The competitive advantage of Taiwan’s information technology is strongly built upon hardware equipment manufacturers. As the part of IT industry, the software industry not just attracted far less attentions than the hardware industry, but also maintained small and medium size of enterprises. Traditionally, SMEs are invested with low level of the innovative resources and R & D investment. However, the survival of software industry is strongly based on the capability of R & D. In order to understand how those 6,500 SME’s companies in Taiwan compete and interact with each other, we selected two cases to observe their competitive behaviors. Through the participant observation and in-depth interview methods of qualitative approach, four dimensions are constructed as "Social Network," "Business Strategy," "Products and Technology," "Corporate Culture" to realize the tension between two competitive firms. From the findings, the strength of interpersonal networks cannot bring obvious and significant benefits of their business. The phenomenon of frequent mobility of staff is the means of upgrading company’s technical ability. The differentiation strategy supported by the technical capability is the sufficient and necessary conditions for surviving radical market competition.