Telecom firm to pay for value of software rather than development cost
By Yoon Ja-young
KT, the country’s leading communications company, surprised the software industry Thursday by announcing plans to nurture the sector. Most of all, it would be recompensing for the value of the software, instead of paying for only the labor cost of the developers.
The announcement comes as refreshing news in a country where the software industry hasn’t been paid its due remuneration. “KT may be small compared with conglomerates, but I believe our small effort will bear big fruit if other companies or the government agree with our initiative and determine that they should join it to save the software industry,” KT Chairman Lee Seok-chae said.
It is not the first time for KT to lead the initiative in the country’s IT industry. Under Lee, who had the insight to see a step further than others, the once state-owned company, which was a symbol of inefficiency, is suggesting where the country’s IT industry should head.
Information over technology
From the time he was inaugurated as KT chairman, Lee has pointed out that the IT Korea is strong at “T,” the hardware, but weak at “I,” the software, and has focused on strengthening the latter.
He was right. The country had to be ill at ease when Google announced the acquisition of Motorola. The country has powerful handset manufacturers like Samsung and LG, but the power was shifting to software. Those ruling the operating systems such as Google and Apple hold the keys, and hardware companies feel they can be replaced by other manufacturers at anytime.
Korea, meanwhile, accounts for less than 3 percent of the global software market.
The introduction of Apple’s iPhone helped KT increase its market share, but it has a bigger meaning for the country’s IT industry. It brought in overall change in the industry, leading to a second leap forward. Lee chose it as the trigger for transition from hardware to software and from a “walled garden” to an ecosystem.
“He saw the value of the iPhone in ‘software and content through an open market,’ not the handset itself,” a representative for KT said.
Applications from the App Store provided not only consumers with new experiences, but also developers with new business opportunities. The statistics back this up. During the first year since the introduction of the iPhone, young entrepreneurs beginning startups increased 32.4 percent.
The iPhone initiative by KT moved the government as well. Witnessing the importance of the software industry, it committed to investing 1 trillion won to the content industry for three years. Other mobile carriers and manufacturers also started expanding open partnerships with the software sector and small businesses.
Upon his inauguration, Lee led merger of KT with KTF, the telecommunications arm, and the convergence between wired and wireless helped it deal with the explosive growth in traffic. KT has led convergence in the industry, such as between IT and finance or between satellite broadcasting and IPTV.
To face Apple and Google, KT led the Wholesale App Community (WAC), the app store comprising of 60 mobile carriers and targeting their 4 billion users.
From government to IT leader
When Lee took charge of KT, there was concern as to whether the former top government official would fit the rapidly changing IT industry. However, he proved himself to be a successful IT CEO, with an endless innovation agenda.
Lee, majored in business administration at Seoul National University and holds a Ph.D. in economics from Boston University. He held leading government posts, including vice minister at the agricultural and finance ministry, and as minister of information technology.
When he was appointed, KT was in trouble. Its main business, wired communications, was falling, but the 100-year-old, previously state-owned company, wasn’t bracing for change.
The chairman changed the corporate culture, instilling a dynamic and young atmosphere.
He also showed a sixth sense in discovering talented people such as Pyo Hyun-myung, president of KT’s Mobile Business Group. Song Jung-hee, the senior executive vice president in charge of service innovation group at KT, is another.
Song, who earned a Ph.D. in electrical and computer engineering at Carnegie Mellon University, set up the country’s IT strategy regarding future growth engines while working for the government and in academia.
The chairman scouted her to be in charge of transforming the service business from a customer point of view, and Song proved her ability by leading the software industry nurturing plan and the joint venture on data center service business with Softbank.
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