PwC: How do you see the software industry's competitive makeup evolving?

Chen: New competitors for software vendors will likely be from Internet service providers, e-commerce providers, and process management consulting firms. Additionally, the IT function of established application software vendors and IT service providers may transform to specialized IT companies focusing on services to internal and external businesses, constituting a new force of competition.

PwC: How is the adoption of cloud-based software services affecting what the software industry creates and delivers?

Chen: SaaS [software as a service] has completely changed how the design, planning, and delivery of software is managed. It requires a higher level of standardization and flexibility of software applications, as well as enhanced product functionality and customer experience. As a result, future software will require integration of business application, software architect, Internet specialists, and experts specializing in enhancing customer experience. A product offering through periodic software updates/issues will need to be transformed to an approach that affords more rapid adaption to a dynamic market needs.

Furthermore, the distribution channel will experience transformation, from a more conventional product-focused selling model to partnerships with Internet service providers in efforts to develop value-added services. Such partnerships will be based on revenue/profit sharing.

Mass customization will become the mainstream market approach, which requires software companies to establish a strong public infrastructure under the SOA [service-oriented architecture] philosophy, and provide a rich supply of software modules that enable factory-style assembly of software.