Option 5: “Internationalisation and Productisation”
This strategic option would look to strengthen Scottish software firms in the short to medium term that are looking to establish a more international presence and to productise their offerings. As an option, it addresses Scottish software’s structural weakness in having no indigenous firms with over 500 employees.
This strategy would encourage and induce:
- more full engagement of Scottish software players in the international scene;
- much more rapid entry into the international scene for embryonic firms than is currently the case;
- substantially advantageous conditions for Scottish firms in developing products and software packages in particular.
The advantages of this strategy are:
- a matched response to the global nature of the software industry;
- better concentration of software products as the more profitable market offerings enabling higher growth within the industry.
It will address some specific weaknesses of the current performance of the sector namely:
- profitability appears to be low - typically 5%. This is in line with the high service orientation and small firm dominance of the sector in Scotland but does not bode well for future growth;
- although there are significant overseas sales by a handful of firms, Scotland’s export performance in software is generally poor; the majority of ‘exports’ being to the rest of the UK. Again, the service orientation of the sector is a root cause, as is the high proportion of software employees, in in-house departments who indirectly export software embedded/or adding value to hardware and electronics;
- software performance in Foreign Direct Investment has been poor being less than one in 20 projects and about 0.5% share of the investment and 1.7% of the jobs created.
As such, a strategy in which internationalisation and productisation are central themes offers an excellent way forward for the software community. Clearly, the strategy must also look to address other specific and longer term development issues such as increasing the software business birth rate, the shortage of both technical and business management skills, and better access to finance for deal making.
