IT and Outsourcing in North Korea a Unique Perspective on an Evolving Technology Sector

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IT and Outsourcing in North Korea a Unique Perspective on an Evolving Technology Sector viewpoints DOI:10.1145/2240236.2240245 Paul Tjia VEmerging Markets Inside the Hermit Kingdom: IT and Outsourcing in North Korea A unique perspective on an evolving technology sector. HE OUTSIDE WOrld’S view of emerged, which fall into three main its export work, KCC’s main focus has North Korea ranges from the types, all state owned in whole or part. been the local market and it develops fear of nuclear demagoguery, There are a number of large special- various products, such as Red Star (the through tales of economic ist IT service providers who work both North Korean version of Linux), e-learn- difficulties, to the fun pok- for local and overseas clients. The big- ing products, and translation software. Ting of the film Team America. Behind gest of these is the Korea Computer KCC also produces games; their version these and many other—almost univer- Center (KCC). Established in 1990, it of Go, a popular Asian chess-like game, sally negative—projected images of the has more than 1,000 employees. Like has won the Go computer games world country, there is another side. Some- almost all IT firms, it is headquartered championship for several years. Simi- what unexpectedly, the Democratic in the capital, Pyongyang, but also has lar, but smaller corporations such as People’s Republic of Korea—to use its regional branches throughout the the Pyongyang Informatics Centre and official title—has a sizeable IT sector. country and offices overseas that en- Korea Pioneer Technology are employ- Some 10,000 professionals work in the able it to work for clients in Europe, ing hundreds of staff. field, and many more have IT degrees. China, South Korea, and Japan. Despite Some IT firms have developed They are already engaged in outsourc- from the internal IT departments of ing contracts for other countries, and large commercial enterprises, such keen to expand further. Having access to as Unha Corporation or Korea Roksan General Trading Company. As the North Korea’s IT Sector a pool of highly country’s IT sector has become more The origins of the local IT sector can technically skilled dynamic, some of these are being be traced back to the 1980s, with the spun off as separate ventures, allow- establishment of various IT research labor is a key rationale ing the IT firms to take on a broader organizations and the creation of IT behind the growth scope of clients and IT service ac- faculties in higher education institu- tivities. Third, there are a number of tions such as Kim Il Sung University of IT outsourcing joint venture IT firms. These include and Kim Chaek University of Technol- in North Korea. Nosotek (set up with a German en- ogy (the latter having an international trepreneur) and Hana Electronics collaborative research program with (which involves U.K. investment), Syracuse University). Over time, sev- plus several joint ventures with Chi- eral hundred IT “corporations” have nese business partners. 22 COMMUNICATIONS OF THE acm | AUGUst 2012 | VOL. 55 | NO. 8 V viewpoints An IT company in Pyongyang, North Korea. Pyongyang has become a base for IT offshoring. Historically, North Korea’s IT infra- always significant proportions of M.S.- tions like China or the Philippines. The structure has been behind the curve and Ph.D.-qualified software engineers, country’s highly regulated economy is but in recent years the country has and a surprising number have partici- also an advantage in reducing attrition been investing in order to catch up. In pated in training courses abroad: most rates—the type of “job-hopping” that a typical IT firm, one can therefore see often in China and India, but also in Eu- can bedevil Indian contracts is pretty staff using state-of-the-art technology, rope. These organizations are already much unknown in North Korea. mostly imported (for example, hard- well versed in quality assurance meth- Some of the outsourcing to Pyong- ware from Dell, running the latest ver- ods including ISO9001 and CMMI. yang-based firms is quite general. At the sions of Windows or Unix). An example of the typical skills fairly low-skill end is basic digitization. Internet access is still heavily regu- profile is shown in the accompanying For example, Dakor—a Swiss joint ven- lated but a recently laid optical fiber table, which gives the expertise list for ture—is conducting data entry work for backbone connecting all cities and Daeyong Corporation, a relatively small European research firms and interna- counties provides for a high-speed start-up based in Pyongyang that is in- tional organizations like the United Na- network—“Kwangmyong”—utilizing volved in Web and mobile applications tions and the Red Cross. Work involv- a fairly sophisticated architecture that development—including Android and ing more skill includes producing Web forms what can be seen as a “national Blackberry—for foreign clients. sites for U.S. and European customers intranet.” A nationwide 3G mobile tele- (though in most cases, the end client communications network was com- IT Outsourcing to North Korea is unaware of North Korean involve- pleted in 2009. Mobile operator Ko- Having access to a pool of highly tech- ment since this is subcontracted by an ryolink (a joint venture with Orascom nically skilled labor is a key rationale intermediary that deals direct with the Telecom from Egypt) has more than behind the growth of IT outsourcing to client). Examples of projects involving one million subscribers. North Korea. But such labor is available more advanced skills include North Of course, the core of any IT sector is in many parts of Asia. A unique selling Korean firms providing programming its human resources. As noted earlier, point for North Korea is cost. Tariffs inputs for enterprise resource plan- A I some 10,000 professionals already have asked can be less than U.S. $10 per hour, ning systems, business process man- J T IT careers, and thousands of North Ko- enabling clients to employ experienced agement systems, and e-business ap- AUL AUL P rean youngsters graduate with IT de- software engineers for just a few hun- plications. One corporation is building grees each year, thus creating a large dred dollars per month. This means a bank management system—based pool of technically qualified staff. In the North Korea undercuts not just India on the tenets of Islamic banking—for a PHOTOGRAPH BY BY PHOTOGRAPH corporations I have visited, there are but also later-emerging software loca- client located in the Middle East. AUGUst 2012 | VOL. 55 | NO. 8 | COMMUNICATIONS OF THE acm 23 viewpoints But there are also emerging spe- cialisms within North Korea’s IT ex- port sector. Perhaps not surprisingly, one of these is IT security. North Ko- rea might have an image—warranted or not—of encouraging cyber attacks, but it has invested a lot in technology and expertise to thwart such attacks on its own systems and, more gener- ally, in security. Fingerprint identifica- tion products used for access control (and time attendance) have already been exported, and there are other products developed in areas of car li- cense plate identification, and voice/ face recognition. On the lighter side, film has been one of the main forms of state-sup- ported entertainment in the country IT security, such as facial recognition, is an important export commodity for North Korea. since the formal division of the Korean peninsula into two states in the 1950s. From this foundation has developed an export production capacity for high-quality cartoons and animation. The specialized state corporation SEK Studio, established in 1957, has more than 1,600 employees, and works for several European film production stu- dios. Other firms have worked on 2D and 3D animation contracts, and this is starting to expand into areas of relat- ed capability such as computer graph- ics and games exports for Wii, iPhone, BlackBerry and other platforms. Finally, North Korean IT corpora- tions have developed a set of language skills. English is quite widely used but specialisms have developed in Chinese Developers working on a graphics design project. and Japanese alongside (of course) Korean. North Korea is therefore be- ing used as a base for those who wish to have software products or systems translated into East Asian languages. At present, much of this work is near- shoring; that is, coming from clients based in China, Japan, or South Korea. But the potential is there for a wide range of customers who are targeting East Asian markets, which are consid- ered especially relevant to small- and medium-sized clients. The Challenges and Future of IT Outsourcing A I North Korea’s IT sector faces a number J of challenges, despite its government’s T AUL AUL eagerness to promote international P collaboration. First, and perhaps larg- est, is the challenge of perceptions. North Korean firms produce and export high-quality cartoons and animation work. North Korea confronts a difficult mix BY PHOTOGRAPHS 24 COMMUNICATIONS OF THE acm | AUGUst 2012 | VOL. 55 | NO. 8 viewpoints Example of a North Korean IT corporation skill set. obscure location for IT work, accom- panied by images of animal-drawn carts and corrupt bureaucrats. A few Major Skills Ansi C/C++, VC++6, VB6 brave U.S. firms stuck a toe in the wa- VC++.NET/CLR, C#, VB.NET, ASP.NET, .NET ter with some small onsite “body shop- DotNetNuke, Silverlight, Telerik Sitefinity Java, J2EE, Spring, Struts, Hibernate, Swing, JUNIT, ANT ping” projects and built up slowly from JBoss, Apache Tomcat there. Today, India’s software industry PHP4/5, Joomla, Wordpress, Magento, Drupal is a multibillion-dollar juggernaut on Zend Framework, CodeIgniter, CakePHP, Yii, Smarty which Fortune 500 and other firms rely MySQL, MSSQL, MS Access, PostgreSQL, Oracle Shell script , JavaScript, VBScript for portions of their IT services.
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