The software industry includes businesses for development
that are using different business models, mainly either "license/maintenance based" (on-premises) or "Cloud
based" (such as SaaS
, MSaaS, DCaaS etc.). The industry also includes software service
s, such as training
, consulting and data recovery
The first company founded to provide software products and services was Computer Usage Company
in 1955. Before that time, computers were programmed either by customers, or the few commercial computer vendors of the time, such as Sperry Rand
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. Other influential or typical software companies begun in the early 1960s included Advanced Computer Techniques
, Automatic Data Processing
, Applied Data Research
, and Informatics General
. The computer/hardware
makers started bundling operating systems
, systems software
and programming environments with their machines.
When Digital Equipment Corporation
(DEC) brought a relatively low-priced microcomputer
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 the IBM AS/400
The industry expanded greatly with the rise of the personal 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
'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. From the point of view of producers of some proprietary software
, SaaS reduces the concerns about unauthorized copying
, since it can only be accessed through the Web, and by definition no client software
is loaded onto the end user's PC.
Size of the industry
According to industry analyst Gartner
, the size of the worldwide software industry in 2013 was US$407.3 billion, an increase of 4.8% over 2012. As in past years, the largest four software vendors were Microsoft
, Oracle Corporation
, and SAP
Mergers and acquisitions
The software industry has been subject to a high degree of consolidation over the past couple of decades. Between 1995 and 2018 around 37,039 mergers and acquisitions
have been announced with a total known value of US$1,166 bil. USD. The highest number and value of deals was set in 2000 during the high times of the dot-com bubble
with 2,674 transactions valued at 105. bil. USD. In 2017, 2,547 deals were announced valued at $111 billion. Approaches to successfully acquire and integrate software companies are available.
Business models within the software industry
Business models of software companies have been widely discussed.
[Cusumano M. (2003) Finding Your balance in the Products and Service Debate, Communications of the ACM. Vol. 46:3] Network effect
s in software ecosystem
s, networks of companies, and their customers are an important element in the strategy of software companies.
* Software engineering
* World's largest software companies
* Function point
* Software development effort estimation
* Comparison of development estimation software