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Global Development Institute

Software Strategies in Developing Countries

Richard Heeks

Abstract

Production of software provides many potential benefits for developing countries (DCs), including creation of jobs, skills and income.  This paper reviews five different strategic approaches to software production that can be adopted:

  • Export of software services, the model followed by India – the most successful producer – is beset by various constraints, but does offer opportunities for a few countries.
  • Export of software packages has been far more limited.
  • Production of packages for the domestic market is difficult given the domination of imported packages.
  • Selling software services to the domestic market is the choice of most DC software enterprises, but it typically represents a survival strategy more than a development strategy.
  • Finally, some firms successfully ‘straddle the intersections’ between the other strategies, often by recognising synergies and growth routes between different market segments.

Given the many constraints that exist, the paper reviews the factors underlying successful software production in developing countries, which fall into three domains:

  • Enterprise tactics, such as the ability of successful firms to identify growth markets and to access necessary inputs.
  • National strategy, such as government assistance in providing the inputs of finance, skills, technology and knowledge that successful firms require.
  • National vision, that carries forward both government and enterprises.

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Educator's guide

Synopsis questions

  1. Describe the different strategic approaches to software production that developing countries might adopt. [all parts]
  2. How feasible is each of the strategic approaches described? [all parts]
  3. Are software exports "24-carat or fools' gold"? [part 1]
  4. What differentiates developing country winners and losers in software production? [part 5]

Development questions

  1. What are the benefits to developing countries of building up local software production?
  2. Have India's software successes helped or hindered other developing countries?
  3. You have been called in as a consultant. Make recommendations on future action for:
    • a developing country software company
    • a developing country government
  4. Do you agree that a future Microsoft will not emerge from a developing country?
  5. Are imported packages likely to penetrate all parts of a developing country's domestic software market or will some parts remain that are too specialised/localised for imports? What are the implications of your answer for software production in developing countries?
  6. Is government intervention necessary for software industry development, or should developing countries leave that development to market forces?
  7. Is 'vision' something that you are just born with, or is it something that you can develop?