History of Software Industry

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Copyright 2012. Dr. June Sung Park. All rights reserved.

Do you know when the first software was developed in history?

1910s 1930s 1950s 1970s
At Cambridge University, EDSAC(Electronic Delay Storage Automatic Calculator) computer first implemented the stored program concept , which was invented by John von Neumann at Princeton University. This stored program technology gave birth to software.

History of Software
- Advent of Computer and Software
IBM dates back to the Tabulating Machine Company founded in 1896. IBM engaged Columbia University in its computer science research programs and together developed and offered the first computer science courses in 1945. IBM developed its first computer in 1949. In 1949 at Cambridge University, EDSAC(Electronic Delay Storage Automatic Calculator) computer first implemented the stored program concept , which was invented by John von Neumann at Princeton University in 1944. This stored program technology gave birth to software. In the early 1950s , some 40 companies were competing in the new computer business. A start-up called UNIVAC introduced in 1951 the first commercial computer to use magnetic tape and developed the first business (data processing) application software, starting the mainframe era.

The Remington Rand UNIVAC mainframe computer and printer in 1952

Martin Campbell-Kelly, From Airline Reservation to Sonic the Hedgehog A History of the Software Industry, MIT Press, 2003.

History of Software
- Advent of Application Software

The U.S. government project, SAGE air defense system, was developed between 1949-1962 spending $8B producing 1M LOC. Of the 1,200 programmers in the U.S. in the late 1950s, 700 worked on the SAGE project. In 1957 Ken Olsen established Digital Equipment Corporation which created minicomputers and stimulated the growth of software industry.

Between 1954-64 SABRE airline reservation system was developed by IBM and numerous subcontractors for American Airlines, which involved 200 software engineers and cost $30M.

DEC PDP-11 minicomputer in 1960s

History of Software Business

- Advent of IT Service Companies
The first independent software company, Computer Usage Company, was started in 1955 by former IBM employees to develop custom software to oil exploration companies, insurance companies and retail companies. This company went bankrupt in 1985. Other IT services companies started as an independent software company such as CSC, which dates back to 1959, and EDS to 1962. Arthur Andersen created an IT services division (which was split into Andersen Consulting in 1989 and renamed as Accenture in 2001) in 1953 to help GE automate payroll processing . It recommended installation of UNIVAC I computer and printer, which resulted in the first commercially owned computer installation in 1954. Other accounting firms Price Waterhouse, Coopers and Lybrand, Ernst & Young, etc. followed the suit to provide IT services developing custom applications for financial management and other back-office business functions.

Every year Andersen Consulting sent thousands of recruits, most fresh from college, into 150-acre training center in St. Charles, IL. They spent several weeks there being indoctrinated in a rigid corporate culture and a strict methodologies. Andersen Consulting's soldiers were conservatively dressed, clean cut and well programmed.

History of Software Business

- Advent of Software Products

In the early 1960s IBM introduced a software product, called Consolidated Functions Ordinary, for insurance companies, but following the convention of the day, it bundled this product with its hardware and did not sell it separately. The first software product sold separately from hardware was a flow charting program developed by Applied Data Research (which was later acquired by CA) in 1964*. The first software product to exceed $100M in cumulative sales was Mark IV, a file management package made by Informatics founded in 1962. In mid-1960s IBM decided to price and sell software separately from hardware because the U. S. Department of Justice would find bundling to be anticompetitive.

In the mid-1960s, when software was still bundled with hardware, several independent contract programming firms attempted to license a generalized program to multiple users for a standard fee. Applied Data Research (ADR) was one of those companies. At that time, ADR was building system software under contract to RCA, the U.S. Government and others. Most contracts were fixed price, competitively bid and had little profit potential. We bid against Computer Science Corporation, Computer Usage, and several other companies. Having completed the program with perhaps a $5,000 to $10,000 investment, ADR decided to try to license it to RCAs base of about 100 users. We prepared some descriptive marketing literature and wrote to all 100 users. We priced the program, called AUTOFLOW, at $2,400 and licensed two copies. To protect our intellectual property rights in the program, our attorney suggested we "lease" the program for three years at a time and call the program "equipment" because contract law was very clear on the limited rights of a party when they leased equipment.
Copyright 1998, Martin A. Goetz, All Rights Reserved

* Martin A. Goetz, How ADR Got Into the Software Products Business and Found Itself Competing Against IBM (http://www.softwarehistory.org/history/Goetz1.html)

