Chapter-I: Introduction 1. Origin of the Study The MBA program of DIJ requires that each student complete an internship attachment period of at least 10 to 12 weeks with an organization and submit a report on the basis of it. Considering the fast pace of the software industry today, I am working one of the youngest and brightest organization in the industry, Hello Dacca, as my place of internship. There is a lot of speculation regarding the future of the software industry, in general.
With the little bit of healthy competition that the industry had been lacking till now, it is no doubt that the consumers would soon egin feel its affect in the form of lower prices and more packages to choose from. However, it remains a doubt as to which companies would Just survive and which companies would thrive and prosper. Hence, I chose to carry out a comparative analysis of the prospects and challenges of software companies in Bangladesh, with particular emphasis on the future prospects of Hello Dacca Pvt.
Ltd. 1. 1 Watershed of the Software Industry In 1955, the world’s first software company was formed in the United States. Now, more than half a century later the software market has entered a period of drastic change. Many information processing functions found in packaged software has been transferred to the Web, and the use of open source software (OSS) has become widespread. There are also strong signs that “Software as a Service” (SaaS) will assume a greater prominence.
These developments go beyond a mere discussion of whether to charge fees or to choose between packaged software or contracted development, or to use open source or proprietary software; they have shaken the software industry to its very foundation.
Will the software industry continue to develop as a high-tech industry, or will creative destruction occur and a new industry rows from the ashes? Perhaps the industry will disappear altogether and become just another business service like embedded software?
Tim O’Reilly describes three long-term trends in the evolution of software: (1) commoditization, (2) network collaboration, and (3) SaaS 2. History & Definition of the Software Industry Software Industry consists of that part of computer programming activity that is traded between software-producing organizations and corporate or individual software consumers. Traded software represents only a fraction of domestic software activity, whose extent cannot be reliably estimated, since much computer rogramming takes place within firms and its value is not captured by the industrial census or software industry analysts.
According to the industry analyst INPUT, in 2000 the U. S. market for traded software was $138 billion (Table 1). The U. S. software in the year 2000 were $259 billion, according to the trade publication Software Magazine. The traded software industry consists of three main sectors: programming services, enterprise software products, and shrink-wrapped software products. These three sectors became established in the mid-1950s, the mid-1960s, and the late 970s, respectively, in response to the technological opportunities and the business environment of the time.
The most successful firms developed specialized capabilities that enabled them to prosper within their sector; however, this specialization made it difficult to move into other sectors, and very few firms have been successful in more than one software sector. It should be noted that the software industry is not confined to independent software vendors, but also includes computer manufacturers such as 18M, Unisys, and NCR who supply programming services and software products alongside their hardware offerings and are among he largest software suppliers.
These are sometimes referred to as “captive” markets because computer users have relatively little choice in the supplier of basic operating software for corporate systems. 2. 1 Programming Service The first commercial electronic computers”usually known as “mainframes””were sold in the early 1950s. They were very expensive, typically renting for $100,000 a year. Most computer-owning corporations undertook their own program development and operations, for which they maintained a staff of up to thirty or forty individuals.
This was not a disproportionate expense in relation to the overall costs of unning a computer. By the mid-1950s, however, mainframe prices had fallen significantly, and computer use diffused rapidly”the national computer stock rising from 240 mainframes in 1955 to over four thousand by 1960. Owners of these more moderately priced computers were often unwilling to recruit a permanent programming staff, preferring instead to commission programs from software contractors. Many of the early programming services firms were established by programming entrepreneurs to satisfy this demand.
The first such firm, the Computer Usage Corporation (CUC), was incorporated in New York in 1955 by two ormer IBM programming employees, and the firm initially specialized in developing technical applications for the oil and engineering industries. The capital barriers to software contracting were (and remain) very low, and it was often said that all one needed was “a coding pad and a pencil. ” The most important capability was the technical knowledge of the principals, usually acquired through working with a computer user or manufacturer.
Several dozen firms entered the programming services industry in the second half of the 1950s. In a majority of cases, the firms pecialized in particular technical applications, or within a vertical market such as financial services, retail, or manufacturing. A very different type of entrant came into programming services in the mid-1950s, specializing in the construction of very large programs that were beyond the technical capability of even the largest and most sophisticated users. The first firm of this kind was the Systems Development Corporation (SDC), a subsidiary of the RAND Corporation, Santa Monica.
SDC was incorporated in 1956 to develop the programs for the giant SAGE air-defense system. more than a million computer instructions. SDC employed several hundred programmers, estimated at the time to be perhaps halfof the nation’s programming manpower. SDC also trained hundreds of individuals to become programmers. There was, however, a rapid turnover of staff, as experienced programmers left for more remunerative employment in the private sector. At the time, SDC was hailed as the “university for programmers” and it was said that in the 1960s, SDC alumni were to be found in almost every major software firm in the country.
SAGE was a “real-time” system, in which the computer lay at the heart of an information system that esponded instantaneously to external events. As the U. S. government deployed more and more real-time defense systems in the late 1950s and 1960s, systems integrators such as TRW, MITRE, General Electric, Wasting house, Hughes Dynamics, and Lockheed began to develop expertise in software construction. Real-time technologies were hugely expensive to innovate but once established by the military, they quickly diffused into the civilian sector in applications such as airline reservations and on-line banking.
When Europe and the rest of the world began to catch up in the 1960s, American independent software firms and the programming ervices operations of computer manufacturers had a strong first-mover advantage. By the late 1960s, the most successful of the start-up software contractors had become significant firms. For example, by 1967 CUC had 700 employees, offices in twelve U. S. cities, and annual sales of$13 million. CUC, and firms like it, now offered a broad range of computer services that went well beyond program writing.
Another firm, the Computer Sciences Corporation of El Segundo, California, established in 1959 by five programmers to write software for computer manufacturers, grew to ecome one of the largest computer services firms in the world (which it remains, with revenues in 2000 of$9. 4 billion, and sixty-eight thousand employees worldwide). Nonetheless, giant firms are the exception and the programming services industry is remarkably lacking in concentration. By the late 1960s there were several hundred programming services firms, but less than fifty of them had as many as a hundred employees.