An Overview of the History of the Software Industry:
The 1950s: The software industry began in the late 1950s when the use of computers for business applications expanded rapidly creating a huge demand for people with programming experience. A number of people who had learned their programming skills working for computer manufacturers or for the large companies and government agencies that were the first computer users saw this as an opportunity to start their own companies and sell their services under contract.
The first such company, Computer Usage Corporation (CUC), was founded in 1955 by Elmer Kubie and John W. Sheldon, two former IBM employees. The company was founded with $40,000 in start-up capital which supported a staff of five in addition to the two founders. Its first project was a program written for California Research Corporation to simulate the flow of oil. CUC became a public company in 1960 and by 1967 had a staff of over 700 people in 12 offices around the U.S. and revenues over $13 million. Unfortunately, it suffered financial losses in the late 1970s and eventually went bankrupt in 1986.
In 1959, seven Univac programmers founded Applied Data Research (ADR) to market their programming skills to computer manufacturers such as Sperry Rand and Honeywell to develop systems software. ADR went public in 1965 and, in the late 1960s, became one of the first companies to successfully sell software products. It continued to be one of the largest U.S. software product companies until it was acquired by Ameritech for $215 million in 1986.
Fletcher Jones and Roy Nutt, who had gained their computer experience in the aerospace industry, founded Computer Sciences Corporation (CSC) in 1959 with $100 and a contract from Honeywell to develop a business-language compiler called FACT. By 1963, CSC was the largest software company with revenues close to $4 million. CSC continues to thrive today as one of the world largest information technology services firms with more than $10.2 billion in revenues.
The 1960s: The number of computers in use and their size and speed expanded rapidly in the 1960s escalating the demand for software to support the numerous tasks for which computers were now being used. This provided enormous opportunities for entrepreneurs to create new companies to serve this expanding market. Some of the companies founded in the early 1960s were Informatics, Electronic Data Systems (EDS) and California Analysis Center, Inc. (CACI) in 1962, Management Science America (MSA) in 1963, and Keane, Inc. in 1965.
By 1965, there were an estimated 45 major software contractors in the U.S, some employing more than a hundred programmers and with annual revenues as much as $100 million. In addition, there were hundreds of small firms, typically with just a few programmers. In 1967, it was estimated that there were 2,800 software services firms in the U.S. By the end of the 1960s, a number of these firms, such as Informatics, ADR, and CSC, were publicly held.
By the early 1960s, a customer of any of the major hardware manufacturers could expect to have access to a library of software which was included (bundled) in the cost of the computer. This software included the computer’s operating system, of course, but also utility programs (such as sort programs), compilers for languages such as COBOL and FORTRAN, and a growing library of programs written to handle specific applications. IBM, for example, maintained a library of application programs written by its programmers to meet the needs of specific customers but which were then made available at no cost to other IBM customers.
Computer users had the choice of getting the software they needed from their hardware vendor or having it custom-built for their needs by their own programmers or by a contract programming firm. Many of the executives in the software industry didn’t believe that there would ever be a viable market for software products--it was too difficult to compete against free software from the hardware manufacturers.
But early in the 1960s, some contract programming firms began to see opportunities, when there was no comparable product available from the hardware vendor, to sell programs they had written to more than one customer. For example, CACI began selling SIMSCRIPT, a simulation language, in 1962, and ADPAC Corporation made several sales of its ADPAC compiler in 1964 to customers who had seen it used by ADPAC programmers and wanted it available to their own programmers.
In 1965, ADR released AUTOFLOW, a program which automatically produced program flowcharts by reading the program source code, and which ultimately was sold to thousands of customers. And in November, 1967, Informatics released MARK IV, a generalized file management and report generation program, which surpassed $1 million in revenues within 12 months after its formal announcement.
ADR and Informatics, both very successful contract programming firms, were the first companies to set up the kind of organizations needed to market and support software products and therefore to become true software product companies.
In the late 1960s, the concept of software as a product began to take hold despite the environment where customers were used to getting their software for free. In January, 1967, International Computer Programs, Inc. (ICP) published the first issue of its ICP Quarterly, a catalog of software programs that were available for sale. Forty-nine programs were offered in that first issue but by the end of 1969, each issue of the ICP Quarterly listed hundreds of software products (often called “software packages”).
