What is software development and production?

Computer software has been among the fastest growing industries in most East Asian countries in the last few years. The global market is dynamic and diverse, providing a wide variety of market niches to be exploited by newcomers. It might be appropriate for young Vietnamese software compa- nies, already operating on the local or domestic market, to try out new software products for the international market. However, the global software industry represents a challenging and swiftly changing environment that usually requires substantial marketing and distribution efforts as well as an international organization for after-sales service and technical support.

Software differs from electronics hardware, which usually are made from interchangeable components and constructed through a sequential assembly process. Software products are the outcome of an iterative process of design, coding, testing and redesign. Thus there are few formal approaches to the creation of computer programs. Centralization, standardization, re-usability and similar criteria for mass-production are not easily applied to computer software production. Even if companies may follow standardized procedures within their organization, there are only very few industry-wide standards for product features, tools and project- management techniques.

Software is often seen simply as a non-standardized good, composed of omplex knowledge for still-evolving markets. Thus, in most developing countries, factory-type methods of mass-production of software are rarely applied to production.

In highly developed countries however, mass-production techniques and modern management practices have been moving into the software industry. Indeed, some experts believe that further standardization of software produc- tion will become an important lever for the swift and cost effective creation and diffusion of software applications. In some cases these practices have been applied to developing countries as well.

Even though software may be highly dependent on the specific charac- teristics of the market, the software industries in several of Vietnam's neigh- boring countries have begun the transformation from an 'unstructured service' into an industry offering an internationally marketed set of products with a guaranteed level of quality. By creating libraries of interchangeable software code that are used as "building blocks" for quickly assembling programs, companies in some of these countries have been able to enhance the international competitiveness of their products. Software production tools that use this "building block" approach run on powerful technical work- stations and are called 'computer aided soft engineering' (CASE) tools.

Another innovation in the way software is produced has been the devel- opment of software subcontracting arrangements. More and more, large electronics companies, including large software developers, 'outsource' routine tasks to specialized software subcontracting firms. Moreover, soft- ware subcontracting is sometimes organized on a global scale. European and US firms, for example, are using software subcontractors located in India to create an international 24 hour production schedule. In principle, this type of arrangement, could reducing the amount of time it takes to finish a project by half. During our interviews and visits to some of the Vietnamese IT service firms, we have seen early examples of sub-contracting arrangements with a major foreign customer and a software house in Europe.

The software and IT service sector includes a range of specialist activities that may be grouped in the following six categories:

  1. Systems software development such as operating systems, compilers and utilities.
  2. Development of packaged applications.
  3. Development of specialized "firmware" that is built into particular hardware products to perform a dedicated function (e.g. computer code embedded in engine controls for automobiles).
  4. Hardware/software integration; including systems planning, design, installation, and maintenance (systems integration).
  5. Customs application development and service.
  6. Data processing services offered to customers.
These six categories of specialized activity may also be seen as six (or more) separate IT markets.

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Last update: May 8th, 1995

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