Information Economy Report 2012 of UNCTAD-The Software Industry and Developing Countries

The spread of information and communication tech­nologies (ICTs) continues to facilitate technological change in the globalizing economy. Recent editions of the Information Economy Report have documented how the rapid diffusion of mobile telephony and improved international broadband connectivity, includ­ing in the least developed countries (LDCs), as well as the introduction of new services and applications, are facilitating more inclusive development. This not only has implications for enterprise development but it also expands the scope for leveraging ICTs in such devel­opment areas as health, education, governance, the private sector and more.

In order, however, to ensure that this improved access to ICTs brings about the desired benefits, the devices and services provided have to respond effectively to the needs and capabilities of users. In many instances, this in turn necessitates access to relevant technological capabilities within the domes­tic economy. This applies in particular to the area of software, which critically influences the functionality of goods and services offered by both the private and public sectors. Against this background, the Informa­tion Economy Report 2012 puts the focus on the role of software in developing countries.

To facilitate structural transformation and technologi­cal advancement, it is necessary for countries to build domestic capabilities to allow individuals, firms and organizations to engage in learning processes. In this context, Governments should seek to adopt policies that help expand the opportunities for such learning, especially in new industries that offer wide learning opportunities. The software industry is such an industry. As a general-purpose technology, software has wide application throughout the economy and society. It is also characterized by relatively low capital barriers to entry and its relevance is likely to remain high in the future.

Developing software capabilities is important for sev­eral reasons. Software consists of a set of instructions that enable different hardware (computers, mobile phones, smart phones and tablets, and the like) to perform the operations required. In this sense, it can be seen as the “brain” of ICT devices. Software can help firms to manage their resources better, access relevant information, lower the costs of doing business and reduce time to market. Greater emphasis on ICTs in the delivery of government, health care, education and other services is also raising the need for capa­bilities to develop customized software applications. Different ICTs are increasingly permeating societies in countries of all levels of development. In this context, developing the technological capabilities to adopt and adapt existing software solutions, and eventually to in­novate, becomes more relevant.

Consequently, countries increasingly need a cer­tain capacity to understand, manipulate and adapt software. Other things being equal, locally based software expertise is better positioned to understand domestic needs and therefore to develop relevant and innovative applications and content. Countries with well-developed software industries are better placed to implement their own tailored solutions. Further­more, close interaction between domestic producers and users generates learning opportunities and gains in terms of productivity and operational efficiency, and thereby contributes to market expansion and diver­sification. Software industries also tend to generate high-end, direct and indirect employment, especially for skilled youth.

The opportunities of software and service activities for developing countries – thanks to the low capital entry requirements as well as the sector’s high-value, high-growth nature and high-technology, knowledge-rich profile – are well recognized. However, in many developing countries, it is only recently that sufficient demand for ICT applications and software has emerged to warrant a more systematic treatment of the software area. Thanks to changes in the ICT land­scape, there is today more scope even for small-scale developers in developing countries to participate in software development and production.

The expanding use of mobile phones is creating new domestic demand for mobile applications and ser­vices geared towards improving access to domestic news and entertainment, government services, patient care, market information services and mobile money transfers. Having the software developed locally enhances the chances of it being adapted to the spe­cific needs of the domestic users (for example, taking cultural and language considerations into account). Improved broadband Internet access allows developers in developing countries to engage in software projects and export their services. Meanwhile, novel software production modes – such as distributed peer-production over the Internet – are leading to the creation of new business models based on local software service provision and adaptation.

As a framework for its analysis, the Information Economy Report 2012 introduces the concept of the national software system. It emphasizes that actions and interactions of domestic software producers and users are greatly influenced by the quality and afford­ability of ICT infrastructure, access to relevant hu­man resources and capital, the legal framework, and enabling business infrastructure, as well as by the links with software networks in the rest of the world. Overall, the competitiveness of the system is affected by the national vision, strategy and government poli­cies which should nurture software capabilities and the software system as a whole. Governments play a central role in the system. They are important users of software (notably through e-government and public procurement activities) and they strongly influence the enabling factors of the system.

Source and Full Report:

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