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.
The software industry started in the early 1960s, almost immediately after computers ('mainframes') were first sold in a more or less standardized way. Universities and businesses began to use these computers and to seek out programs to do certain computing tasks. 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. But others were done on a commercial basis, and the very first standalone software firms started in the United States in 1959-1960. Pretty soon, the computer-makers started bundling operating systems software and programming environments with their machines. IBM, which delivered most of the computers at the time, became a household name in corporate businesses worldwide.
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 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. Infrastructure software, including operating systems, middleware and databases, is made by companies such as 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. Microsoft has never returned the stick. Other companies that have substantial mindshare (not: marketshare) in the software industry are SUN Microsystems, the developer of the Java platform, Red Hat, for its open source momentum, and Google for its Google Docs. However in terms of revenues coming from software sales, the software industry is clearly dominated by Microsoft .
US companies dominate the software industry: 74 companies out of the 100 largest software companies are headquartered in the United States. The European Union follows with 13 companies. 8% of the largest software companies are from Japan.
Where their legal domicile is less important than where they sell. IBM is legally domiciled in the U.S. receiving most of its revenue outside the U.S. SAP, the fourth largest software supplier, by my research, is based in Germany but gets 75%-80% of its revenue outside of Germany, etc. etc.
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.