Local software industry near bottom in global maturity list

SINGAPORE — The Philippine software industry has been ranked third in Southeast Asia in terms of “maturity” although the sector, along with its counterparts in most countries in the region, stood at the bottom of a yearly industry index covering 52 countries.

The Philippines scored 3.99 in the Local Software Economy Maturity Index, good for 48th place and unchanged from last year when the International Institute of Software Economics, Innovation and Entrepreneurship (IISEIE), a global nonprofit research and advisory organization, started the ranking.

Switzerland kept its No. 1 ranking with a score of 10.46 while the United States overtook Israel to grab second spot with 10.19.

South Korea was the highest ranked Asian country at 22nd place (7.07) while Singapore and Malaysia were the best-performing Southeast Asian countries at 29th (6.47) and 39th (5.00), respectively. Singapore kept last year’s ranking while Malaysia went up by a notch, overtaking Saudi Arabia.

Thailand, Vietnam, and Indonesia were at the bottom of the ranking at 49th, 51st, and 52nd, respectively, the same as last year.

The index took into account the proportion of the information technology (IT) sector to gross domestic product (GDP), the percentage of software companies to total IT companies, percentage of software employees to all employees and the percentage of software sales to total IT sales.

This methodology placed India (35th) ahead of China (50th), which scored even lower than the Philippines, data from the IISEIE showed.

This year’s list was released during Microsoft’s Accelerating Asia Pacific 2010 conference where the software giant discussed its public sector initiatives and “citizenship” or corporate social responsibility programs.

Malcolm Fraser, chief executive officer of the IISEIE, told BusinessWorld that software industry maturity was related to competitiveness and was also a factor for economic growth.

The index is positively correlated to GDP growth and hews closely to the Networked Readiness Index (NRI) of the World Economic Forum, which measures the “propensity for countries to exploit the opportunities offered by information and communications technology (ICT).” The NRI takes into account a country’s ICT environment, the readiness of individuals, businesses, and governments to use ICT, and the usage of ICT.

The IISEIE’s report on this year’s index noted that ICT production contributed to output, employment, and export earnings while ICT use increased productivity, competitiveness, and growth.

“Within the ICT industry, the software segment is the fastest-growing sector,” it said.

The Philippines has around 400 software companies in systems analysis and design, project management, systems integration, application maintenance outsourcing, application development, package implementation, and application transformation services.

The country has 80,000 software developers, 35,000 of them in the export sector, data from the Philippine Software Industry Association’s Web site showed.

John Galligan, Microsoft’s Asia-Pacific director for Internet policy, said the Philippines had among the “best developed” software talents in the region, pointing to the country’s booming outsourcing sector.

“What they can do (software talents) is to develop applications that are relevant to local companies,” he told BusinessWorld.

Competitiveness

Microsoft executives and industry experts said developing countries like the Philippines could improve competitiveness scores by investing in ICT projects, pointing out that technology would help address “challenges” such as heavy administrative and regulatory burdens, urbanization, disaster response, identity protection, and improving the health and education systems.

“The time calls for a new normal in citizen services,” said Seng Heng Chuah, regional director at Microsoft Asia-Pacific’s government unit. Microsoft is offering its “citizen services platform,” launched in 2008, to governments to help improve communication and the delivery of services.

Developing countries like the Philippines can begin “in stages,” such as moving government agencies to the Web and automating processes, Mr. Chuah said on the sidelines of the two-day Microsoft conference that ended yesterday.

“Our conversations [with government officials] have centered on city development, cloud computing, and education,” he told BusinessWorld.  –FELIPE F. SALVOSA II, Associate Editor, Businessworld