KOREAN IT SERVICE INDUSTRY TODAYJUNE SUNG PARK, PROFESSOR, KAIST;

CHAIRMAN, SOFTWARE ENGINEERING METHOD AND THEORY (HTTP://SEMAT.ORG)

2014 INTERNATIONAL FORUM ON INDUSTRIAL ECONOMIES, KOREA DEVELOPMENT INSTITUTE, SEOUL, 11/6/2014

HISTORY OF KOREAN IT SERVICE INDUSTRY

Out of 60 years’ history of computer technology, Korean IT service industry was started 30 years later

than leading countries, so has been busy imitating information systems proven successful elsewhere.

1950 1960 1970 1980 1990 2000 2010

Mainframe Batch Online Client / Server Web Mobile Cloud

2

SLOW ADVANCE IN IT SERVICE TECHNOLOGY

IT service technology in Korea is outdated due to a low IT maturity level of domestic firms, the lack of

export drive, and the lack of technology transfer through global delivery centers from world class

vendors.

1950 1960 1970 1980 1990 2000 2010

Mainframe Batch Online Client / Server Web Mobile Cloud

Structured Methods Info. Engineering

Waterfall Process

CBD

Unified Process

SOA

3

POOR MANAGEMENT OF IT SERVICE BUSINESS

IT service business has been managed like a manufacturing business in Korea, while it is a “people business” with very different business economics.

Ineffective business models have been pursued, such as the coupling of internal IT shared service and external IT service business, and the coupling of IT service business and software product business.

Inadequate HR management has been conducted rather than pursuing “talent management” practices.

Instead of training their own professionals with standard processes, methods and curricula, low-cost subcontractors have been used, resulting in low quality, low productivity, and cost overruns.

4F. Barber and R. Strack, The Surprising Economics of a People Business, Harvard Business Review, June 2005.

E. Michaels, H. Handfield-Jones and B. Axelrod, The War for Talent, Harvard Business School Press, 2001.

LACK OF INTERNATIONAL COMPETITIVENESS

Leading Korean IT service companies

pursued revenue growth as a generalist

instead of profit increase as a specialist.

With the lack of strategic focus, service

professionals had no distinctive

competencies.

With the lack of competencies, the

transition from labor-based services to

asset-based services couldn’t be made.

As a result, companies couldn’t grow to

a global company.

5F. Barber, P. Catchings, Y. Morieux, Rules of the Game for People Business, Boston Consulting Group, April 2005.

F. Giron, The Move to an Asset-Based Services Play, Forrester Research, 2012.

Productized Assets

Globally Integrated Operation

Economies of Scope

Asset-Based Service

Labor-Based Service / Specialist

Labor-Based Service / Generalist

FUTURE DIRECTIONS

Train professionals with advanced software engineering and emerging technologies such as cloud, mobility, social, big data, and IoT.

Train professionals with fundamental IT service disciplines such as Business Process Innovation, Service-Oriented Enterprise Architecture, Metadata Management, IT Service Automation, etc.

Train management with “people business,” “talent management,” strategic planning, and IT service process standardization and integration.

Pursue transition from LBS to ABS.

Expand delivery centers to abroad.

Then try export.

6After all, it’s a business of selling knowledge and skills of specially trained professionals

(like lawyers, medical doctors, building architects, etc.)