History of Software Business

- Origin of End User License Agreement
A task force was formed at IBM in 1966 to study how to unbundle its software and protect its IP. It was decided that patenting would be too difficult, so instead copyrights and licenses should be used to allow IBM retain ownership of its code. Hence came the End User License Agreement. It was also decided that the operating system (such as OS/360) would not be unbundled. It was in 1970 when IBM began selling software independently of hardware. After this unbundling, many new firms appeared to make IBM-compatible application software. It also became common practice to charge an up-front fee for delivery and installation of the software product, and charge separate fees, paid over time, for maintenance and upgrades. By mid-1960s there were 50 major software companies and 3000 smaller software companies in the U.S. Europe and Japan also saw a growing number of software companies. SAP was founded by former IBM employees in Germany in 1972 and Baan in Belgium in 1978.

IBM System/360 in 1960s

History of Software Business

- Advent of Software Engineering
OS/360, a new OS for IBM/360 family of mainframes, was the biggest programming effort to that time. It took 5000 person-years between 1963-66 producing more than 1M LOC. It cost $500Mfour times the original budget, and a year late, very buggy. This project inspired Watts Humphrey, the project director, to develop reference processes for software development which has now become the CMMI, and Frederick Brooks, one of the project managers, to publish in 1975 The Mythical Man-Month. In the late 1960s and early 1970s, a new field called Software Engineering was created to bring industrial discipline, methods and tools to software development. These efforts resulted in Structured Programming, Software Lifecycle Processes, Inspection, Quantitative Project Management, etc.

Andersen Consulting introduced a software lifecycle process called Method/1 in 1979 as a major upgrade of the client binders that it had developed since early 1970s to standardize systems integration activities. Accenture, The History of Accenture, 2005.

Mainframe 1960 Disk Minicomputer Interactive OS PSDN 1970 SA&D PC RDB 1980 LAN IE Client / Server 1990 CBD / UP BPR

- From 1950s Till Today

Evolution of Software Technology

2000

2010

Web 2.0 Mobility Cloud

Big Data Analytics

Social Business

Enterprise SOA

SOA / AP

BPM/MDM

BI

Web Services

E-Business

Virtualization

Intranet

XML

E-Commerce

HTML

DW/OLAP

Internet

Inter-Org. Networking

Groupware

Online TPS

DSS/EIS

EDPS MIS

Evolution of Software Technology

- From 1950s Till Today
Mobile Cloud Computing E-Business (2005-2015) Client/Server (1995-2005) Computing (1986-95))

Batch Computing (1950s-1975s) 1950s 1960s 1970s

Online Computing (1976-85)

1980s

1990s

2000s

2010s

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Evolution of Software Technology

- 1976-80
Mobile Cloud Computing E-Business (2006-2015) Client/Server (1996-2005) Computing (1986-95))

Batch Computing (1950s-1975s)

Online Computing (1976-85)

1950s

1960s

1970s

1980s

1990s

2000s

2010s

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Evolution of Software Technology

- 1980-1990
Mobile Cloud Computing E-Business (2006-2015) Client/Server (1996-2005) Computing (1986-95))

Batch Computing (1950s-1975s)

Online Computing (1976-85)

1950s

1960s

1970s

1980s

1990s

2000s

2010s

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Evolution of Software Technology

- 1990-1995
Mobile Cloud Computing E-Business (2006-2015) Client/Server (1996-2005) Computing (1986-95))

Batch Computing (1950s-1975s)

Online Computing (1976-85)

1950s

1960s

1970s

1980s

1990s

2000s

2010s

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Evolution of Software Technology

- 1996~2005
Mobile Cloud Computing E-Business (2006-2015) Client/Server (1996-2005) Computing (1986-95))

Batch Computing (1950s-1975s)

Online Computing (1976-85)

1950s

1960s

1970s

1980s

1990s

2000s

2010s

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Evolution of Internet and Software Business

- Story of AOL

In 2000, AOL (America Online) purchased Time Warner for US$164 billion and named the new company AOL Time Warner. The shareholders of AOL owned 55% of the new company while Time Warner shareholders owned only 45%, thus the smaller AOL bought out the far larger Time Warner. After the merger, the profitability of the ISP division (America Online) decreased. Meanwhile, the market valuation of similar independent internet companies drastically fell. As a result, the value of the America Online division dropped significantly. This forced a goodwill write-off, causing AOL Time Warner to report a loss of $99 billion in 2002 at the time, the largest loss ever reported by a company. In 2003, the company dropped the "AOL" from its name, and in December 2009, Time Warner span off AOL as a separate independent company. Time Warner is back to the world's largest media conglomerate and second largest entertainment conglomerate in terms of revenue (behind Disney).

