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The international computer software industry: A comparative study of industry evolution and structure
152
J PROD INNOV 1997;14:137-156
BOOK
MANAG
implementation (MDI) framework. This approach considers the application of technology and the design of user teams from an integrated point of view and examines their impact on organizational change. This is accomplished by the MD1 team: a cross-functional team that includes representatives of all the parties with a stake in the process. The book is organized into four parts. Part I introduces the basic themes and concepts that are used throughout the book, including the MD1 framework. Part II expands on this framework, and describes the composition of the MD1 team. MD1 team members might include “delegates” from the user team, representatives from the information technology and other functions, affected managers and, where appropriate, external stakeholders such as suppliers and managers. The crux of the book is found in Part III, which describes the process by which the MD1 team designs and implements the new information technologies and the teams that will use them. Finally, Part IV discusses the implications of redesigned user teams and technologies in terms of their impact on the organization. We believe that this section, which deals with such issues as team-based reward systemsand lateral career paths, will be the least useful part of the authors’ presentation. What we liked about Teams and Technology was its straightforward, jargon-free approach to what is, after all, a very complex process. In effect, it serves as a readable, relatively easy-to-follow guidebook for a manager faced with the need to design crossfunctional teams while making the best use of increasingly dynamic information technology. Although their presentation is straightforward, the authors make no attempt to gloss over the complex human considerations involved in the process. In this they are aided by their behavioral science backgrounds. For example, chapter 4 not only specifies the characteristics of a good user team delegate, it also provides considerable insight regarding the difficulties faced by an individual who has to perform as a member of the MD1 team without compromising his or her role as a user team member. A number of devices are used to facilitate reader understanding. For example, the book contains numerous examples of applications of the MD1 process in different settings. In addition, there are a number of diagrams and charts that are very useful in understanding the concepts described. Two of these are particularly noteworthy in that they relate to the central focus of the book: Table 5-1, which shows a matrix that
REVIEWS
associates various stakeholder types with their focal area, their role and key characteristics; and Table 6-1, which relates the design features of project teams to their respective characteristics. A feature of the book that adds very little, however, is the continuing, fictitious “Paws and Claws” example that is presented in the form of italicized vignettes at the beginning and end of every chapter. Although these are intended to illustrate situations involved in the MD1 process as its exposition unfolds, we did not find them helpful. In contrast, the occasionally lengthy notes for each chapter appear at the end of the book where it is doubtful they will be seen by the average reader. That is unfortunate because some of these notes contain substantive material that would less likely be overlooked if included in the chapter itself. According to Mankin, Cohen, and Bikson (p. 65), “The challenge for organizations . . . is not so much overcoming resistance to change as it is establishing conditions that enable their employees to embrace the opportunities it creates.” Those who are responsible for designing effective cross-functional project teams should find Teams and Technology helpful in that regard. Laurence P. Feldman University of Illinois at Chicago
The International Computer Software Industry: A Comparative Study of Industry Evolution and Structure, edited by David C. Mowery. New York: Oxford
University Press, 1996. 324 + x pages. $49.95. As David Mowery writes in his first paragraph, limited scholarly research has been published on the software industry despite its major role in the industrialized countries. This pioneering collection of 11 essays presents a Sloan Foundation-sponsored study of the industry’s evolution in the United States, Western Europe, Russia, and Japan that will shape the research agenda for the foreseeable future. And, although focused on software (as well as computer hardware), the authors’ conclusions have implications for other technology-driven industries, particularly with regard to the importance of academic research and sophisticated lead users. The book covers both custom and off-the-shelf ‘ ‘package’ ’ software, emphasizing traded (versus in-
BOOK
REVIEWS
