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Thesoftware industry includes businesses fordevelopment,maintenance andpublication ofsoftware that are using differentbusiness models, mainly either "license/maintenance based" (on-premises) or "Cloud based" (such asSaaS,PaaS,IaaS, MBaaS, MSaaS, DCaaS etc.). The industry also includessoftware services, such astraining,documentation, consulting and data recovery. The software and computer services industry spends more than 11% of its net sales for Research & Development which is in comparison with other industries the second highest share after pharmaceuticals & biotechnology.[1]
The first company founded to provide software products and services wasComputer Usage Company in 1955.[2] Before that time, computers were programmed either by customers, or the few commercial computer vendors of the time, such asSperry Rand andIBM.
Thesoftware 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 asComputer Sciences Corporation (founded in 1959) started to grow. Other influential or typical software companies begun in the early 1960s includedAdvanced Computer Techniques,Automatic Data Processing,Applied Data Research, andInformatics General.[3][4] The computer/hardware makers started bundlingoperating systems,systems software and programming environments with their machines.
WhenDigital Equipment Corporation (DEC) brought a relatively low-pricedmicrocomputer to market, it brought computing within the 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 microcomputers, so other manufacturers including IBM, followed DEC's example quickly, resulting in theIBM AS/400 amongst others.
The industry expanded greatly with the rise of thepersonal computer ("PC") in the mid-1970s, which brought desktop computing to the office worker for the first time. In the following years, it also created a growing market for games, applications, and utilities.DOS,Microsoft's firstoperating system product, was the dominant operating system at the time.
In the early years of the 21st century, another successfulbusiness model has arisen for hosted software, calledsoftware-as-a-service, or SaaS; this was at least the third time[citation needed] this model had been attempted. From the point of view of producers of someproprietary software, SaaS reduces the concerns aboutunauthorized copying, since it can only be accessed through the Web, and by definition noclient software is loaded onto the end user's PC.
Market research firm Gartner estimates the global market for IT spending in 2024 at $3.73 trillion. If telecoms services are included, this will rise to $5.26 trillion.[5] Major companies include Microsoft,HP,Oracle,Dell and IBM.[6]
The software industry has been subject to a high degree of consolidation over the past couple of decades. Between 1995 and 2018 around 37,039mergers and acquisitions have been announced with a total known value of US$1,166 billion.[7] The highest number and value of deals was set in 2000 during the high times of thedot-com bubble with 2,674 transactions valued at US$105 billion. In 2017, 2,547 deals were announced valued at US$111 billion. Approaches to successfully acquire and integrate software companies are available.[8]
Software industry business models include SaaS (subscription-based), PaaS (platform services), IaaS (infrastructure services), and freemium (free with premium features). Others are perpetual licenses (one-time fee), ad-supported (free with ads), open source (free with paid support), pay-per-use (usage-based), and consulting/customization services. Hybrid models combine multiple approaches.
Business models of software companies have been widely discussed.[9][10]Network effects insoftware ecosystems, networks of companies, and their customers are an important element in the strategy of software companies.[11]
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