As Information Technology (IT) and its various applications have become widespread, the demand for software throughout the world has steadily increased. In their turn, a number of least developed and developing countries have striven to occupy a place in the global software market by utilizing their cheap labor force and high level of education. A model for evaluating the success potential of these countries was introduced by R. Heeks and B. Nicholson. We will discuss here an improved model proposed by E. Carmel (See: EJISDC (2003) 13, 2; www.ejisdc.org ). According to Carmel , "The model is useful in order to look back and explain the success of those nations that have already succeeded in this industry, namely Israel , India , and Ireland . But, more importantly, the model is useful as a framework for prescriptive policies and strategies to be taken by other nations in order to improve their national well-being."

The software industries of Iran and Ukraine, in particular, have been studied with the help of this model. The Carmel model and these studies allow us to make some comparisons among the software industries of Armenia , Iran , and Ukraine . According to the four-tier taxonomy of software-exporting countries introduced in the first part of this article, Iran and Ukraine belong to the fourth and third tier respectively. Armenia, in its volumes of software exports lies between them - it surpasses Iran but is behind Ukraine.

The roots of the software industry in Iran go back to the beginning of the 1960s. However, the US trade embargo, the country's negative image in the US and Europe , and the overall instability in the Middle East have complicated the development of international trade in Iranian software.

Ukraine has significant scientific and research potential. From the very beginning Kiev was a leader in computer technology in the Soviet Union , with one of the biggest schools of cybernetics. The annual revenue from software industry exports amounted to $60-70 million in 2002, with annual growth of 15-20%.

Eight success factors according to Carmel

The first and perhaps foremost factor is the existence of government vision and strategy , along with corresponding policy. This implies appropriate legislation, funding, and taxation policy, and support for the development and modernization of the educational system and the communications infrastructure. Ukraine , according to experts, could have achieved much greater success if its government had had a strategy for the development of this field. Iran 's government, on the contrary, has been paying sharp attention to the software industry. However, according to experts, the existence of a national strategy in the case of Iran is not considered to be a success factor. There are many reasons for this. In addition to unfavorable internal and external political circumstances, the strategy itself is scattered, and is designed inconsistently, leaving numerous interested parties outside the discussions.

Armenia may, in this sense, find itself in a more favorable situation. In 2000 a drastic change in the Armenian government's attitude occurred when the IT industry was declared a priority field. Nevertheless, in Armenia, too, the government's role is often formal and far from decisive.

The second factor is human capital , which encompasses the collective characteristics and abilities of software professionals: national orientation and traditions, quantity, composition, language skills, and managerial skills. In all three countries, the knowledge of English is equally insufficient. The improvement of management skills is considered an urgent task in each of the countries. Armenia falls considerably behind the others in the number of professionals working in this sphere and in the number of computer graduates per year, however, in all three countries there is a growth trend in these numbers. Armenia (like Ukraine ) probably has an advantage vis-à-vis Iran in the local traditions shaped in the IT sphere during the Soviet era.

The third factor is quality of life. Unlike developed countries and like a number of developing countries, Armenia , Ukraine and Iran don't have desirable localities where talented professionals tend to concentrate.

The fourth factor is wages. Low wages are a decisive factor in so-called offshore-outsourcing services; managers tend to shop for the lowest-cost supplier. The differences in wage rates are very tempting for managers who are under cost pressures. There are no significant differences among the three countries in this area, and they can be considered competitive in the international market.

The fifth factor is Software Industry Characteristics, which include clustering effects, the number and size of firms, the associations which organize the firms, the industry's degree of common vision and branding, and the standards that the firms aspire to. A successful software exporting industry requires a critical mass of firms, with at least some of significant size (around which other smaller software firms develop). Cluster effects arise in an environment of both competition and cooperation among the firms. And competition spurs innovation. Cooperation is manifested at two levels - first, the internal coherence or degree of specialization of a national industry. Those national industries that are not specialized are less likely to succeed, since they cannot compete simultaneously on all fronts.

The second level of cooperation is the software firms' ability to build strong associations or consortia that serve to promote the nation's industry abroad and provide services to its members.

To be continued.