ternally developed) and stand-alone (versus embedded) software. This economic history shows the daunting constraints of scholarly books tracking a fastmoving industry like software: the “present” has changed greatly since the authors concluded their efforts, though the analysis of the past remains sound. Such analysis is demonstrated by Edward Steinmuller’s chapter on the history of the U.S. software industry. He identifies two key industry inflection points. The first came in the late 1960s with the unified IBM 360 architecture, IBM’s unbundling of software, and the emergence of the minicomputer. The second was in the early 1980s with the creation of a packaged software market linked to the adoption of PCs. Steinmuller describes the cause and effects of these inflection points, and his analysis reminds us that opportunities for radically new products in technology-driven industries can become obsolete by the same sort of technological shifts that led to those opportunities in the first place. After Steinmuller’s chapter, the implicit focus of several others is the government policies associated with both the lead of U.S. firms and with the largely unsuccessful efforts of global competitors to catch up. In a second chapter on the United States,Richard Langlois and Mowery argue that the U.S. lead can be traced to defense R&D policies during the industry’s formative years and, in particular, the strong efforts by military sponsors to diffuse cutting-edge knowledge to industry. Failed attempts to catch up with the U.S. lead are the focus of two chapters on Western European countries. I found these particularly valuable. Many of the Europeans problems stem from the designation of a single ‘ ‘national champion” hardware producer in each major country, which, rather than threatening IBM (or later Japanesefirms), left only Germany with a major independent hardware maker. The book chronicles how mergers of failing firms in Britain and France led respectively to ICL and Groupe Bull, both of which later became dependent on Japanese capital and technology. These European chapters have the most detailed and up-to-date market statistics of the book, including breakdowns for hardware and software, products and services. and by size of computer (PC to mainframe). They also chronicle in detail various cooperative research projects such as the ESPRIT and Eureka Europrojects and the United Kingdom’s Alvey project. Such “catch-up” programs are a relatively minor part of the two chapters on Japan, which focus on
custom mainframe software and PC package software respectively. The first of these notes that independent software firms play a small role in the Japanese market, in comparison to firms spun-off from large user firms and computer makers, as well as the in-house software development capabilities of the users and hardware producers. This chapter, by Y. Baba, S. Takai, and Y. Mizuta, also examines the pressures that favor custom software over package software among user firms, particularly in mainframe software. It concludes with a fascinating table classifying Computopia’s list of the top 100 Japanese software companies as either spin-off or independent firms. The other chapter on Japan reprints and extends one of the first scholarly examinations of its difficulties developing a PC package software industry. Here, Tom Cottrell argues Japan’s main problem was the emergence of multiple incompatible standards, caused by the oligopolistic hold of Japan’s mainframe hardware companies and the difficult customization of MS-DOS to support the Japanese language. Come11 also notes the productivity penalty paid for Japan’s use of scarce software engineers to product custom software: producers gain less revenue by selling custom software once instead of multiple sales of the same package, whereas users have fewer options (because a package can support multiple users). The remaining chapters examine the Russian software industry, intellectual property policies. and the RISC fad in central processor chips. The topics are broad and disparate, but the essaysshare a set of common (if unarticulated) themes concerning the global development of the software industry: the importance of links to complementary producers (mainly producers of computer hardware);
l
l
l
l
the tension between entrepreneurial software developers versus integrated firms providing hardware, software, and services: the central role of universities in the industry’s development, including the importance of links to industry and the relative emphasis placed on theory and applied techniques in both teaching and research; and the role of key users (though the analysis does not take it to the next logical step. i.e.. that the wide
154
J PROD INNOV
BOOK REVIEWS
MANAG
1997;14:137-156
diffusion of software throughout the economy supported producer growth via user feedback). As these themes suggest, the book has a strong public policy emphasis, often neglecting examination of market forces in favor of central government policies, which are readily identifiable but often marginal in impact. For example, whatever boost given by U.S. government policies for software diffusion in the first two postwar decades, even indirect effects are questionable for the PC era. Few workers moved from defense contractors to PC package software firms (due to gaps both in corporate culture and age), so, for instance, the adoption of PCs by thousands of school districts is a more important (yet unexamined) government policy for this segment. The book suffers from other problems endemic to such edited academic volumes. Some data and observations are dated; conflicting assessmentsamong authors in the United States, Europe, and Japan are left unresolved, and important areas of inquiry are left uncovered in all three continents. There are also important gaps in the geographic coverage, most notably India (which would provide a contrast of language and institutions to the similar strategies used in Russia), Southeast Asia (which is seeking to emulate both Japan and the United States) and Canada (enabled by spillovers of U.S. technology). And, despite the emphasis on the role of the U.S. computer science departments, such researchers are absent from this volume. Some authors show a weak understanding of the specific technologies and practices they write about; for example, with the dispersal of standard-setting power across multiple firms (e.g., Compaq, Intel, and Microsoft in PCs), the book’s discussion of the importance of links to hardware producers should instead talk about computer architectures (using the formulation of Ferguson and Morris [ 11). Thankfully, other authors (notably Peter Grindley and Robert Merges) inform their writing with a keen grasp of specific developments. Finally, reading the book’s self-identified limitations gives some idea of why such macro-level research has been so scarce. One key problem is that of measurement: as noted by Steinmuller, Commerce Department SIC codes are virtually useless for software, so the authors largely rely on International Data Corp. estimates. Also Commerce data only report goods that are resold: as Steinmuller notes, traded software probably represents a minority portion of the output of the industry. The role of software embedded in other types
