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The World Software Industry and Software Engineering Lqv C7 WORLDBANK TECHNICAL PAPER NUMBER 104 The World Software Industry Public Disclosure Authorized and Software Engineering lqv C7 Opportunities and Constraints for Newly Industrialized Economies Robert Schware Public Disclosure Authorized I L Public Disclosure Authorized tsCjj 1 ___ Public Disclosure Authorized *3 RECENT WORLD BANK TECHNICAL PAPERS No. 55. Technica, Ltd., Techniques for Assessing Industrial Hazards: A Manual No. 56. Silverman, Kettering, and Schmidt, Action-Planning Workshops for Development Management: Guidelines No. 57. Obeng and Wright, The Co-composting of Domestic Solid and Human Wastes No. 58. Levitsky and Prasad, Credit Guarantee Schemes for Small and Medium Enterprises No. 59. Sheldrick, World Nitrogen Survey No. 60. Okun and Ernst, Community Piped Water Supply Systems in Developing Countries: A Planning Manual No. 61. 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Cemea, Involuntary Resettlement in Development Projects: Policy Guidelines in World Bank-Financed Projects (also in Spanish, 80S) No. 81. Barrett, Urban Transport in West Africa No. 82. Vogel, Cost Recovery in the Health Care Sector: Selected Country Studies in West Africa No. 83. Ewing and Chalk, The Forest Industries Sector: An Operational Strategy for Developing Countries No. 84. Vergara and Brown, The New Face of the World Petrochemical Sector: Implications for Developing Countries (List continues on the inside back cover) WORLD BANKTECHNICAL PAPER NUMBER 104 The World Software Industry and Software Engineering OpFportunities and Constraints for Newly Industrialized Economies Robert Schware The World Bank Washington, D.C. Copyright ©31989 The International Bank for Reconstruction and Development/TH:E WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the UJnited States of America First printing August 1989 Technical Papers are not formal publications of the World Bank, and are circulated to encour- age discussion and comment and to communicate the results of the Bank's work quickly to the development commnunity; citation and the use of these papers should take account of their provisional character. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they nrpresent. Any maps that accompany the text have been prepared solely for the convenience of readers; the designations and presentation of material in them do not imply the expression of any opinion whatsoever on the part of the World Bank, its af- filiates, or its Board or member countries concerning the legal status of any country, terri- tory, city, or area or of the authorities thereof or concerning the delimitation of its boundaries or its national affiliation. Because of the inforrnality and to present the results of research with the least possible delay, the typescript has not been prepared in accordance with the procedures appropriate to formal printed texts, and the World Bank accepts no responsibility for errors. The material in this publication is copyrighted. Requests for permission to reproduce por- tions of it should be sent to Director, Publications Department, at the address shown in the copyright notice above. The World Bank encourages dissemination of its work and will nor- mally give permission promptly and, when the reproduction is for noncommercial pur- poses, without asking zlfee. Permission to photocopy portions for classroom use is not required, though notification of such use having been made will be appreciated. The complete backlist of publications from the World Bank is shown in the annual Index of Publications,which contains an alphabetical title list and indexes of subjects, authors, and countries and regions; it is of value principally to libraries and institutional purchasers. The latest edition is available free of charge from the Publications Sales Unit, Department F, The World Bank, 1818 Hi Street, N.W., Washington, D.C. 20433, U.S.A., or from Publications, The World Bank, 66, avenue d'I6na, 75116 Paris, France. Robert Schware is a senior information technology specialist in the World Bank's Informa- tion, Technology, and Facilities Department. Library of Congress Cataloging-in-Publication Data Schware, Robert, '1952- The world software industry and software engineering opportunities and constraints for newly industrialized economies / Robert Schware. p. cm. -- (World Bank technical paper, ISSN 0253-7494 ; no. 104) Includes bibliographical references. ISBN 0-8213-1265-0 1. Computer software industry. 2. Software engineering. I. Title. II. Series. HD9696.C62S35 1989 338.4'70053--dc20 89-16586 CIP ABSTRACT Information processing is one of the most significant industries in the world economy today. Its expansion is based in part on the increase in cost- effectiveness of computer hardware. Since software is the major part of most computer systems, the field of software engineering can be expected to grow in the foreseeable future. The software engineering field is rapidly evolving, and the production of software is becoming less labor intensive and more technology intensive. The key questions for newly industrialized economies (NIEs) are: How can the disadvantages of being late in software development be overcome? What are the trends in international competition? What are the characteristics of new technologies that affect software production? How feasible and cost effective will it be for NIEs to adopt the new technologies? In face of serious software backlogs and shortages of labor, what type of skilled labor are most needed? How can NIEs build up their software experience in domestic markets and penetrate the world software market? This paper reviews the major trends in the global software industry, taking into account the changing nature of the competition in a relatively young industry that is rapidly growing and changing. The software industry, particularly in the United States, is in a state of flux, with product cycle transitions, shifts in standards, corporate acquisitions, and important sttrategic realignments that affect competitiveness in computer software and services. The paper then investigates the sources of competitive advantage in software production. The impact of new technologies on the process through ,which software is engineered is analyzed in terms of changing requirements-- for capital outlays, labor, and skills--and in terms of the constraints and opportunities these present to NIE software firms. While new technologies are beginning to be widely used in software production and are clearly a major stimulus for change in production methods, other developments are beginning to play an important part in the competitiveness of firms. One of these is the importance of organization and management of software production, which is illustrated in a maturity model for software firms. Another is the importance of alliances to help penetrate the world software market and deliver competitive advantage. The prospects of the NIEs will depend a great deal on the way software firms mature organizationally and technologically, as well as on ways in which firms can build alliances with foreign partners. This must be kept in mind today when planning or building the software industries of tomorrow. If these industries are to be internationally competitive, the strategic alliances that are becoming major business development tools and the profound changes that are now unfolding in software development cannot be ignored. - iv - ACKNOWLEDGMENTS A number of persons and organizationshave assisted
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