Technical Barriers and Complete Solutions: Taiwan’s Software Companies Need Larger Global Markets

The previous question was about market size. Market size often indicates the potential return. This question is about technical barriers in software and complete solutions. In 2001, Taiwan’s Openfind wanted to build the world’s largest Chinese-language search engine, also called Openfind—you can Google it. The National Taiwan University professor who founded the company confidently told investors that the Chinese-language barrier was extremely high. However strong Google’s technical capabilities might be, its search technology had been developed for English, and its Chinese search results were far inferior to Openfind’s. But we all know what happened next. In the face of technology, there was essentially no barrier, and before long we saw Google sweep across the world. Software may be eating the world, but it has another characteristic: zero marginal cost. That makes winner-take-all outcomes easy to produce. We do not see 1,000 search engines around the world; in the end, people use just one to three. The other issue is complete solutions. The previous post mentioned Tai Ruan (台軟) developing word-processing software. But Microsoft offered not only word processing, but spreadsheets and other office tools as well. It could give customers a complete office suite. Suppose some Taiwanese software products and solutions really are good. Another problem then arises: large companies often have complete solutions. Take France’s Dassault Systèmes. Through acquisition after acquisition, it has assembled a comprehensive range of solutions. When competing for enterprise customers, a small Taiwanese startup may have an exceptionally talented team, and its product A may score 15–20% better overall than the product of an Israeli startup acquired by the giant. Yet the giant has a complete set of solutions—A, B, C, D, E, F, G, H, I, J, K, and so on—with mutual support and full integration. Enterprise users do not have to buy A from one vendor, B from another, and then F from a third, only to find someone else to integrate A, B, and F. ----- In Robin’s view, market size is the most important consideration in software. Twenty to thirty years ago, Taiwan’s software industry depended on Taiwan’s position as a computer manufacturing powerhouse: 9.5 out of every 10 computers were made by Taiwanese manufacturers. Software was also bundled with each computer sold. That is how we came to see Taiwanese software successes such as PC-cillin, among the most successful and internationally established names today, and CyberLink. Fast-forward 30 years, and Taiwanese software companies have to find ways to reach beyond Taiwan and compete in large international markets, because software is another industry in which the biggest players tend to keep growing stronger.