A division of Soft Landing Korea Ltd.
By Tom Coyner
January 17, 2007
The Korean information technology (IT) industry is unique. It mainly consists of specialists often found within very large customer organizations, largely staffed by generalists. At the same time, the IT departments can be examples of what is happening in other parts of Korean corporations. Like anywhere, there are both good and bad points that together dish up challenges. At the risk of stereotyping, I will try to describe the lay of the land in the IT industry from the perspective of a software vendor.
Characteristics of Modern Korea
There is a national compulsion to be Number One. Also, Koreans rightly pride themselves on their IT knowledge and skills with one of the highest number of information specialists per capita in the world. These IT professionals often find themselves working for companies driven in part by a desire to have the latest, the best, and thereby be the most competitive.
Korea remains and perhaps is becoming even more nationalist than ever. Out of national pride, there is a strong temptation to do it by themselves -- without foreign assistance. We have labeled this mentality as ``IT Juche'' after the North Korean economic-political theory of being independent of outside dependencies. Like Juche of the North, IT Juche has a strong emotional appeal but sometimes comes up lacking when it comes to selecting and implementing the ideal or even appropriate solution.
Korean organizations tend to be factional around strong personalities who compete within the organization for position, power and survival. This in turn creates silos of information that are often more political than technical. These personality-centered power structures create an aura of uniqueness-- even when there is little substantial differentiation with the external competition.
Korea impresses foreigners daily as a society seemingly always in a hurry. Without question, Korea has one of the most competitive societies in the world. Koreans are among the best educated in the sciences -- at the expense of liberal arts where rote learning is less applicable. All of this leads Koreans to be early -- often first -- adapters, but often slipshod in implementation.
This approach to often reckless adoption can be traced to what I call the ``bak-sa'' (or Ph.D.) Mentality that has been a part of the Korean consciousness for many years. That is, there is a traditional reluctance to admit inadequate knowledge in this highly competitive environment. It is no wonder that South Korea has the highest per capita Ph.D.s in the world. In any event, Koreans are well known to be a quick study -- and quick to proclaim mastery of a subject matter.
Once a new bak-sa appears to have mastered a new subject within his or her organization, that person often becomes highly resistant to outside advice and intervention.
Price, Price, Price
Operations are usually price driven -- rarely value or even genuine ROI managed. It is not that individual managers are unaware or unconcerned, but often large organizations are staffed by aging general managers quietly desperate to display their importance to the overall company by demonstrating that they will tangibly and visibly lower costs -- i.e., increase their value to the company.
As a result, vendors normally compete on function and price -- often in the ``order taking'' capacity rather than selling. This is inherent to the traditional approach of selling in Korea. So the vendors are ultimately responsible in part for the preoccupation of price over value.
The finance and purchasing departments are generally ill equipped to evaluate technology acquisitions and consequently push for the cheapest option. Consequently, there is a strong temptation to beat down the vendors' prices or to grow the scale of a project beyond vendor profitability as a way, once again, to prove to others in the company either they are superior managers of vendors, or to cover the fact they too narrowly defined the project in order to reduce the price.
Often the beginning of the end for many new vendors is getting their first contracts with a large client. Often these start-up firms go bankrupt due to the associated costs from project creep. In the end, their demise results in the lack of external support, thus causing IT departments to justify expansion in head count to create internal support of acquired, now unsupported, technology.
In time, some companies conclude that it may make more sense to hire more engineers to reinvent the wheel since vendors cannot be trusted to adequately support their needs.
Self-Made Steam Shovels
Due to a combination of "IT Juche,'' "bak-sa'' mentality, and "we are unique,'' there is a strong tendency among large Korean companies to build a steam shovel rather than buy a somewhat expensive trowel. Building their own solutions often results in a strong pride in self-development that also incidentally brings along job security. Only the architects and builders really understand the nature of these homegrown systems and often only they understand how these systems integrate with other systems. The net results within many large Korean companies are very large -- and inefficient -- systems that may require extraordinary resources to maintain.
What is Likely to Work
As a foreign company hoping to sell into the Korean IT industry, some general guidelines for success are as follows:
Work with Korean partners who have already established their own relationships with key individuals in target accounts.
Hire competent Korean employees who have both excellent people as well as technical skills.
Recognize tools that allow customers to "roll their own'' solutions are much likely to succeed than turnkey and application systems.
Consider that applications and turnkey solutions are much tougher to sell and to keep clients on track with the rest of the global customer base since Korean customers often wish to modify much more than most markets' customers.
Keep in mind professional "service,'' though now understood to possibly mean billable work, retains the traditional meaning of "free.'' Often customers expect the costs of service to be somehow buried into maintenance and even license pricing of the technology.
What Does the IT Industry Teach About Korean Business?
From an outsiders' perspective, there is often a shocking lack of genuine management controls or matrices. Even if the management systems are in place, there is a lack of real diligence in using these management tools other than going through the motion where often data used is not credible. This often includes not sticking to structured programming and rushing ahead without documenting modifications of the systems. Rapid growth of the Korean economy has encouraged firms to take short cuts rather than lose out to the competition in the break-neck pace of the Korean economic miracle. The results of this mentality can be seen in the IT shops as well as other parts of many large Korean companies.
Most IT departments and businesses operate with relatively large numbers of people working extraordinarily hard for extraordinarily long hours. Yet, this too is changing. As the Korean economy opens up to world-class competition and as the economy has its periodic business slow downs, Korean companies have been reevaluating their hiring strategies and are keener than ever for increased efficiencies. Given this, Korean companies are looking more aggressively for new ideas and sometimes, new technologies from abroad. The open question is how fast each company will move forward given each organization's traditions and culture.
Tom Coyner, a long-term resident in Korea, runs consulting firm, Soft Landing Korea. Coyner can be reached on softlandingkorea.com.