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根据Mowery(1996),全球软件行业是一个大的和动态的市场。欧洲的公司和个人获得总收入估计的479亿和2000年预计将扩大在快速度在不久的将来(欧洲信息技术天文台(EITO],2001)。这篇文章的目的是找出对欧洲利益相关者和发现机会和约束的新兴软件市场(如开源和嵌入式软件)。
Part1 Summary
According to Mowery (1996), the global software industry is a large and dynamic market. European companies and individuals were estimated to gain total revenue of 47.9 billion in 2000 and are expected to expand in a fast speed in the near future (European Information Technology Observatory [EITO], 2001). The purpose of the essay is to identify the interest for the European stakeholders and discover the opportunities and constrains of the emerging software market (e.g., open source and embedded software).
软件的本质是一组指令设计为计算机来实现。这个角色的软件意味着它可以预包装、建造和服役。基于特征的软件、形状创建和贸易在软件市场。首先软件是“卖”作为商品直到最近。电脑的出现提供了一个大众市场对软件贸易和应用程序。数据显示,欧洲消费超过生产在这个市场相对份额的收入分别为88%和12%)。
The nature of the software is a collection of instructions designed for computers to implement. The character of the software means it can be pre-packaged, constructed and served where it is consumed in the market. Three issues, based on the character of the software, shape the creation and trade in the software market. First, the software was “sold” as a commodity not until recently. The emergence of the PC provided a mass market for software trade and application. According to the data, Europe consumes more than produce in this market (relative share of receipts of 88 percent and 12 percent respectively). Second, a lower bound on the size of the employment in software industry is given (2 million employees and 1.35 percent of total European Union employment) although it is difficult to estimate the number of employee whose job involve software creation. More importantly, investment in outsourcing such as IT services shows larger amount (about 80 percent) than the investment in direct software products. Third, the boundary between operating system and application software has become less separate in the development. Software producers have an incentive through horizontal and vertical integration to reach a new market or provide more functionality.
Viewing software as “commodity” or “product”, it is possible to make a distinction between global software (generic) and specialized software (non- generic). While the global software is a designed to meet “generic” user needs, an alternative approach is non-generic solution for specialized purpose such as game software and real-time control of a machine. What distinguish the global software is its complexity, large number of skilled user and proprietary standards used to set the barriers for rivals. These elements also provide a market advantage to support the dominance of leading global software producer. The US companies are benefit from this advantage because of the early lead in global software development. But this market advantage is not obvious in specialized software market because the feature of market for these products is to provide software that is better suit to some users. However, it is possible to use the generic solution for situated problems, which is the integrated software solution (ISS) that shares features of both the products mentioned above. The examples include product data manager (PDM) and enterprise resource planning software. Furthermore, European companies do not have specific disadvantage in ISS.
Characterizing the technical change in software is difficult in using the term “radical” or “cumulative”. In particular, “breaks” in changes of software development is ambiguous. At the same time, the speed of change in software is considerate, e.g. Microsoft introduces a new operating system about every eighteen month. Consequently, many software producers focus on the productivity and communication with other organizations for the creation activities. An exception is the case of embedded software, the need for quality, reliability and safety provides an obvious guide for innovation. Therefore, the “trajectory” of technical change in it is also relatively clear.
Despite the difficulty in defining the character of technical change in software, the systemic nature of software reinforces the “cumulative” nature of software innovation. The growth of software is “stratified”, i.e. changes in different level of system have a “push” and “pull” effects on all related factors. For example, the Internet revolution provides a new platform for software creation. Moreover, a rapid development in computer and software also leads the problem of designing software that really works. Good design creates a user-friendly interface for people.
The firm performance in software industry is heavily relying on the effectiveness of distribution system. An effective distribution system is a principle to decrease the marginal reproduction cost of a software product and increase the revenue as an incentive to invest the innovation activity. During the history of software development, there has been a dynamic search for software distribution system. The original model of software distribution is to charge the physical distribution in a “licensing” agreement. “Shrink-wrapped” or packaged software was provided in a lower cost with the advent of PC era. And the widespread diffusion of CD-ROM and Internet enabled the “file transfer” with very low cost. However, an adoption externality, which serves to concentrate the revenue in only few companies, arises at the same time although a new distribution system diminishes the reproduction cost (e.g. MP3 recording software is benefit from the MP3 exchange on the Internet). Ways to moderate the negative effects of adoption externalities is to extend the standardization of data structure and improve the distribution system.
The comparison between the software industry in Europe and United States is involved in this paper in order to understand European participation in software market. According to this paper, US companies have a dominant share in the global software market. At the same time, however, European companies also benefit from the US global software that it reduces the cost to invest in generic software and focus on the specialized application. In integrated system solution, several US leading firms (e.g. Microsoft and Oracle) have moved to this market as a mean to examine the generic solution for specialized problem. In contrast, European firms continue to focus on the customization and specific needs which do not appear to have specific disadvantage. Apart from the current market, the increasing use of Internet and CD-ROM opens up new markets in the future. Meanwhile, the first-mover advantage of US dominant company will diminish, which provides more innovative potential for the European firms.