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http://en.wikipedia.org/wiki/Time_Warner

Evolution of Internet and Software Business

- Growth of e-Commerce

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Evolution of Internet and Software Business

- Growth of e-Business

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Evolution of Internet and Software Business

- Story of Webvan

Target market: $450B retail grocery market Product: Online ordering and same-day delivery of household groceries

HBR Press, 1998.

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Evolution of Internet and Software Business

- Story of Webvan

Founded

Built warehouses and software

1,100 Beta tests; Launched Webstore

File for bankrupcy due to the absence of sufficient customers and staggering infrastructure costs

1996

1997
Raised $400M VC during 1997-99

1998

1999
IPO raising $400M (Market Cap $8.5B)

2000

2001

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Evolution of Software Technology

- 2006~Present
Mobile Cloud Computing E-Business (2006-2015) Client/Server (1996-2005) Computing (1986-95))

Batch Computing (1950s-1975s)

Online Computing (1976-85)

1950s

1960s

1970s

1980s

1990s

2000s

2010s

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Evolution of Internet
Web Site E-Business Web Services Mobile Cloud Computing

1992-1995 During 1993-2000 Time Warners market value grew 10 times to $84B, while AOLs grew 1000 times to $163B.

1996-2002 Between 2006 and 2008, e-business ends; i.e., enterprises will have integrated the Internet into all their processes. (Gartner 2000)

2003-2005 By 2008, SOA will be prevailing , ending the 40-year domination of monolithic SW architecture. (Gartner 2006)

2006-2012 By 2012 80% of Fortune 1000 enterprises will be using some level of cloud services (Gartner 2009)

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Evolution of Internet and Software Business

- Story of Amazon

Amazon founded in 1994 as an online retailer of books invested billions of dollars to build the sophisticated Web infrastructure required to support its massive e-commerce business.

In 2002 Amazon released product data as Web Services to hundreds of thousands of its third-party affiliates Web sites that advertised Amazon products using the Amazons API and received a portion of Amazons resulting sales.
In 2003 Amazon decided to expand the Web Services to sell its storage, computing and other technology services to software developers, and ultimately to create an Internet-based operating system for computing.
R. S. Huckman, et al., Amazon Web Services, Harvard Business School, Case Study 9-609-048, 2008.

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Evolution of Internet and Software Business

- Story of IMVU

Founded in April 2004 Followed customer development process Designed to test hypothesis and answer unknowns Minimum feature sets, maximum customer coverage Used extreme programming approach and agile management practices Shipped in 6 months Charged from Day 1

No infrastructure owned leveraging cloud services

No press release 2007 revenue of $10M Ship 20 times a day Now has the worlds largest virtual goods catalog of 100M+ items created by 50M+ members.

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Evolution of Internet and Software Business - Story of Salesforce.com

Microsoft
Bubble Burst Dot Com Boom $20 1991 1998 2001 2004 2010 $60

$140 Cloud Computin g Boom

$40

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Salesforce.com

Evolution of Internet and Software Business

- Story of Accenture

Accentures Cloud Application Factory, offers rules, tools, and schools to accelerate a companys adoption of cloud computing. Everything from delivery toolkits to integration frameworks reduces risks and ensures the success of highly complex, global deployments. For example, some companies have 10,000 applications that could conceivably run in the cloud. An automated sustainability assessment helps determine the business case for cloud computing on an application-by-application basis. Our competitive advantage is that we created an industrialized approach to solution design and development using proven assets specifically for salesforce.com that make it faster to deliver salesforce.com solutions, said David Jones, business development director at Accenture. The Force.com Factory can generate work plans and estimate timelines for rebuilding applications on salesforce.coms cloud-based multitenant architecture.

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Evolution of Internet and Software Business

- Story of WaveMaker

WaveMaker is a visual drag and drop tool for building great-looking web and cloud applications. WaveMaker applications are based on industry standard, open source technologies including: Spring (Java server), DOJO (Ajax widgets), Hibernate (database access), JAXWS (web services), JSONRPC (client/server communication), Acegi (security) and JDK.

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