Inflection Points for Washington and the Software Industry

The Obama Administration and Congress have reached an inflection point in the wake of the 2012 election: The country is facing a steep “fiscal cliff” that no one wants to go over, but steering away from it will require policymakers to make difficult budgeting choices that few people will like.

The software industry meanwhile has come to an inflection point of a different sort: Companies like those in BSA are innovating rapidly, but they face daunting challenges around the world as courts, lawmakers, and regulators adopt policies that are closing off access to key markets, undermining the business of developing and commercializing intellectual property, and imperiling the growth and evolution of cloud computing.

What’s the connection between these two sets of problems? The ultimate concern for policymakers in Washington is not the fiscal cliff so much as the need to sustain economic growth and recovery -- and it happens that addressing the software industry’s chief concerns will help.

That convergence of issues is the subject of BSA’s 2012 Global Strategy Summit, being held this week in Washington, D.C. Executives from 17 BSA member companies are meeting with key Administration officials and leading Members of Congress to discuss ways to accelerate the software-driven IT economy and create jobs by protecting IP rights, enacting a digital trade agenda that opens global markets, and fostering the growth of cloud computing.

There are a number of steps lawmakers and the Administration can take before the end of the year. As BSA outlined at the outset of the current lame duck session of the 112th Congress, those steps would ideally include bringing cybersecurity legislation back up for debate (a hope now deferred), reforming the Electronic Communications Privacy Act (ECPA), passing legislation to reform the H1-B Visa and Employment-Based Green Card system, establishing Permanent Normal Trade Relations (PNTR) with Russia, and pressing China in upcoming negotiating sessions of the Joint Commission on Commerce and Trade to curb software piracy and end market-access restrictions.

But those steps alone will not secure the full, job-creating promise of a robust digital economy that is driven by continuous technology innovation, open to international competition, and unfettered by market-skewing laws and regulations. To achieve that goal, the most important step policymakers can take is to enact a robust digital trade agenda that ensures overseas markets are open to all the products and services that define the information age.

The top priorities in this digital trade agenda should be ensuring that new agreements like the Trans-Pacific Partnership extend world-class intellectual property protections and guarantee data can flow freely across international borders so cloud computing services can flourish on a global scale. The agenda also should entail ending compulsory transfers of intellectual property, eliminating market-skewing procurement preferences, and embracing industry-led international technology standards.

Without such a digital trade agenda, the overseas markets that U.S. IT companies depend on for a substantial majority of their sales will begin receding into the horizon -- distant and inaccessible.

Germany, for example, is poised to require companies providing cloud computing services to house users’ data inside German borders -- even mundane commercial information that has nothing to do with national security. To do business there, you would have to build a local data center, which could be a prohibitive burden for some, if not most foreign cloud providers. Brazil, Indonesia, and many others meanwhile have adopted or are pursuing policies that severely restrict the flow of data across borders.

China classifies many of its information networks as “sensitive” in a way that excludes foreign suppliers of security and other IT products from a significant slice of its economy, including the financial, transportation, health, and education sectors. And India has far-reaching procurement mandates that require not just government agencies but also government-licensed entities, such as telecommunications and financial-services firms, to buy Indian-made electronics.

These kinds of policies set a dangerous precedent, effectively chopping up the global IT economy in a way that curbs growth opportunities for U.S. companies and denies customers everywhere the benefits of the world’s best IT products and services. That is an untenable prospect for all concerned -- and something America needs to steer the world away from, just like the fiscal cliff.

This post was also featured on BSA's blog, BSA TechPost.