionality without extra costs to end user. However, the drawbacks of this model includes less control or even loss of control, limited opportunities for customization and increased vendor lock-in and switching cost. The market drivers and constraints of this innovation are listed in the following chart.
  • Compared to proprietary software system, an Open Platform architecture has external programming interfaces that allow users to not just “read”, but also “write” to change the features or functionality. Open platform can help businesses respond more quickly and cost-effectively to the changing market conditions. Compared to traditional platform which not only being fixed in functions, but also not based on standardized interfaces between the major components, an open platform is actually enabling the users to incorporate the best-of-breed software for each of the application specific functions and to respond new application needs in an efficient way. The market drivers and constraints of this innovation are stated in the following chart.
  • There is a lot of buzz in the media about “cloud computing” and how it will transform the relationship among consumers of IT services, those who use IT services and those who sell them. In general, cloud-computing users can avoid capital expenditure (CAPEX) on hardware and software. Many cloud computing advocates believe that it offers a very affordable access to computing resources. Resource sharing via clouds also optimizes energy usage. However, another side of stories about cloud computing derives from concerns about dependability, reliability, security-related issues and lock-in to providers. For instance, if the cloud computing services have suffered outages, internal IT or business managers can at time do little when they are affected. The market drivers and constraints of cloud computing are listed in the following chart.
  • Inus Tech: INUS Technology, Inc. has been a world leader in providing technology that makes 3D scanning an extremely powerful tool for a variety of applications, including manufacturing, R&D, quality inspection, medical research, civil engineering Honest Tech: Honest Technology Inc. is a premier supplier of digital video communication and entertainment solutions. As a pioneer of real-time MPEG encoding/decoding software technologies, Honest Technology is working with innovative companies around the world to enable the transition from analog to digital video. Inca Internet : INCA Internet is a leading information security company that provides many security solutions with leading innovational technologies under the brand name “nProtect”. With a focus on Software as a Service (SaaS) and an innovational technology with a global patent, INCA Internet’s 13 products include industry leading solutions, such as nProtect GameGuard, the world’s leading online game security solution by market share, and nProtect Netizen, Korea and Japan’s leading ASP based online security solution.
  • Ahn lab – Inca internet – innovative solution + global Inus tech - Honest tech -
  • Ahn lab – Inca internet – innovative solution + global Inus tech - Honest tech -
  • Ahn lab – Inca internet – innovative solution + global Inus tech - Honest tech -

The Changing Global Economic Order and the Tall Re-Order of the Global Software Industry Presentation Transcript

  • 1. The Changing Global Economic Order and the Tall Re-Order of the Global Software Industry – An Emerging Players Perspective on Competitive Strategies A Frost & Sullivan Software Industry Webminar © 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan. December, 2009 Developed by ICT Practice Frost & Sullivan Asia Pacific
  • 2. To go where no kimchi has gone before
    • April 8, 2008, South Korea's first astronaut, Yi So-yeon, blasts off for space.
    • Kimchi was the toughest to turn into space food.
      • Make it bacteria-free while retaining its unique taste, color and texture
      • Teeming with microbes, like lactic acid bacteria, could turn dangerous in space if cosmic rays cause them to mutate
      • Short shelf life, especially when temperatures fluctuate rapidly, as they do in space.
