the extent of globalization
of Software innovation
Will the software development laboratories follow the production mills?
HaS innovative activity
software become global?
The question attracts interest because software has
become a global business.
For example, exports of business services and computer and information
services grew at an average annual rate
of 27% in India (1995–2003) and at a
rate of 46% in Ireland (1995–2004), with
similar rapid growth in Brazil, China,
3 Yet, the question remains
open. While software production takes
place in many countries, innovative
software is not created everywhere.
Moreover, there is increasing evidence of growing software development
operations in countries such as India.
For example, the Microsoft India Development Center (located in Hyderabad)
has grown from two products and 20 employees in 1998 to 70 products and over
1,500 employees today. SAP Labs India
is now that company’s second-largest
Research and Development and Global
Services and Support center, with 25% of
its employees engaged in research and
new product development. IBM’s India
Software Labs similarly have large operations in Bangalore, Gurgaon, Pune,
Hyderabad, and Mumbai. Yet, despite
these anecdotes the question is not easy
to answer at a general level. In many
cases innovation cannot be defined. For
that matter, sometimes software cannot be defined.
In this column we summarize and
extend an investigation into software
2 We look at software developed to be sold as a standalone product,
software developed to be sold as a service (such as software available for use
on salesforce.com), and software developed by a user firm. We exclude software for semiconductor chips and also
software written for application-specific
computers such as some CAD software.
One measure of innovation appears
in patent data. To be sure, not all inventions are patented and not all patents
are important. However, information
in the text of the patents and their technical classes can help identify patents
related to software. Moreover, patents
provide a consistent source of data
about innovative activity and can provide some useful insights.
In 2007, 12,692 U.S. software patents
were issued to inventors in the U.S.—a
larger number of patents than all other
areas of the world combined ( 6,397).
That is striking because growth in software patenting between 1988 and 2007
in the U.S. was comparable to that of
the rest of the world: patenting by U.S.
inventors grew at an average annual
rate of 32.6%, compared to 34% in the
rest of the world. Software innovation
in the so-called underdog countries
has been growing, but not faster than
in the U.S. (see the figure here).
We also interviewed the Indian software research and development labs
of several large multinational firms.
We found some evidence of increasing
autonomy among software development centers. In particular, we found
that most organizations started by giving their Indian software labs assigned
development or testing work. Yet, it
rarely stopped with those assignments.
20 CommunICatIons of the aCm | feBRuaRY 2009 | vol. 52 | No. 2