Taking the Focus Off the Hardware

IT companies in Korea have built up a strong reputation over many years as excellent hard¬ware manufacturers, especially in the field of memory and flat panel displays. But the Ko¬rean software industry has always been lag¬ging behind. While there are some game com¬panies in Korea that have a portion of international mind-share, useful software applications are not nor¬mally Korea’s forte.

There’s never really been anything to write home about. However, it doesn’t have to be that way. Korean companies can jump into the software business at any time. The question arises, then, if a new or small Korean business were to jump into the software industry, where would be a good place to start? Using yesterday’s techniques and business practices can be a very bad move for a new software company. Where is the cutting edge; where is the place that new software companies can find success?

Software development used to be a simple product creation business. Companies would create a software application, burn it onto a hundred thousand CDs, package it up, and deliver it to stores. It was a simple commodity. Large companies were best at this, able to create a number of related applications and putting them into a pack¬age together. Many famous software development companies such as Adobe, Oracle and of course Microsoft have made their fortunes by delivering packaged software to stores. But the Internet is changing all that.

As the Internet becomes more prevalent, software is moving off the local com¬puter and onto the Internet, hosted in a central location and offered as a service. Take Adobe’s flagship product, Photoshop, as an example. It has been the beginning and end of digital photo editing, both for 15 year old hobbyists at home and professionals in the press. It costs $699 and is considered a good investment for any company that deals with photos on a regular basis. However, it now has competition from an unex¬pected angle. Aviary.com has developed a set of photo editing tools to rival Adobe’s entire creative suite, and they don’t run as programs on a local computer, but as a webpage. They are fully functional desktop-quality applications but accessed within a Web browser like Internet Explorer or Firefox. And, what’s more, they are freely avail¬able to anyone who signs up to the website.

Google has also done something with their Google Docs offering. They offer a fully functional document editing software application, a presentation application, and a spreadsheet application. These are similar in form and function to Microsoft’s Word, PowerPoint and Excel. But whereas Microsoft Office is $399.95 from its home page, Google Docs are freely available to anyone who signs up, exactly in the same manner as Aviary. There are many other websites that have sprung up like this, from simple functions like a to-do list, to complex proj¬ect management tracking functions.

They are all generally laid out in the same way. This is a radical shift in the business model and philosophy of software creation. The traditional business model of selling a commodity has given way to something that doesn’t look like a business model at all; in fact it looks like it’s giving all the company’s hard work away for free. However, it is not quite free.

A visitor to Aviary.com might not notice right away, but the website includes some limited advertise¬ments. Also, the content created using the site’s tools remains on the site, and is sorted, tagged, and ranked by popularity. The website also has a tiered membership policy. While anyone can access many features of the web site for free, and store up to 50 creations, if someone wants more storage space, more features available, no advertisements, ac¬cess to tutorials and user groups, and a Pro status symbol next to their user¬name, that user needs to buy a membership. Mem¬berships are $95 a year and come with all those extra features.

Aviary.com is pursuing a different goal than unit sales. They are creating value by creating a kind of on¬line social club, one where you pay membership fees, mix and mingle with other people who have similar in¬terests, browse, critique, and admire each other’s work, and instantly distribute your own work to the entire club, and the entire Internet. This social network of people who share the interests of Aviary’s software of¬ferings is quite valuable to its customers, who are more than willing to pay the membership fee to join. Aviary. com is a software company that is following the busi¬ness model of a gym rather than a manufacturing plant, and it works out for them rather well.

Google Docs follows a similar business model, but not as vigorously as Aviary.com does. Google has always offered services with its Google Ads program in mind, which is the core of the Google business model. The more people visit Google and search, the more money and value Google obtains. Integrated into the Google Docs page is easy and quick access to the other fea¬tures of Google, including the main search page. This is Google’s bread and butter. Google Docs is another av¬enue to get people to use Google for searches, and this is profitable for them.

Aviary.com and other on-line subscription-based ap¬plications are following a formula that is new, but is not original to them. It was most famously followed by the very popular on-line photo-sharing site Flickr.com. Flickr created a system where every action by its users was considered in creating valuable services for its us¬ers, and its users are willing to pay a membership fee in order to access all of the features Flickr offers to them. Also, advertisers are willing to pay to reach the number of users Flickr attracts with its valuable offerings. Flickr creates value in several ways. First of all, they collect digital content, which in Flickr’s case are photos, and open it up to interaction from users from all over the world. While Flickr does offer a private option for its photos, approximately 80 percent of its content is pub¬licly available. Each user’s interactions with the content are recorded to find out which photos are popular, which are highly rated, which are commented on, and which are ignored. Flickr processes all of this using a secret algorithm and then gives the photos a new rating, “interesting¬ness.” It then recognizes the photos with the most interestingness and places them prominently on the front page of the website. The users who created the photos enjoy the exposure of their work, the users who visit the site appreci¬ate the most interesting and popular photos be¬ing easily accessible, and everybody wins. Aviary is obviously following the same model that Flickr pioneered in 2004.

Giving away free software applications on-line in order to attract regular website visitors was combined with another popular Internet phenomenon, social net¬working, in 2007. Facebook, now with over 100 million users globally, opened up its website to third-party de¬velopers in the middle of last year. Thousands of devel¬opers, from individual hobbyists at home to corporate entities, developed applications for Facebook in hopes of becoming more famous or generating traffic to their own websites.

So far, the most popular Facebook applications have been games, video posting, and friend-finder applica¬tions. But, a report titled “The Key to UC Revenue Suc¬cess: It’s the Apps” by Denise Culver, research analyst with Light Reading’s VOIP Services Insider, focused on making money with Unified Communications. First, she said, the Facebook phenomenon is going to seep into the corporate environment. Social networks will soon be as widespread as instant messaging and e-mail, she predicted, and because of this, many companies will be looking for ways to create serious social networking applica¬tions to take advantage of the existing social networking phenomenon. Some people said that 2007 was the year of the Facebook application.

Is a Facebook application still the cutting edge of software development? Probably not now, because what can be better for users than to write an applica¬tion that can work on-line, on a social networking site that over 100 million people use, and can give the kind of content value that Flickr.com and Avi¬ary.com give? How about an application that works on-line, but on a large num¬ber of social networking, shopping, and rich content sites? This is what Google’s OpenSocial API, launched at the end of 2007, does.

OpenSocial, created by Google, is a tool for application developers to build social applications across many websites. Google has gotten many famous web¬sites to support the OpenSocial frame¬work, from social networking sites such as MySpace, Orkut, Ning, and LinkedIn to software as a service companies Sales¬force.com and Astadia.com to even Ko¬rean portal site Daum. Applications that are created with the OpenSocial APIcan work in the same way and be connected together when they are used on any of these sites, and many more. Despite a slow start at the end of 2007, OpenSocial has been gaining a lot of popularity re¬cently. Of course, many people are saying that the future of computing is mobile computing, with the Android operating system or the iPhone. The android OS is much easier to program for, because it is open-source and not strictly con¬trolled. Any small or medium-sized Ko¬rean company wanting to make a splash in the programming market could eas¬ily produce one or more small Android applications which would be great for both the domestic and international markets. The Android platform is linux-based, so in theory everything that one knows about Linux can be applicable to the Android operating system. Android programming is also similar to Java, so experience in that language can also be helpful.

So the cutting edge of software de¬velopment may in fact be a full-featured on-line application which creates digi¬tal content and includes a convenient OpenSocial component, or is entirely an OpenSocial application itself, or it may be something that can be run on a mo¬bile application. New Korean software development houses could look into these avenues in order to jump into the cutting edge of software.