Professor Gyu-Geon’s team at Hanyang University's team analyzed the effect
A 1% raise will increase corporate sales by 2 trillion units
Undervalued domestic rate compared to overseas software
A study has found that if the public sector software (SW) maintenance rate is increased from 11% to 15%, 10,000 new jobs will be created annually. The SW industry insists that the maintenance rate must be raised urgently, since it has huge positive impacts on the entire industry such as job creation and sales increase.
According to the 'Analysis of the Effect of Increasing the Maintenance Rate for Commercial Software' conducted by the research team of Professor Gyu-Geon Lim at Hanyang University (President of the Korea Society of IT Services) at the request of the Korea Software Industry Association, the expected average annual employment rate is 12,638 people when the commercial SW maintenance rate is raised to 15%. The SW maintenance fee is a cost paid for stable software support, such as updating and responding to failures after SW product introduction. The maintenance rate is the ratio applied when calculating the cost of maintenance. If the rate is 10%, 100,000 won each year must be paid as a maintenance fee annually after purchasing a SW product worth 1 million won. The average annual cost of introducing commercial software in the public sector (2015~2019) is 2.788.7 trillion won. Of this, the cost of maintenance is 1.7984 trillion won(for all five years).
Based on this, the research team estimated that an additional 1% increase in the commercial SW maintenance rate would cost 162 billion won, and an additional 15% would cost 631.9 billion won. Currently, the average maintenance rate in the public sector is 11.1%. If it is raised to 15% and if the average simple wage per person is calculated as 50 million won, 12,000 new people can be hired per year. The research team predicted that even if the commercial SW maintenance rate was raised by just 1%, the effect of sales increase across the company would reach 2.146 trillion won. Professor Lim emphasized on the 20th that, "Rather than about 2 trillion won generation in new sales, it is like an effect of 2 trillion won if all of the new sales of 162 billion won are calculated as operating profit."
In 2018, the Korean government presented the 'Public SW Business Innovation Plan' and announced that its plan to raise the commercial SW maintenance rate to the global level of up to 20% by 2022. However, according to the '2019 SW Industry Survey', 3 out of 10 companies receive a rate of less than 10%. There is also reverse discrimination, as a 20% rate is applied to foreign SW companies.
Professor Lim said, “If the rate of domestic SW continues to be relatively under valued compared to foreign SW, it is obvious that the competitiveness of domestic companies will weaken. To match the appropriate level between domestic and foreign software, an average rate of at least 15% should be set.” Professor Lim added, “As confirmed in the research, we expect to see various positive effects by raising the rate such as job creation and higher operating profit. Receiving the full software price will be the key to increasing the competitiveness of domestic software companies”
The industry plans to continuously demand an upward adjustment of the SW maintenance rate. Jun-hee Cho, President of the Korea Software Industry Association, said, “As social distancing has become common due to COVID-19, interest in software, the core technology and the virtual industry, has also increased. Since more users’ consumption of SW products increases the value and leads to a greater market dominance, now is a time for the government to make a preemptive and active investment.”
President Cho said, “For Korean commercial SW companies not to fall behind in the competition with global companies, products and technology investments based on receiving the right software prices must be made. Raising the SW maintenance and repair rate, which is the key to getting the SW at full price, will not only secure the competitiveness of SW companies but also create jobs, thereby having positive effects on society as a whole.”
By Staff Reporter Jiseon Kim email@example.com