In conclusion, although European companies such as SAP and Software AG is world leading software producer, the software development history shows that Europe generate less of these dominant companies than United States.\http://www.ukassignment.org/ygkczy/
Part 2 Discussion
The software industry, where the emphasis has been mainly on component based structure (Kratochvíl and Carson, 2005), is strongly influenced by the concept of “Modularization”. The innovation in software industry involves integration of many different types of knowledge from different sources. One outcome of this problem is the creation of monopolistic or oligopolistic industry in which larger companies can coordinate the knowledge integration process. Modularization, benefits to the specification of knowledge generation, is a possible solution to tackle the problem of this monopolistic industry i.e. pricing, extension of market control and speed of innovation. According to Baldwin and Clarke (1997), a modular system is composed of independent designed units but still function as an integrated whole. For example, a Hi-Fi system consists of sources (e.g. CD player), Amplifier and speaker etc. which imply the similar decomposability of software system.
Software needs an unambiguous blueprint to describe detailed component, system structures and their interdependence relationship. An unambiguous blueprint, rather than simply saying that the products should be customized in certain way, is a specification of component-orientated process visible for both producer and customer understanding (Kratochvíl and Carson, 2005). Progress has been made that Unified Modelling Language (UML) designed by Object Management Group has become a standard in world software-documentation market. All UML documents are portable across all UML-related tools. As a result, the distinction between “build” and “buy” software strategy is becoming less obvious based on the growing modular development of complex software (ibid.). Instead, interaction, communication and knowledge-sharing between companies have become more complex for most firms. However, such “modularization” solution is vulnerable to non-cooperative strategies in creating blueprint for component interface. Non-cooperative strategy increase the competitor’s cost and set barriers for the new entrant which might limit the creation of “modules” by other firms (Steinmueller, 2004).#p#分页标题#e#
The “interactive” feature in knowledge production of software industry is discussed in the paper. According to Steinmueller (2004), “Knowledge generation in software industry are extremely dispersed among disciplines and organizations”, which confirm the change that software innovation is closely bound to the information exchange between firms. The role of this “interactive” feature includes communication between companies, “physical” connection between software and hardware (e.g. network computing stimulates search engine) and user to producer interaction. In particular, the more interaction and free access to the information, the greater chances for successful technical change in software production (Lundvall, 1985). The reason of this mechanism is because an independent innovation might be too risky for a firm.
A network theory may be introduced as an explanation of the “interactive” feature in software innovation. A network is a clear link with selected partner in a space of firm’s complementary assets and market relationship which aims to reduce the uncertainty of innovation (Freeman, 1991). The application of network (e.g. technology agreement) is beneficial for technological complementary and reduction of lead time in most of industry. Especially in software industry, where the pace of development is extremely rapid (e.g. Microsoft Windows) and knowledge is enormously spread, there is no time to “stand alone’ in innovation. Collaboration as a result of network theory, provide more access to technology which is needed for a software development or an investment required for a project. However, some public institutions such as University are frustrated to adapt the changes of “interactive” feature and network theory in software industry. University research project cycles are in compatible with the research of large and specialized software because of the time needed to develop such system is long. This partial incompatibility may result in an imperfect system which challenges the network theory of software innovation. It also suggests that there is a coordination problem in knowledge generation and system integration.
Finally, this paper has a limitation to cover the current trend in the fast pace of software development. According to Voas and Zhang (2009), the evolution of computer can be divided in six phases. While this paper has covered four phases which are mainframe computing (licensing agreement), PC computing (packaged software), Network and Internet computing (freeware and shareware etc.), grid computing and the latest cloud computing is not included in the paper. The author emphasizes in the paper that the firm performance also rely on the distribution system such as the wide spread use of internet stimulates a new business model. Therefore, it is necessary to consider the up-to-date technical change for the analysis of software market.
Figure1. Six phases of computer paradigm
The evolution of cloud computing, like network computing, provide a new platform for software company to generate technical innovation and meet emerging user needs. This new style of computing provides us a service supported by virtual resources over the internet (Furht, 2010). The cloud computing provides three kinds of service: Infrastructure as a service (IaaS), Platform as a service (PaaS) and Software as a service (SaaS) which enable the user to rent CPU, memory and storage etc. from a virtual store (i.e. IaaS) to build a system, add middleware software such product data manager (PDM) on the system (i.e. PaaS) and support the application we would like (i.e. Saas) from a software provider. The massive boom in the cloud computing market is expected to reach 8.3 billion US dollars in 2010 with a dramatic 16.6 percent increase (Hickey, 2010). At the same time, according to Gartner research (ibid.), this market is expected to achieve revenue near 150 billion US dollars in 2014. Gartner research also point out that United States is now leading the global cloud computing market (60% of the market share in 2009), but the US leading position will be challenged because more countries have encouraged the could computing such as Western Europe.
In conclusion, there seems no direct solution in European software industry, but it can be mitigated by increasing technical change for “modularization” and “network” of knowledge generation. In a modularized system, the European firm can benefit from the knowledge sharing and participate without disadvantage in producing add-value subsystems. Furthermore, policy maker should also pay attention to embrace the emerging market such as could computing in order to diminish the early lead advantage of US firms in traditional software market.
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