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 Analysis
Summary Korea is on
the right track for positioning itself to join the developed nations.
The government has been proactive to establish a knowledge-based
society. Some of the government's actions were deregulating
telecommunication industry and putting computers in schools and
community centers to provide universal access. As a result, Korea
now possesses one of the best telecommunication infrastructures in the
world. However, the performance software and e-commerce markets
was sub-par due to security and piracy problems. The country needs
to resolve these issues to jump over the hurdle and go further in the IT
industry.
Korea possesses one of the best telecommunication infrastructures in the world. Approximately half of the population in Korea became active Internet and mobile phone users. This is a result of the supervision of a proactive government. The South Korean government deregulated telecom industry, which helped the country's Internet and wireless market enormously. People in South Korea enjoy relatively cheap telephone, broadband network services, high-speed cable modems, and DSL services. Indeed, eMarketer ranks Korea first when it comes to the time spent online per user, as shown in the table below. In addition, Ben Macklin ranks Korea third, behind the US and Canada, on a worldwide basis and number one within Asia, ahead of Japan and Singapore, in terms of broadband readiness. Furthermore, the highly skilled labor force is one of Korea's strengths. The Korean government and culture put high emphasis on education and successful careers. According to the CIA, the literacy rate as a percentage of people who can read and write at age 15 and over, is 98%. This is higher that that of many developed nations.
Despite these efforts to achieve the full potential, the country has been held back by concerns of security and piracy. Ipsos-Reid, a marketing firm, surveyed 8,500 adults, ages eighteen and over, from sixteen different countries and concluded that potential online credit card fraud is a major concern for 46% of adults around the world and a moderate concern for 26% [8]. The graph below shows that 10% of people in Korea know someone who personally has experienced e-fraud. Comparing this number to those from other fifteen nations surveyed, it is the second highest, just behind China. In addition, more than half of software in Korea is pirated according to the Business Software Alliance. It is crucial to resolve these problems to further enhance advancement of e-commerce and software industries in Korea. Also, IT literacy and English fluency are low in Korea. Most Korean Internet users have been on the Internet for only couple of years, and the Internet shopping malls and electronic shops are still in an embryonic stage. English fluency is needed to bring more opportunities in international market and electronic commerce since English is the most-used business and technical language in the world. To make matters even worse, the labor costs have been rising rapidly in the past decade in Korea. This may result in a sudden turn-off for the hot Korean hardware industry. The computer hardware is becoming a commodity item, thus, the best way to compete is through low costs.
The potential for non-IT companies, that rely on IT as an enabler, is great. First, the telecommunication infrastructure in Korea is solid. This eliminates the need to find innovative ways to resolve telecommunication problems such as bypassing poor telephone services or poor ISPs. Second, the Korean government is promoting e-commerce. For example, the Korean government is offering many incentives for foreign businesses such as corporate tax exemptions and income tax reduction. Third, there are many Internet users in Korea. Approximately half of the population is online in Korea. However, there are three challenges. First, Korea does not have enough software people. It is very time consuming and costly to train the software development capabilities internally. Thus, I believe the best way is to outsource. The potential countries to target are Israel, India, Ireland, and the US, to name a few. Second, there is a security issue. So far, the Korean government has been stepping to the right direction to resolve this problem. For example, the Electron Signature Act was passed in 1999. It provides an outline of the requirements and procedures for digital signatures authentication and licensing of certifications authorities. However, the impact of these government initiatives to lower security problems is unclear at this point and it may take a while to fix this problem since it involves cultural aspects as well. Third, the English literacy rate is low. However, this problem can be easily fixed by localizing the websites.
Although the potential for non-IT companies is great, it is not the case for other IT business such as software design, hardware manufacturing, hardware assembly, software programming, and call centers. The first thing to consider is its labor. Despite the well educated labor, there are not enough software engineers and the average level of labor cost in Korea is higher than that of other developing countries. The level of labor cost has increased significantly than the past and there are no reason to spend high labor cost when the same level of productivity can obtained from other nations such as India and Israel. Second, the piracy rate is way to high. According to the Business Software Alliance, the piracy rate in 2000 was 56% for Korea, compared to 24% in the US. This means that the market will not offer proper incentives for software companies. Third, the English literacy rate is low. Today, it is crucial to speak English to effectively communicate to teams in other countries. |
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