Software development covers three major product categories, each with its own use:

(i)    applications software - designed to perform specific functions such as payroll or accounting
(ii)   systems software - computer operations or tools for software development, and
(iii)  middle ware - programs between applications and system software

Based on interviews with industry sources, the local software development sector is composed of more than 300 firms providing employment to an estimated 10,000 programmers. The industry offers a host of software development services including analysis and design, prototyping, programming and testing, customization, reengineering and conversion, installation and maintenance, and education and training in system software, middleware and application software.

With the exponential spread in the use of new ICTs worldwide, the global software industry promises to be one of the most robust growth areas today. A study by McKinsey & Co. projects total revenues for IT-enabled services worldwide to reach about US$142.2 billion by the year 2008.

The US is the industry’s largest market for software products and services, accounting for 40% of the total demand. This is followed by Europe with a 38% share and Japan with a share of 12% of the total world demand.

Among software developers, India is the world’s leading supplier. It has maintained its premier position in the software development industry due to skilled manpower and linkages with key markets.

Local software companies generate sales in two ways: first, by developing software products that are marketed to users; and second, by obtaining contract work from other firms. Sometimes, software firms deploy or assign their skilled personnel to a particular client or company to handle specific IT needs. In 2001, the Philippine software development industry posted about US$15 million in revenues.

The Philippines has been providing first-rate software development products and services to markets such as the US, Europe, Japan and Australia for more than two decades now. The industry experienced robust growth in the 1990s when foreign investors began to take advantage of local programming expertise. At present, however, the foremost issue facing the industry is the lack of skilled manpower. Manifestations of the problem occur at two levels: programming and project management.

Despite the number of IT schools operating in the country, the curricula in these schools do not meet industry needs and the graduates are not considered skilled enough by the industry for immediate hiring. There are also a limited number of senior personnel with the experience and aptitude to manage projects. No formal training for this position is available, and the expertise is acquired through experience on the job.

Software developers also have to contend with the high cost of operations. Development software licenses are expensive, particularly those of well-known brands. Equipment upgrading and the tools to improve productivity such as work-tracking software also entail substantial investments.

As with the three other IT sectors covered under the Pearl2 Project, the local software development industry has no comprehensive marketing program to develop and sustain foreign clients. Part of the problem concerns the lack of CMMI certification which most clients abroad consider important. CMMI certification, however, is a long and expensive process most local firms can ill afford. The local market for software development, on the other hand, is small. Local clients generally still lack appreciation for the value of software development and are reluctant to invest in this activity or purchase local software products.


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