    • Research efforts:
      • Kim Sung Soo, a Korea Food Research Institute scientist = control the fermentation process/ plastic package
      • Lee Ju Woon at the Korean Atomic Energy Research Institute, = kill the bacteria with radiation/ can
    Prelude – Space Kimchi
  • 3. Objectives
    • Share trends in global software industry in view of the new economic order
    • Share Korean Software industry development
    • Share relevance of alternative solutions to achieve growth and innovation in new economic order
  • 4. Content
    • Global Software Industry Trends
    • Growth of the Korean Software Industry
    • Korean Software Industry Relevance to the Future Industry Order
  • 5. Flag Global Software Industry Trends
  • 6. Global Software Industry Trends The global software industry growth is expected to decelerate … Source: Frost & Sullivan, 2009 Global (2007-2011) CAGR of 3.1%
  • 7. Possible vertical expansion Network IBM EDS Sun Microsystems HP Oracle Peoplesoft, Siebel Servers Database Business SW Services Juniper Cisco SAP The Dynamic Global Software Market ICT Horizontal Layers EMC Horizontal leaders Occurred vertical expansion Vertical Expansion by Horizontal leaders Legend Global Software Players Verticalization As the global economy re-structures, global software players are re-aligning their competitive strategies 87% decline 28% decline Fortunes of the Global Leading Multinationals Source: Frost & Sullivan Analysis, 2009 Source: Frost & Sullivan, 2009
  • 8. One of the key trends that we can observe is the impact of economic slowdown to accelerate the shift of IT budgets to be more OPEX centric From CAPEX to OPEX Source: Frost & Sullivan, 2009 Business Profitability Contracting Revenue Rationalizing Cost Fixed Costs (lump sum, long and distanced ROI) Variable Costs (Scalable, Just-in-time, Low incidental overheads) Operating Expenditure (OPEX) (Maintenance, IT Services/ Outsourcing, Software as Service (SaaS)) Capital Expenditure (CAPEX) (Hardware, Software, Licensing) IT Budget % % Accelerating shifts of IT Budgets in becoming more OPEX centric Economic Slowdown
    • Increasing pressure for businesses to be more lean and agile in managing costs and relating expenses to actual value creation:
    • Increasing profits
    • Increasing revenue
  • 9. On-demand Services such as Salesforce.com to deliver SaaS…flexible, service-based consumption model puts less strain on the business and truly scales costs Emerging Trends in the Software Industry
  • 10. Open Platform such as open source, php, and proprietary platforms to deliver PaaS…allow users to not just “read”, but also “write” to change the features or functionality. Emerging Trends in the Software Industry
  • 11. Cloud computing is realizing infrastructure such as Amazon Web services, as a service IaaS… deploying computing resources for ‘utilitarian’ usage. Emerging Trends in the Software Industry
  • 12. Commoditization of Global Software to Emerging Players
    • Overseas Market Reach/Performance
    • Commitment to Customers
    • Effective Alliances and Partnerships
    • Mastering Intangibility – Marketing & Branding
    • Innovating Niche to Compete
    Key success factors for navigating the future growth of the software industry include: 4. 2. 5. 3. 1. Frost & Sullivan’s Survey of IT services & software vendors from a leading ICT exporting country in Asia – 2009 Q2 Source: Frost & Sullivan, 2009
  • 13. Frost & Sullivan envisions a process oriented rather than technology oriented approach in segmentation of the software industry in the future… Emerging Software Industry Structure Source: Frost & Sullivan, 2009
    • The demise of product/technology leadership as the language of competition
    • Focus on understanding the needs of chosen key segments and integrates to their industry drivers and constraints
    • Solutions that are “easiest to use and buy” rather than the “most superior technology” will become the winner
  • 14. Flag Growth of Korean Software Industry
  • 15. From Hardware to Software How Koreans scale the IT industry value chain… Source: National IT Industry Promotion Agency (2008) Global Market Share of South Korea since 2007 Need to scale up the value chain Increasing competition from low cost markets Decreasing margins due Commoditization of ‘me too’ boxes Need to increase economic value add Need to increase capacity for differentiation
  • 16. Korean Software Industry Development The increasing globalization of the Korean software industry is reflected by the high growth rates in export value. Export (2007-2011) CAGR of 12.9% Industry (2007-2011) CAGR of 5.5% Source: Frost & Sullivan, 2009
  • 17. How the Korean software industry is positioned for a process oriented industry landscape Korean Software Industry Positioned in the New Landscape … Source: Frost & Sullivan, 2009
  • 18. Flag Relevance to the Future
  • 19. Sizing the Future of Korean Software Export Positioned for healthy growth in the future… Value $mil 2011 2007 CAGR 2007-2011 19.07% 16.53% 19.34% 6.75% 5.8% Source: Frost & Sullivan, 2009
  • 20. Positioning of Korean Players vis-à-vis Global Players Source: Frost & Sullivan, 2009 By leveraging on its focused and nimble nature, Korean software companies are redefining the industry positioning landscape..
