Computer Software
Description
Companies in this industry design and publish computer software. Major companies in the US include Activision Blizzard, Adobe, IBM, Microsoft, NortonLifeLock, Oracle, and Salesforce; as well as Dassault Systèmes (France), Sage Group (UK), and SAP (Germany).
In 2024, the global IT spending for enterprise software is about $1.1 trillion, according to Gartner. Many US-based software companies outsource some of their production work to other countries due to the high cost of domestic labor.
The US computer software industry includes about 13,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $280 billion.
COMPETITIVE LANDSCAPE
The health of the global economy heavily influences spending for software products. The success of software companies depends on technical expertise and effective marketing. Small software companies compete mainly by targeting niche markets or developing new technology. Many small companies form alliances with larger ones to market their products. The US software industry is concentrated: the 50 largest companies generate about 70% of revenue.
Competitive Advantages:
Access to Programmers - The ability to attract and retain talented programmers is crucial in the software industry, where developer shortages are a widespread challenge. Companies with adequate resources may recruit internationally, but immigration laws hinder that practice in some markets.
Global Reach - Because software spending is so closely tied to economic growth, the ability to sell into multiple countries and regions can provide critical protection against downturns in individual markets.
Operational Agility - The software sector is marked by rapid innovation and disruptive technologies, factors that favor companies with the ability to quickly bring products to market and adjust development strategies as markets shift.
Companies to Watch:
Google is best known for its search engine, but the company looms as a competitive threat in multiple software segments with its growing portfolio of largely hosted (and often free) consumer and business applications.
The largest software company in the world, Microsoft has long dominated both the consumer and enterprise software markets.
Salesforce.com embraced software-as-a-service from its outset, and the company continues to be a leading force in the cloud-based enterprise software market.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major products include system software, which accounts for about 40%, and application software, about 40%. Other products include operating systems software publishing which accounts for about 15%. Computer software also offers game software publishing.
Software is developed by teams of programmers who design the structure of a product and write applications to run on specific platforms - distinct combinations of operating systems, hardware, and system configurations. Developers use programming languages such as C, C++, C#, Java, and Python to write applications that translate human language and multimedia elements into lines of machine code. That code, expressed in binary sequences, directs computers to perform various functions. Some programming languages are optimized for designing particular types of applications. For example, SQL is typically used to build programs that manage large databases. One application may contain millions of lines of code, usually produced in chunks called modules or subroutines. Inevitably, such complicated, lengthy programs contain errors, or bugs.
The rough draft of a new program is called the alpha version. The beta version is an almost-final product that is tested by actual users to find and correct additional bugs. Programmers often begin work on a new version of a product soon after the application is released for sale, correcting bugs that were not detected in the beta process. Subsequent updates may offer major improvements or introduce entirely new features. The complexity of most software requires that software companies provide technical assistance to users, which can be an expensive operation for small companies.
The software industry relies heavily on research and development to create new products and services. Security is another top priority for software engineers, who must take precautions to safeguard data stored on remote cloud servers and mobile devices.
Software companies are increasingly delivering products on cloud-based platforms, typically charging subscription fees for access to online applications. Benefits of this model, also known as software as a service (SaaS), include greater collaborative functionality and lower maintenance costs for users.
In 2024, the global IT spending for enterprise software is about $1.1 trillion, according to Gartner. Many US-based software companies outsource some of their production work to other countries due to the high cost of domestic labor.
The US computer software industry includes about 13,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $280 billion.
COMPETITIVE LANDSCAPE
The health of the global economy heavily influences spending for software products. The success of software companies depends on technical expertise and effective marketing. Small software companies compete mainly by targeting niche markets or developing new technology. Many small companies form alliances with larger ones to market their products. The US software industry is concentrated: the 50 largest companies generate about 70% of revenue.
Competitive Advantages:
Access to Programmers - The ability to attract and retain talented programmers is crucial in the software industry, where developer shortages are a widespread challenge. Companies with adequate resources may recruit internationally, but immigration laws hinder that practice in some markets.
Global Reach - Because software spending is so closely tied to economic growth, the ability to sell into multiple countries and regions can provide critical protection against downturns in individual markets.
Operational Agility - The software sector is marked by rapid innovation and disruptive technologies, factors that favor companies with the ability to quickly bring products to market and adjust development strategies as markets shift.
Companies to Watch:
Google is best known for its search engine, but the company looms as a competitive threat in multiple software segments with its growing portfolio of largely hosted (and often free) consumer and business applications.
The largest software company in the world, Microsoft has long dominated both the consumer and enterprise software markets.
Salesforce.com embraced software-as-a-service from its outset, and the company continues to be a leading force in the cloud-based enterprise software market.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major products include system software, which accounts for about 40%, and application software, about 40%. Other products include operating systems software publishing which accounts for about 15%. Computer software also offers game software publishing.
Software is developed by teams of programmers who design the structure of a product and write applications to run on specific platforms - distinct combinations of operating systems, hardware, and system configurations. Developers use programming languages such as C, C++, C#, Java, and Python to write applications that translate human language and multimedia elements into lines of machine code. That code, expressed in binary sequences, directs computers to perform various functions. Some programming languages are optimized for designing particular types of applications. For example, SQL is typically used to build programs that manage large databases. One application may contain millions of lines of code, usually produced in chunks called modules or subroutines. Inevitably, such complicated, lengthy programs contain errors, or bugs.
The rough draft of a new program is called the alpha version. The beta version is an almost-final product that is tested by actual users to find and correct additional bugs. Programmers often begin work on a new version of a product soon after the application is released for sale, correcting bugs that were not detected in the beta process. Subsequent updates may offer major improvements or introduce entirely new features. The complexity of most software requires that software companies provide technical assistance to users, which can be an expensive operation for small companies.
The software industry relies heavily on research and development to create new products and services. Security is another top priority for software engineers, who must take precautions to safeguard data stored on remote cloud servers and mobile devices.
Software companies are increasingly delivering products on cloud-based platforms, typically charging subscription fees for access to online applications. Benefits of this model, also known as software as a service (SaaS), include greater collaborative functionality and lower maintenance costs for users.
Table of Contents
- Industry Overview
- Quarterly Industry Update
- Business Challenges
- Business Trends
- Industry Opportunities
- Call Preparation Questions
- Financial Information
- Industry Forecast
- Web Links and Acronyms
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