Monday, October 10, 2011

Shift to soft power from hardware industry

I pick up this article from Technology section of South Korean newspaper "The Korea Times" as the title itself is so catchy and now the entire globe is changing their perception from so called Hard power to Soft power in every section. We all know that technology is very important in our day to day life as it has become one our necessary requirement at present.

Have a look....................

Google’s acquisition of Motorola Mobility and HP’s separation with its PC business are symbolic events representing the shift to software in the IT industry.

Seong Min-hyun, a researcher at the KT Economic & Business Institute, noted in a report that “destructive innovation” on traditional businesses by software companies is magnifying. He cites the contrast between the collapse of Borders and the ascendancy of Amazon, which became the top bookseller and transformed books into software by releasing the Kindle. Meanwhile traditional music record companies were replaced as contents suppliers by software companies like Apple or Pandora.

The researcher says that the new software businesses, spawned in favorable conditions such as with lower start-up costs and expansion of the borderless online economy on the Internet, are maximizing the software revolution. “Google, eBay, Apple and MS are guiding the new era of software, brandishing the soft power of the United States.”

The healthy venture ecosystem existing in Silicon Valley allowed the transition, according to Seong. “Entrepreneurship encouraging start-ups and angel investors share explosive synergy. The winner rises from fierce competition,” he said, pointing out that 43 percent of the global top 10 percent Internet companies are from the United States.

The Korean IT industry, meanwhile, focused on bolstering hardware instead of software, fails to attain global competitiveness. “Korea ranks 14th among 19 OECD major countries in software competitiveness… due to the borderless online market economy which seeps in software from elsewhere, losing in the software competition means losing local markets as well as the global export market.”

Kim Jae-pil, a researcher at the institute, says that Korea should learn lessons from Finland which heavily relied on Nokia. “Both Korea and Finland convey an image of being IT powerhouses through cell phone exports. They also have high economic reliance on certain companies,”

Sluggish smartphone sales, however, caused an operating deficit for the first time in 15 years for Nokia, which once accounted for 20 percent of the tax income for Finland. The market cap of Nokia plummeted by 75 percent from the peak, and the crisis was quite a blow to the local economy, welfare, employment and the state image of Finland, Kim points out.

This is not the end though. He said the fall could be an opportunity of industrial structural change for Finland, noting the success of Rovio as the Finnish economy convert to the software sector.

Rovio, a Finnish venture company, rose to rank a top software company thanks to the success of the mobile game “Angry Birds.” Sales are estimated at $100 million, only one five hundredth of that of Nokia, but the company is expected to create much value in console games, movies and character businesses.

“The success of Rovio is the outcome of Finland’s software nurturing policy that started in the early 1990s. Keeping with the times, it set up a university-industry cooperation center in 2010, to support mobile software startups,” Kim said.

He advised Korea to move its economic axis to software while leaving behind hardware. “The government should set up an ecosystem to nurture the software industry, covering the startup of potential businesses and intellectual property rights to technology as well as investing more in such.”

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