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Margarita Roa, Manila Software, Service Exports The software industry still remains underdeveloped in the Philippines, industry sources said. “It is still very much a sunrise industry and we haven’t even scratched the surface of opportunities in the software industry,” said Augusto C Lagman, chief executive officer of Software Implementors, Inc. The Philippine Department of Trade and Industry (DTI) has identified the computer software industry as one of the top 14 export winners of the country. Software and service exports have grown exponentially in less than 10 years. The Bureau of Export Trade Promotion (BETP) reports that exports grew from only about US$10 million in 1989 to US$250 million in 1997. The sector’s dollar earnings were expected to reach US$300 million by the end of 1998. The Philippine Software Association (PSA) earlier projected that the country will reach this export level in the year 2000. The Philippine software industry is composed of around 200 firms that are either independent and privately owned, joint ventures with foreign firms, or subsidiaries of large domestic companies. It has over 30,000 IT professionals, 10,000 of whom work abroad. But as in other developing countries, growth in the Philippine software sector is still largely spurred by international software companies that have either set up their subsidiaries in the country or appointed local vendors as distributors. The number of major software firms that have established their presence in the Philippines has been growing in recent years. A study conducted by accounting and auditing firm Price Waterhouse for the Business Software Alliance (BSA) in 1997 projected that sales of packaged software in the country will grow at an average annual rate of 19.1% between 1996 and 2001. By the year 2001, it estimated that the industry could create 973 new jobs, boosting the industry’s total contribution to 2,656 direct and indirect jobs.
Local Firms Struggle But despite the rosy projections, Philippine software firms are still struggling to penetrate both local and international markets. In the case of software packages, the high risk and cost of product development prevent many Philippine firms from engaging in the business. PSA estimated that only about 65 Philippine software companies are engaged in actual product development and majority are in the services business. SoftTech Advantage (STA) president, Emma V Teodoro, said developing products requires much time and capital. She cited that STA’s year 2000 conversion tool, Fieldex, took 50 man-years to develop. By Philippine standards, STA is already a large software company with nearly 200 people. But Teodoro said the company still experiences some time gaps between developing new products and marketing existing ones. Product development and marketing is even more difficult for many smaller companies which employ an average of less than 50 people each. Teodoro said a negative perception amongst Philippine firms made it difficult for local software companies to penetrate the domestic market. She also noted that there were some “lousy” software firms that have earned the mistrust of local businesses. Entering the international market is even more difficult without a known brand name and proper business connections, she said.
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