The Government of The Philippines and the private sector are working hand in hand in preparing a road map that is expected to set the direction of the local software industry in the next few years.

The Commission on Information and Communication Technology (CICT) and the Philippine Software Industry Association (PSIA) are collaborating in planning the road map which will be based on a global study conducted by information technology research and consultancy firm XMG Inc.

XMG?s Global Software Industry Maturity Model classifies the Philippines, along with China and India, as an ?active supplier,? or a country that meets the needs of foreign markets either as an outsourced software services provider or an exporter of packaged software. Compared to the Philippines, however, China and India have far bigger software industries that can adequately address the requirements of foreign and domestic markets.

Factors

XMG?s model cites two primary factors that drive the growth of a country?s software industry: increased ICT spending and the rising number of professional software developers.

XMG stated that India and China are following the path towards becoming ?global drivers? like the US and Japan whose domestic software ecosystem ?pulls? the global supply chain for software products and services.

Driven by its large supply of IT workers, India is classified as a net exporter of products and services. China, on the other hand, is a net importer due to its huge domestic investments in ICT, which is largely government-led.

In the Philippines, ICT spending is seen having a cyclical effect in terms of developing domestic demand for software products and services. By improving network readiness and reducing software piracy, ?undervaluing total spending on software,? can be avoided, said PSIA president Fermin Taruc. This means aggregate domestic spending on ICT will be higher if the incidence of software piracy is lower.

?Other countries like China have deployed the local (software) industry to drive domestic spending. That is what?s lacking in the Philippines,? lamented Lauro Vives, global managing partner for XMG.

In spite the low domestic demand, XMG expects the Philippines to continue becoming an active supplier in the next few years and grow its software industry in the process. Vives, however, warned that the country should find ways to curb its depleting manpower base of software professionals to sustain this growth.

At present, most local software companies provide services rather than sell packaged software. According to a PSIA study, the industry last year generated about 7 billion pesos (US$129 million) in revenues, an estimated 70 percent of which was accounted for by services, said Taruc, who also heads Jupiter Systems Inc. The company developed its own ERP (enterprise resource planning) software, and is one of only a few local software players that has successfully penetrated the foreign market.

PSIA now has 40 members, most of which provide services for clients abroad. ?We can elect to remain as an active supplier. That?s not necessarily bad because it brings investments to the country,? Taruc said.

CICT officials and PSIA representatives will meet in the next few weeks to formulate a road map by June. The road map will be based on key drivers identified by the XMG study, Taruc said.