Among the numerous firms founded in the late 1960s were Phillip Hankins, Inc. (PHI) and Information Science, Inc. (InSci) in 1965, AGS Computer Systems, turnkey systems, inc. (TSI), and Boole and Babbage in 1967, Cincom, Cullinane Corporation and Atlantic Software in 1968, and Pansophic Systems, Inc., McCormack & Dodge, Dylakor and Syncsort in 1969.
On June 30, 1969, IBM announced that, effective January 1, 1970, it would begin to unbundle (charge separately for) some of its software effectively ending the expectation of its customers that they would always be able to get all the software they needed from IBM for free.
The 1970s: The 1970s saw the contract programming industry continue to grow at a rapid pace. These companies came to be known as "professional services" firms reflecting the fact that they often provided a broad range of consulting, analysis and design services in addition to programming.
The software products industry became firmly established as a viable source of software for computer users. If, at the beginning of the 1970s, customers were skeptical that software purchased from a vendor could meet their needs as well as software written in-house, by the end of the decade almost all computer users were buying some portion of their software from software products companies. As a result of unbundling, the hardware vendors were also major players in the software products field.
In 1971, ICP held its first annual Million Dollar Awards program recognizing software products that had generated over $1 million in revenue. Twenty-nine software products made the list. By 1976, the Million Dollar Awards roster had grown to 100 products from 64 software companies. Fifty-two products had passed $5 million in revenue, 15 had passed $10 million, 4 had passed $20 million, and Cincom’s TOTAL database management system received an award for revenues in excess of $50 million.
The invention of the PC in the mid-1970s led to the founding of the first PC software firms such as Microsoft and Software Arts, which produced the VisiCalc spreadsheet program.
Despite the growth and demonstrated success of the software industry throughout the 1970s, it was not generally recognized as a major investment opportunity. Funding dried up even for those professional services firms that had gone public in the 1960s and the newly-established software products firms had an extremely difficult time raising capital to fund their growth. Almost all of their growth was internally financed and many of the company founders extensively leveraged their own personal assets to keep the companies going. In 1978, a full ten years after its founding, Cullinane Corporation went public, the first software product company to do so. But the perception of the software business as an investment opportunity was still a number of years away.
Referrence:http://www.softwarehistory.org
The 1950s: The software industry began in the late 1950s when the use of computers for business applications expanded rapidly creating a huge demand for people with programming experience. A number of people who had learned their programming skills working for computer manufacturers or for the large companies and government agencies that were the first computer users saw this as an opportunity to start their own companies and sell their services under contract.
The first such company, Computer Usage Corporation (CUC), was founded in 1955 by Elmer Kubie and John W. Sheldon, two former IBM employees. The company was founded with $40,000 in start-up capital which supported a staff of five in addition to the two founders. Its first project was a program written for California Research Corporation to simulate the flow of oil. CUC became a public company in 1960 and by 1967 had a staff of over 700 people in 12 offices around the U.S. and revenues over $13 million. Unfortunately, it suffered financial losses in the late 1970s and eventually went bankrupt in 1986.
In 1959, seven Univac programmers founded Applied Data Research (ADR) to market their programming skills to computer manufacturers such as Sperry Rand and Honeywell to develop systems software. ADR went public in 1965 and, in the late 1960s, became one of the first companies to successfully sell software products. It continued to be one of the largest U.S. software product companies until it was acquired by Ameritech for $215 million in 1986.
Fletcher Jones and Roy Nutt, who had gained their computer experience in the aerospace industry, founded Computer Sciences Corporation (CSC) in 1959 with $100 and a contract from Honeywell to develop a business-language compiler called FACT. By 1963, CSC was the largest software company with revenues close to $4 million. CSC continues to thrive today as one of the world largest information technology services firms with more than $10.2 billion in revenues.
The 1960s: The number of computers in use and their size and speed expanded rapidly in the 1960s escalating the demand for software to support the numerous tasks for which computers were now being used. This provided enormous opportunities for entrepreneurs to create new companies to serve this expanding market. Some of the companies founded in the early 1960s were Informatics, Electronic Data Systems (EDS) and California Analysis Center, Inc. (CACI) in 1962, Management Science America (MSA) in 1963, and Keane, Inc. in 1965.