of products (e.g., avionics, telephone switches) is particularly understated. Such weaknesses highlight both the inherent difficulties and research opportunities in this area. The book’s strengths-both theoretical and descriptivecombined with its limitations should shape the future research agenda on the development of computer software. One such future project would be to provide comparable data for questions raised by some authors but ignored by others. What are the amounts of packaged software, custom software, and integration services in each of the developed countries? What about embedded and untraded software? Are the producers affiliated with users, manufacturers, or leading accounting firms? How do the various posited successfactors (links to sophisticated users and hardware makers, availability of university training, diffusion of academic research, location in an industry cluster) differ among the package, custom, and embedded software? Such gaps in knowledge also apply to micro-level issues, such as the make versus buy decision for each of the three types of software. Of particular interest to JPZM readers is a discussion of how software development practices compare to what we know about NPD processes in other technology-based industries. For example, does assigning parallel teams to successive generations of the same product have a precedent in other industries? How is the role of lead users (“beta sites”) changing? What is best practice for ideation? On balance, those interested in the global software industry-both current knowledge and opportunities for future research-should not skip this book. Joel West University of California, Irvine
Reference 1. Morris, Charles R. and Ferguson, Charles H. How architecture wins technology wars. Harvard Business Review March-April: 86-96 (1993).
Competing in the Information Age: Strategic Alignment in Practice, by Jerry N. Luftman. New York: Oxford University Press, 1996. 411 + xvii pages. $35.00. This book serves a variety of academic and practical needs. The first half of the book introduces the reader
J PROD INNOV 1997;14:137-156
BOOK
MANAG
implementation (MDI) framework. This approach considers the application of technology and the design of user teams from an integrated point of view and examines their impact on organizational change. This is accomplished by the MD1 team: a cross-functional team that includes representatives of all the parties with a stake in the process. The book is organized into four parts. Part I introduces the basic themes and concepts that are used throughout the book, including the MD1 framework. Part II expands on this framework, and describes the composition of the MD1 team. MD1 team members might include “delegates” from the user team, representatives from the information technology and other functions, affected managers and, where appropriate, external stakeholders such as suppliers and managers. The crux of the book is found in Part III, which describes the process by which the MD1 team designs and implements the new information technologies and the teams that will use them. Finally, Part IV discusses the implications of redesigned user teams and technologies in terms of their impact on the organization. We believe that this section, which deals with such issues as team-based reward systemsand lateral career paths, will be the least useful part of the authors’ presentation. What we liked about Teams and Technology was its straightforward, jargon-free approach to what is, after all, a very complex process. In effect, it serves as a readable, relatively easy-to-follow guidebook for a manager faced with the need to design crossfunctional teams while making the best use of increasingly dynamic information technology. Although their presentation is straightforward, the authors make no attempt to gloss over the complex human considerations involved in the process. In this they are aided by their behavioral science backgrounds. For example, chapter 4 not only specifies the characteristics of a good user team delegate, it also provides considerable insight regarding the difficulties faced by an individual who has to perform as a member of the MD1 team without compromising his or her role as a user team member. A number of devices are used to facilitate reader understanding. For example, the book contains numerous examples of applications of the MD1 process in different settings. In addition, there are a number of diagrams and charts that are very useful in understanding the concepts described. Two of these are particularly noteworthy in that they relate to the central focus of the book: Table 5-1, which shows a matrix that
REVIEWS