  • 21. To recognize Korean Software vendors’ globalization effort, Frost & Sullivan has adopted a robust and objective methodology… Ability to Niche Ability to Partner 1 2 Positioning Framework Award Approach +
      • Evaluation Criteria
    • Overseas market coverage
    • Overseas experience
    • % of Overseas revenue contribution
    International Expansion
    • Coverage
    • Niche
    • Direct vs Indirect
    International Market Impact
    • Customer growth
    • Customer retention
    • Customer satisfaction
    International Customer Management
  • 22. Just like space kimchi, Korean software is also going places… Korea ’ s Software Globalization Hall of Fame … International Expansion International Market Impact International Customer Management
    • 20-30% increase in overseas sales
    • overseas sales contributes 70% of revenue
    • 51% increase in overseas sales,
    • overseas sales contributes 95% of revenue,
    • 30% increase in overseas sales, overseas sales contributes 39% of revenue,
    • US , Germany, Japan, China and etc
    • 9 countries (U.S, Canada, Australia, Japan, Brazil, U.K, Germany)
    • 22 countries (Asia, U.S, EU)
    • In terms of # of customers 2:8 / in terms of revenue 1:9
    • Renewal 1 : 9 new sales
    • Renewal 4 : 6 New sales
  • 23.
    • Company Vision:
    • To become the top information security company with innovative values to provide a safe and entertaining IT environment to the world. INCA Internet’s essential values lie in simplicity, passion, and customer satisfaction
      • Reasons for going overseas:
      • To provide our innovational technology, which is not commercially available outside of Korea, for the global market, and ultimately develop as a global company
    • International achievements:
      • Nominated as 2007 Korea Fast 50 by Deloitte Anjin
      • Nominated as 2007 Asia Fast 500 by Deloitte Global
      • Users in over 150 countries
      • 30% of corporate revenue from exports
      • Selected as Top 3 Korean Global Software Company by Frost & Sullivan
    • Key success factors for overseas expansion:
        • Meeting committed and talented partners that know the local market and can work together with us to bring our innovational technology to new territories, best shown by our successful partnership in Japan
        • INCA Internet’s innovational technology that has a clear niche market overseas, with no commercial competitor.
    And the honors go to … Frost & Sullivan Award Recipient 1 - INCA Internet
  • 24.
    • Company Vision:
    • Providing innovative software solutions to meet new market needs by maintaining technical leadership
      • Reasons for going overseas:
      • To satisfy unmet customer needs to improve their business processes with innovative 3D scanning technology
    • International achievements:
      • Yearly export revenue increased about 30% every year
      • more than 200 global reseller sites all over the world including the United States, Japan, Europe, and Asia pacific region
      • 2007: Best Software Award from President of Korea
      • 2006: New Excellent Product Award from Minister of Commerce, Energy and Industry of Korea
      • 2005: World-class product Award from Minister of Commerce, Energy and Industry of Korea Ten Best New Technologies of 2005 from Minister of Commerce, Energy and Industry of Korea
    • Key success factors for overseas expansion:
        • Superior technology to meet customer needs
        • Well-organized company structure
        • Customize our product for global market
    And the honors go to … Frost & Sullivan Award Recipient 2 - INUS Technology
  • 25.
    • Company Vision:
    • Bring high-quality digital video and audio into users’ daily lives by transforming the way video and audio are captured, delivered and experienced.
      • Reasons for going overseas:
      • To have a larger customer base
    • International achievements:
      • More than 95%of revenues from overseas
      • Top 3 consumer video editing s/w company in US (NPD, 2008), customers over 70 countries
      • 2009: CES “Design and Engineering Award Honoree”
      • 2007: “Digital Innovator Award” DigitalLife, NYC
      • 2007: “Red Herring Asia Best 100 Winner”
      • CES “Best Productivity and Security Software”
    • Key success factors for overseas expansion:
      • Simple & Easy concept product
      • Targeting Niche market
      • Local Customer Support
      • Healthy Partnership with hardware manufacturers for PC/hardware compatibilities
    And the honors go to … Frost & Sullivan Award Recipient 3 - Honest Technology
  • 26. Questions & Answers Moon Sun Chang Corporate Communications [email_address] + 82.2.6710.2002 Our experts would be glad to further share their thoughts with you and explore opportunities in which we could add value to your growth and innovation journey. Kam Soon Siew Director – ICT [email_address] + 82.2.6710.2036
  • 27. Global Growth Consulting Company