Since I first began working on the Local Software Economy initiative, I’ve had the privilege to speak with countless entrepreneurs, listening to their ideas and future plans, as well as discussing what they need to make their dreams a reality. From these conversations, what I keep hearing about is how closely government is tied to their success.

By providing environments that promote entrepreneurism and, more specifically, IT innovation, what’s clear is that governments are often the initial catalysts behind strong local software economies. So, how can governments become better stewards of these economies?

That’s a big question, and one that I plan on addressing in a series of future blog posts on the topic. However, a good starting point is to examine what we believe are the 10 most important elements that drive a nation’s local software economy and foster emerging businesses within this sector. Today, we’ll look at the first five. Be sure to check back again soon for my second installment.

The first important element is demand: While it may be somewhat obvious, the level of a nation’s expenditures on information and communication technology (ICT) investments has a large impact on the current and future market potential for local software economies. In fact, there’s an emerging body of research that links countries’ overall economic competitiveness and GDP growth to their level of investments in ICT. We’ve even performed some informal research of our own on this topic.  But ultimately and going to the extreme to make this point, an environment that looks for innovation and technology to boost productivity and value, is an environment where the number one question that defines innovation is easier to answer -  innovation for whom, who is buying, who is sustaining it?

Secondly, the education system is critical to a nation’s economy and sustainability. Access to education and government investment in education programs are critical. In the IT sector, education in science, technology, engineering and math (STEM) disciplines are particularly important.  But most of all, I realized that the relationship with failure and opportunities to make mistakes could significantly increase not just the number of entrepreneurs in a particular economy, but potentially their success rate. And that’s the part where I understood from the startups I’ve talked to, that our Academic Institutions have to play an important role. How many of us ever had an idea, but we were afraid to risk it? Students have the same chances of success, but the willingness to risk it and the effects of a potential mistake are significantly more controlled. They need to able to transform the mistakes in true and powerful learning experiences.

The third element I consider vital for boosting the local software economy is the government readiness. Where countries rank in e-government can also have a big impact on their ability to encourage IT entrepreneurism. Are services and applications for new businesses made available online? Are government systems interconnected to provide a seamless user experience? Or, are these still paper-intensive, involving redundant systems and processes? The answers to these questions will largely influence how well (if at all) entrepreneurs navigate through the process of starting a new business. Although the processes to open a new company remain similar, the time one would spend thru those cycles can indeed make the difference between success and failure, especially on early stages of an endeavor.

Another vital element is firm-based innovation. The level of innovation that IT businesses posses dramatically impacts their ability to compete in an increasingly global economy. While this is often influenced by internal factors such as research and development, governments can participate by establishing public-private partnership programs aimed at spurring innovation. For instance, programs like the Microsoft’s Imagine Cup challenge are helping fuel creative thinking among tomorrow’s tech leaders.  Access to venture capital also plays a critical role in financing innovation and entrepreneurial risk-taking. Establishing economic policies that encourage this investment is another way that governments can lay the groundwork for more innovative IT businesses.

And last but not the least, infrastructure readiness. As businesses are often a reflection of the countries in which they operate, one can appreciate how emerging IT companies are largely influenced by their access to the infrastructure and resources available in their countries. Over the past decade, access to Internet has become the foundation for commerce. As such, nations that invest in providing high-speed and widely accessible broadband technologies offer a significant advantage to local IT businesses. However, with newer technologies such as Super Wi-Fi, the playing field is starting to level off, allowing emerging countries to invest in comparable broadband technologies at a much lower cost.

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