Hardware vs. Software : Korea Begins to Reprioritize Their IT Market
Korea Evaluation Institute of Industry Technology (KEIT) is ultimately seeking to export Korean-made software overseas under the world best software (WBS) project. Suh Young-ju, President of KEIT delivered the full story about his organization's method of making state-of-the-art software in an interview with Korea IT Times.
Q: How was the WBS project drawn up and what is the goal of the project?
A: Globally, the technologies for hardware production have been standardized, making software development the key part of creating an extra level of "high value-addedness". Since 2002, the global software market has overtaken the global IT market, for example LCD products which take up a third (US$ 1 trillion as of 2008) of the total market. Take Apple for instance, it develops software and designs in-house, while the rest of its work is contracted out to companies in China or Taiwan. The epicenter of IT products' competitiveness is drifting from hardware to software.
As for Korea, it is armed with hardware competitiveness and IT infrastructure, which have made Korea an IT powerhouse. However, when it comes to the software industry, we are lagging behind in relative terms. The Korean software industry accounts for only 1.8% of the global software market. Undeniably, we had been solely focused on hardware development, as a result, the localization rate of embedded software used stands at a mere 1% to 15%. In the case of IT services, Korea has been heavily dependent on internal transactions and the public market, therefore Korea is not packed with international competitiveness in that sphere.
Against this backdrop, the Korean government laid out a "Strategy for Becoming a Software Powerhouse" in the February Emergency Economic Policy Meeting, presided over by President Lee. The WBS project, part of the "Strategy for Becoming a Software Powerhouse", is a large-scale national R&D project, which will be implemented jointly by the Ministry of Knowledge and Economy and KEIT until 2013.
As I mentioned before, Korea's high dependence on foreign-made software is one of its most serious problems. To address this issue, we will team up with software companies to provide support for developing and commercializing software technologies. Furthermore, we ultimately seek to export Korean-made software overseas under the WBS project.
Q: Could you elaborate on the WBS project? What is the content of it?
A: The WBS project was set up mainly with reference to the convergence of software, manufacturing and services. This means we will give priority to developing software products in the manufacturing and service convergence sectors, where creation of new demand for software will be possible and securing international competitiveness is relatively easy. In other words, we try to secure a vantage point in the global software market by creating "blue-ocean" markets in the software field.
If endeavors for manufacturing software fuse well with Korea's strengths in arenas of manufacturing products such as automobiles and mobile phones, synergetic effects will be inevitable. As software emerges as a means to enhance the productivity of services related to subject matters such as medical services and transportation, the convergence of software and services will lead to developing a plethora of promising products.
As of the end of October, under the WBS project, we handpicked the first batch of six WBS beneficiaries: aviation software, mobile software, auto software, medical software, security software and transportation software. We are now sorting out companies who will take charge of seven tasks in the six areas. The seven tasks include developing general-purpose software for unmanned aircraft, software for electronic control units (ECU) -- which is being adopted by the EU-- and intelligent diagnosis systems that inform doctors of lurking diseases by reading and interpreting CT and MRI scans.
These tasks are highly likely to be commercialized and will succeed their foreign-made counterparts within the three-year period of the WBS project. Moreover, the first batch was chosen to fast track the expansion of overseas market shares on the grounds that Korea has already reached a certain technology level in those areas.
The three-year WBS project will be carried out until 2013 and 800 billion KRW will be invested with each task receiving over 2 billion KRW on an average annual basis. As we aim to nurture software companies, only corporations are eligible to conduct software R&D under the WBS project.
The major beneficiaries of the project will be relatively competitive software companies, who are capable of exporting software products once financially supported under the project. We are not simply supporting financially strapped companies, but we will unearth and help companies with great growth potential. Yet our provision of support comes with one condition, that consortiums should be formed between software companies and potential software buyers.
Q: How will the WBS project be executed?
A: The first round of the WBS project will be conducted for 2 years and six months, from the end of this year to March of 2013, in three stages. A total of 26 billion KRW will be poured into seven tasks. To ensure responsible task implementation and quell moral laxity, KEIT has stepped up "private matching" (private contribution, and the cash ratio of the contribution) and plans to pick WBS beneficiaries under the principles of "company-orientation" and "preference for software SMEs."
In addition, the copyrights for software developed under the WBS project will be held by software developers in order to foster software-specializing companies and achieve the sustainable development of software. KEIT will also introduce the best practices of software R&D quality control so as to swiftly identify the causes of possible problems along the way and upgrade software through documenting the whole process of software development.
In other words, each task's quality control system will be put in place throughout the whole process of software development. In 2012, approximately 100 billion KRW is expected to be invested by the Korean government, and the second round of the WBS project has proceeded with the purpose of discovering new tasks in a top-down manner since October.
Q: What is the expected outcome of the WBS project?
A: The government's "Strategy for Becoming a Software Powerhouse" is anticipated to serve as a springboard for reforming the whole structure of Korea's IT industry. If the initiative is carried out as planned, exports of software, which stood at $5.7 billion US as of 2008, would go up to $15 billion US by 2013 with the number of Korea's software workforces swelling from 140,000 (as of 2008) to 300,000. The WBS project, part of the Korean government's endeavor for making Korea a software powerhouse, is forecast to set important precedents for the processes of software development, quality control and management and software R&D.
Q: Could you give us several examples of expected software success cases?
A: The Ministry of Knowledge and Economy and KEIT have been supporting the development and commercialization of convergence technologies by setting up the Industrial Convergence Technology Project parallel with the Key Technology Development Project.
As a result, in the manufacturing and software convergence sectors, tangible achievements such as obtaining international standards and technology transfers have been made. A case in point is the automobile operating system "sensor nodes", who's R&D was funded by the Korean government. The sensor nodes obtained an international certification in 2009 and were exported to other nations during the same year. Another example is Korea's T-50 supersonic trainer aircraft, equipped with the key technology of the government-funded aircraft application embedded software (an aviation operational program).
The T-50 supersonic trainer aircraft is scheduled to test fly in November. Tasks related to the development of auto software and aviation software are also included in the first round of the WBS project: the task of commercializing electronic control units based on AUTOSTAR (the name for the standard software used in electronic control units) is being adopted largely by auto makers and part suppliers in the EU, along with the task of developing software solutions (integrated aviation, mission control and loading systems) that can be generally applied to unmanned aircrafts.
If the task of developing and commercializing electronic control unit software platforms is carried out successfully, 50% of the embedded software imports will be replaced by Korean-made software by 2013 and 95% by 2015. Once standard solutions for unmanned aircrafts are developed, the creation of a market worth KRW 31 trillion is feasible. By then, Korea will secure a competitive edge in the global unmanned aircraft market. Furthermore, the rate of using transportation cards in the Seoul metropolitan area exceeds 90%, the highest in the world. The task of adapting the card-based AFC (Automatic Fare Collection) software for overseas markets might have been inconceivable had it not been for the "Premium" transport system solution, adopted in 2004 by the Seoul city government.Apple's iPhone landed on Korean soil last year and gave rise to the Smartphone craze in Korea. Apple's iPad is also taking the global market by storm. Behind the mega success of Apple's products are a stellar line-up of applications and the Apple App Store. In short, the competition paradigm of the global IT (information technology) industry is rapidly morphing into a sector which primarily revolves around software.