associates various stakeholder types with their focal area, their role and key characteristics; and Table 6-1, which relates the design features of project teams to their respective characteristics. A feature of the book that adds very little, however, is the continuing, fictitious “Paws and Claws” example that is presented in the form of italicized vignettes at the beginning and end of every chapter. Although these are intended to illustrate situations involved in the MD1 process as its exposition unfolds, we did not find them helpful. In contrast, the occasionally lengthy notes for each chapter appear at the end of the book where it is doubtful they will be seen by the average reader. That is unfortunate because some of these notes contain substantive material that would less likely be overlooked if included in the chapter itself. According to Mankin, Cohen, and Bikson (p. 65), “The challenge for organizations . . . is not so much overcoming resistance to change as it is establishing conditions that enable their employees to embrace the opportunities it creates.” Those who are responsible for designing effective cross-functional project teams should find Teams and Technology helpful in that regard. Laurence P. Feldman University of Illinois at Chicago
The International Computer Software Industry: A Comparative Study of Industry Evolution and Structure, edited by David C. Mowery. New York: Oxford
University Press, 1996. 324 + x pages. $49.95. As David Mowery writes in his first paragraph, limited scholarly research has been published on the software industry despite its major role in the industrialized countries. This pioneering collection of 11 essays presents a Sloan Foundation-sponsored study of the industry’s evolution in the United States, Western Europe, Russia, and Japan that will shape the research agenda for the foreseeable future. And, although focused on software (as well as computer hardware), the authors’ conclusions have implications for other technology-driven industries, particularly with regard to the importance of academic research and sophisticated lead users. The book covers both custom and off-the-shelf ‘ ‘package’ ’ software, emphasizing traded (versus in-
BOOK
REVIEWS
ternally developed) and stand-alone (versus embedded) software. This economic history shows the daunting constraints of scholarly books tracking a fastmoving industry like software: the “present” has changed greatly since the authors concluded their efforts, though the analysis of the past remains sound. Such analysis is demonstrated by Edward Steinmuller’s chapter on the history of the U.S. software industry. He identifies two key industry inflection points. The first came in the late 1960s with the unified IBM 360 architecture, IBM’s unbundling of software, and the emergence of the minicomputer. The second was in the early 1980s with the creation of a packaged software market linked to the adoption of PCs. Steinmuller describes the cause and effects of these inflection points, and his analysis reminds us that opportunities for radically new products in technology-driven industries can become obsolete by the same sort of technological shifts that led to those opportunities in the first place. After Steinmuller’s chapter, the implicit focus of several others is the government policies associated with both the lead of U.S. firms and with the largely unsuccessful efforts of global competitors to catch up. In a second chapter on the United States,Richard Langlois and Mowery argue that the U.S. lead can be traced to defense R&D policies during the industry’s formative years and, in particular, the strong efforts by military sponsors to diffuse cutting-edge knowledge to industry. Failed attempts to catch up with the U.S. lead are the focus of two chapters on Western European countries. I found these particularly valuable. Many of the Europeans problems stem from the designation of a single ‘ ‘national champion” hardware producer in each major country, which, rather than threatening IBM (or later Japanesefirms), left only Germany with a major independent hardware maker. The book chronicles how mergers of failing firms in Britain and France led respectively to ICL and Groupe Bull, both of which later became dependent on Japanese capital and technology. These European chapters have the most detailed and up-to-date market statistics of the book, including breakdowns for hardware and software, products and services. and by size of computer (PC to mainframe). They also chronicle in detail various cooperative research projects such as the ESPRIT and Eureka Europrojects and the United Kingdom’s Alvey project. Such “catch-up” programs are a relatively minor part of the two chapters on Japan, which focus on
custom mainframe software and PC package software respectively. The first of these notes that independent software firms play a small role in the Japanese market, in comparison to firms spun-off from large user firms and computer makers, as well as the in-house software development capabilities of the users and hardware producers. This chapter, by Y. Baba, S. Takai, and Y. Mizuta, also examines the pressures that favor custom software over package software among user firms, particularly in mainframe software. It concludes with a fascinating table classifying Computopia’s list of the top 100 Japanese software companies as either spin-off or independent firms. The other chapter on Japan reprints and extends one of the first scholarly examinations of its difficulties developing a PC package software industry. Here, Tom Cottrell argues Japan’s main problem was the emergence of multiple incompatible standards, caused by the oligopolistic hold of Japan’s mainframe hardware companies and the difficult customization of MS-DOS to support the Japanese language. Come11 also notes the productivity penalty paid for Japan’s use of scarce software engineers to product custom software: producers gain less revenue by selling custom software once instead of multiple sales of the same package, whereas users have fewer options (because a package can support multiple users). The remaining chapters examine the Russian software industry, intellectual property policies. and the RISC fad in central processor chips. The topics are broad and disparate, but the essaysshare a set of common (if unarticulated) themes concerning the global development of the software industry: the importance of links to complementary producers (mainly producers of computer hardware);