By 1965, there were an estimated 45 major software contractors in the U.S, some employing more than a hundred programmers and with annual revenues as much as $100 million. In addition, there were hundreds of small firms, typically with just a few programmers. In 1967, it was estimated that there were 2,800 software services firms in the U.S. By the end of the 1960s, a number of these firms, such as Informatics, ADR, and CSC, were publicly held.
By the early 1960s, a customer of any of the major hardware manufacturers could expect to have access to a library of software which was included (bundled) in the cost of the computer. This software included the computer’s operating system, of course, but also utility programs (such as sort programs), compilers for languages such as COBOL and FORTRAN, and a growing library of programs written to handle specific applications. IBM, for example, maintained a library of application programs written by its programmers to meet the needs of specific customers but which were then made available at no cost to other IBM customers.
Computer users had the choice of getting the software they needed from their hardware vendor or having it custom-built for their needs by their own programmers or by a contract programming firm. Many of the executives in the software industry didn’t believe that there would ever be a viable market for software products--it was too difficult to compete against free software from the hardware manufacturers.
But early in the 1960s, some contract programming firms began to see opportunities, when there was no comparable product available from the hardware vendor, to sell programs they had written to more than one customer. For example, CACI began selling SIMSCRIPT, a simulation language, in 1962, and ADPAC Corporation made several sales of its ADPAC compiler in 1964 to customers who had seen it used by ADPAC programmers and wanted it available to their own programmers.
In 1965, ADR released AUTOFLOW, a program which automatically produced program flowcharts by reading the program source code, and which ultimately was sold to thousands of customers. And in November, 1967, Informatics released MARK IV, a generalized file management and report generation program, which surpassed $1 million in revenues within 12 months after its formal announcement.
ADR and Informatics, both very successful contract programming firms, were the first companies to set up the kind of organizations needed to market and support software products and therefore to become true software product companies.
In the late 1960s, the concept of software as a product began to take hold despite the environment where customers were used to getting their software for free. In January, 1967, International Computer Programs, Inc. (ICP) published the first issue of its ICP Quarterly, a catalog of software programs that were available for sale. Forty-nine programs were offered in that first issue but by the end of 1969, each issue of the ICP Quarterly listed hundreds of software products (often called “software packages”).
Among the numerous firms founded in the late 1960s were Phillip Hankins, Inc. (PHI) and Information Science, Inc. (InSci) in 1965, AGS Computer Systems, turnkey systems, inc. (TSI), and Boole and Babbage in 1967, Cincom, Cullinane Corporation and Atlantic Software in 1968, and Pansophic Systems, Inc., McCormack & Dodge, Dylakor and Syncsort in 1969.
On June 30, 1969, IBM announced that, effective January 1, 1970, it would begin to unbundle (charge separately for) some of its software effectively ending the expectation of its customers that they would always be able to get all the software they needed from IBM for free.
The 1970s: The 1970s saw the contract programming industry continue to grow at a rapid pace. These companies came to be known as "professional services" firms reflecting the fact that they often provided a broad range of consulting, analysis and design services in addition to programming.
The software products industry became firmly established as a viable source of software for computer users. If, at the beginning of the 1970s, customers were skeptical that software purchased from a vendor could meet their needs as well as software written in-house, by the end of the decade almost all computer users were buying some portion of their software from software products companies. As a result of unbundling, the hardware vendors were also major players in the software products field.
In 1971, ICP held its first annual Million Dollar Awards program recognizing software products that had generated over $1 million in revenue. Twenty-nine software products made the list. By 1976, the Million Dollar Awards roster had grown to 100 products from 64 software companies. Fifty-two products had passed $5 million in revenue, 15 had passed $10 million, 4 had passed $20 million, and Cincom’s TOTAL database management system received an award for revenues in excess of $50 million.
The invention of the PC in the mid-1970s led to the founding of the first PC software firms such as Microsoft and Software Arts, which produced the VisiCalc spreadsheet program.
Despite the growth and demonstrated success of the software industry throughout the 1970s, it was not generally recognized as a major investment opportunity. Funding dried up even for those professional services firms that had gone public in the 1960s and the newly-established software products firms had an extremely difficult time raising capital to fund their growth. Almost all of their growth was internally financed and many of the company founders extensively leveraged their own personal assets to keep the companies going. In 1978, a full ten years after its founding, Cullinane Corporation went public, the first software product company to do so. But the perception of the software business as an investment opportunity was still a number of years away.
Referrence:http://www.softwarehistory.org
