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.
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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, and Israel. 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 innovation. 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
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