The software industry includes businesses involved in the development, maintenance and publication of computer software using any business model. The industry also includes software services, such as training, documentation, and consulting.
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The word "software" had been coined as a prank by at least 1953, but did not appear in print until the 1960s.[1] Before this time, computers were programmed either by customers, or the few commercial computer vendors of the time, such as UNIVAC and IBM. The first company founded to provide software products and services was Computer Usage Company in 1955.[2] The software industry expanded in the early 1960s, almost immediately after computers were first sold in mass-produced quantities. Universities, government, and business customers created a demand for software. Many of these programs were written in-house by full-time staff programmers. Some were distributed freely between users of a particular machine for no charge. Others were done on a commercial basis, and other firms such as Computer Sciences Corporation (founded in 1959) started to grow. The computer-makers started bundling operating systems software and programming environments with their machines.
When Digital Equipment Corporation brought a relatively low-priced micro-computer to market, it brought computing within reach of many more companies and universities worldwide, and it spawned great innovation in terms of new, powerful programming languages and methodologies. New software was built for micro-computers, and others, including IBM, followed DECs example quickly, resulting in the IBM AS400 amongst others.
The industry expanded greatly with the rise of the personal computer in the mid-1970s, which brought computing to the desktop of the office worker. In subsequent years, it also created a growing market for games, applications, and utilities. DOS, Microsoft's first operating system product, was the dominant operating system at the time.
In the early years of the 21st century, another successful business model has arisen for hosted software, called software as a service, or SaaS; this was at least the third time this model had been attempted. SaaS reduces the concerns about software piracy, since it can only be accessed through the Web, and by definition no client software is loaded onto the end user's PC.
There are several types of businesses in the software industry[3]. Infrastructure software, including operating systems, middleware and databases, is made by companies and organisations such as Linux, Google, Microsoft, IBM, Sybase, EMC, Oracle and VMWare. Enterprise software, the software that automates business processes in finance, production, logistics, sales and marketing, is made by Oracle, SAP AG , Sage and Infor. Security software is made by the likes of Symantec, Trend Micro and Kaspersky. Several industry-specific software makers are also among the largest software companies in the world: SunGard, making software for banks, BlackBoard making software for schools, and companies like Qualcomm or CyberVision making software for telecom companies. Other companies do contract programming to develop unique software for one particular client company, or focus on configuring and customizing suites from large vendors such as SAP or Oracle.
In terms of technology leadership, the software industry has long been led by IBM. However, Microsoft became the dominant PC operating system supplier. Other companies that have substantial mindshare (not: marketshare) in the software industry are SUN Microsystems, the developer of the Java platform (purchased by Oracle in 2009). However in terms of revenues coming from software sales, the software industry is clearly dominated by Microsoft, since inception. Microsoft products are still sold in largest number across the globe.
According to market researcher DataMonitor, the size of the worldwide software industry in 2008 was US$ 303.8 billion, an increase of 6.5% compared to 2007. Americas account for 42.6% of the global software market's value. DataMonitor forecasts that in 2013, the global software market will have a value of US$ 457 billion, an increase of 50.5% since 2008.[4]
The software industry has been subject to a high degree of consolidation over the past couple of decades. From 1988 to 2010, 41'136 mergers and acquisitions have been announced with a total known value of 1'451 bil. USD[5]. The highest number and value of deals was set in 2000 during the high times of the internet bubble with 6'757 transactions valued at 447 bil. USD. In 2010, 1'628 deals were announced valued at 49 bil. USD.
Business models of software companies have been widely discussed.[6][3] Network effects in software ecosystems networks of companies and their customers are an important element in the strategy of software companies.[7]