l
l
l
l
the tension between entrepreneurial software developers versus integrated firms providing hardware, software, and services: the central role of universities in the industry’s development, including the importance of links to industry and the relative emphasis placed on theory and applied techniques in both teaching and research; and the role of key users (though the analysis does not take it to the next logical step. i.e.. that the wide
154
J PROD INNOV
BOOK REVIEWS
MANAG
1997;14:137-156
diffusion of software throughout the economy supported producer growth via user feedback). As these themes suggest, the book has a strong public policy emphasis, often neglecting examination of market forces in favor of central government policies, which are readily identifiable but often marginal in impact. For example, whatever boost given by U.S. government policies for software diffusion in the first two postwar decades, even indirect effects are questionable for the PC era. Few workers moved from defense contractors to PC package software firms (due to gaps both in corporate culture and age), so, for instance, the adoption of PCs by thousands of school districts is a more important (yet unexamined) government policy for this segment. The book suffers from other problems endemic to such edited academic volumes. Some data and observations are dated; conflicting assessmentsamong authors in the United States, Europe, and Japan are left unresolved, and important areas of inquiry are left uncovered in all three continents. There are also important gaps in the geographic coverage, most notably India (which would provide a contrast of language and institutions to the similar strategies used in Russia), Southeast Asia (which is seeking to emulate both Japan and the United States) and Canada (enabled by spillovers of U.S. technology). And, despite the emphasis on the role of the U.S. computer science departments, such researchers are absent from this volume. Some authors show a weak understanding of the specific technologies and practices they write about; for example, with the dispersal of standard-setting power across multiple firms (e.g., Compaq, Intel, and Microsoft in PCs), the book’s discussion of the importance of links to hardware producers should instead talk about computer architectures (using the formulation of Ferguson and Morris [ 11). Thankfully, other authors (notably Peter Grindley and Robert Merges) inform their writing with a keen grasp of specific developments. Finally, reading the book’s self-identified limitations gives some idea of why such macro-level research has been so scarce. One key problem is that of measurement: as noted by Steinmuller, Commerce Department SIC codes are virtually useless for software, so the authors largely rely on International Data Corp. estimates. Also Commerce data only report goods that are resold: as Steinmuller notes, traded software probably represents a minority portion of the output of the industry. The role of software embedded in other types
of products (e.g., avionics, telephone switches) is particularly understated. Such weaknesses highlight both the inherent difficulties and research opportunities in this area. The book’s strengths-both theoretical and descriptivecombined with its limitations should shape the future research agenda on the development of computer software. One such future project would be to provide comparable data for questions raised by some authors but ignored by others. What are the amounts of packaged software, custom software, and integration services in each of the developed countries? What about embedded and untraded software? Are the producers affiliated with users, manufacturers, or leading accounting firms? How do the various posited successfactors (links to sophisticated users and hardware makers, availability of university training, diffusion of academic research, location in an industry cluster) differ among the package, custom, and embedded software? Such gaps in knowledge also apply to micro-level issues, such as the make versus buy decision for each of the three types of software. Of particular interest to JPZM readers is a discussion of how software development practices compare to what we know about NPD processes in other technology-based industries. For example, does assigning parallel teams to successive generations of the same product have a precedent in other industries? How is the role of lead users (“beta sites”) changing? What is best practice for ideation? On balance, those interested in the global software industry-both current knowledge and opportunities for future research-should not skip this book. Joel West University of California, Irvine
Reference 1. Morris, Charles R. and Ferguson, Charles H. How architecture wins technology wars. Harvard Business Review March-April: 86-96 (1993).
Competing in the Information Age: Strategic Alignment in Practice, by Jerry N. Luftman. New York: Oxford University Press, 1996. 411 + xvii pages. $35.00. This book serves a variety of academic and practical needs. The first half of the book introduces the reader