Computer software industry
The computer software industry encompasses the development, maintenance, and distribution of software applications and systems that enable computers to perform various tasks. This industry includes several subcategories, such as computer applications, gaming software, and operating systems, and has grown in tandem with the computer hardware sector. As of 2022, the industry generated approximately $593 billion in global revenues, highlighting its significance in the modern economy.
Software is essential for everyday computing, allowing users to interact with devices ranging from personal computers to smartphones efficiently. Historically, the industry's roots can be traced back to the early 19th century and have evolved through pivotal inventions like punch cards and early programming languages. Today, software is integral to numerous fields, including education, healthcare, and business, facilitating operations and data management.
With the rise of the internet, cloud computing has transformed how software is accessed and utilized, enabling users to leverage applications without the need for local installation. The industry's future looks promising, with a projected growth rate of 6.5% globally between 2022 and 2027. As demand for software continues to increase, there will likely be abundant job opportunities, particularly for software developers and quality assurance analysts, although some traditional programming roles may decline due to offshoring. Overall, the computer software industry remains a dynamic and vital component of the information technology landscape.
Computer software industry
Industry Snapshot
GENERAL INDUSTRY: Information Technology
CAREER CLUSTER: Information Technology
SUBCATEGORY INDUSTRIES: Computer Applications; Computer Gaming Software; Computer Operating Systems; Computer Programming Languages and Compilers; Computer Utility Software; Custom Computer Programming Services
RELATED INDUSTRIES:Computer Hardware and Peripherals Industry; Computer Systems Industry; Internet and Cyber Communications Industry; Video, Computer, and Virtual Reality Games Industry
ANNUAL DOMESTIC REVENUES: US$297 billion (Statista, 2022)
ANNUAL GLOBAL REVENUES: US$593 billion (Statista, 2022)
NAICS NUMBERS: 511210, 541511
Summary
In modern computing terms, "software" usually refers to nearly all aspects of a computer except for the physical hardware or components. Thus, software includes a computer's operating systems and graphic user interfaces (GUIs), firmware designed to control electronic hardware components, web browsers, and stand-alone programs called applications, such as Microsoft Word or Apple's Garage Band. The software industry developed in parallel with the computer hardware industry. The two industries depend on each other to survive, and many companies offer both hardware and software products. With the development of cloud computing, internet-based firms such as Google have pioneered software that users can access online without downloading code permanently onto their own computers.
History of the Industry
Throughout history, people have searched for more efficient ways of organizing useful information. By the early 1800s, mathematical calculation tables had become standard tools adopted by many professions, including accountants, astronomers, sailors, and mathematicians. However, such tables were frequently inaccurate and difficult to use. This situation led inventor Charles Babbage to design several automatic calculating machines, culminating in his design for the analytical engine in 1834. According to Babbage's original designs, punch cards would have been used to program the analytical engine. Although the project was never completed, Babbage's design inspired mathematician Ada Lovelace to write an extremely perceptive article describing how numbers could be used to represent other forms of data, such as musical notes or the letters of the alphabet. Lovelace also developed a rudimentary computer program for the analytical engine and is considered by many to be the world's first computer programmer.
Punch-card technology represents another forerunner that would lead to the development of modern software. In 1890, former United States Census Bureau employee Herman Hollerith started the Tabulating Machine Company, later known as International Business Machines (IBM). Hollerith had previously developed a punch-card system that allowed thin paper punch cards to store population statistics. Early punch cards had been used to control automated looms in the textile industry, but Hollerith was the first person to perfect the use of punch cards to store many different types of data.
As engineers, scientists, and physicists began experimenting with computer technology, they also developed new methods for storing and manipulating information. Early computers such as the Electronic Numerical Integrator and Computer (ENIAC), one of the world's first electronic computers, used a mixture of vacuum tubes, plug boards, and punch cards to store and input computer instructions. Developed in 1937, the 1,800-square-foot ENIAC was so large and complex that it weighed thirty tons and took days to reprogram.
In 1944, IBM unveiled the Automatic Sequence Controlled Calculator (ASCC) at Harvard University, where it was known as the Harvard Mark 1. Early computer scientists such as Grace Murray Hopper and Howard Aiken soon began creating programs for the Mark 1, working together to write complex mathematical codes that were input into the computer through a series of punch cards. These computer scientists are considered the first programmers in the United States.
Throughout the 1950s, early computer scientists frequently collaborated to develop a standard computer-programming language that would be compatible with specific computer hardware. For example, some groups focused on sharing common programming routines for IBM computers, while others concentrated on models manufactured by Digital Equipment Corporation (DEC). In 1959, Hopper led a team assembled by the US Department of Defense in designing the Common Business-Oriented Language (COBOL), one of the earliest universal programming languages. COBOL is still used by businesses, governments, and military organizations worldwide. In addition, elements of COBOL continue to be used commonly in computer operating systems such as Microsoft Windows and UNIX.
As computer hardware continued to evolve, software programming became more widespread, thanks in part to the development of the integrated circuit in 1959 and the invention of the floppy disk. These important milestones helped bring the computer widespread acceptance in the business world, and in 1976, Steve Wozniak began to market the Apple I, the world's first personal desktop computer. As computers became fully integrated into homes and businesses, programmers simplified the graphic user interface (GUI), leading to the development of Microsoft Windows in 1983 and the Mac OS in 1984. Software has since become an increasingly important aspect of modern life, as specialized programs have been developed for every type of industry and electronic product, from household robotic devices such as the Roomba to smartphones such as the iPhone.
Although the software industry suffered as a result of the collapse of the dot-com bubble during the late 1990s and early 2000s, as did most computer-based industries, the continued rise of the internet has offered companies in the software industry many new opportunities to expand their business. Thanks to powerful new computers and low-cost, or even free, online distribution methods, new developers can sell their software directly to customers online, bypassing wholesalers and retail locations. Delivering software to customers through the internet has dramatically reduced the costs incurred by software developers. This reduced cost has led to an explosion of low-cost shareware and free, open-source software projects such as Linux or the Mozilla Firefox browser. Countless people are involved in the software industry, from software engineers and beta testers to hobbyists who create software for free in their spare time.
The Industry Today
As computers have become ubiquitous in modern life, so has software. Without software, computers would be practically unusable to the average consumer. Software allows consumers of any age and skill range, from children to the elderly, to have access to the internet, play games, connect with other people for work or play, and even edit films and photos. Meanwhile, as advanced smartphones and netbook computers allow more people to access the internet, software developers have gained many new platforms through which to offer their products.
The growing and thriving software industry has evolved to meet the ever-changing requirements of a global society that is constantly utilizing such advanced technology. From handheld gaming systems and electronic appliances to cellular phones and personal computers, software is included in countless devices and utilized by practically every profession. The right software, for example, makes it much easier for architects to design buildings, for doctors to keep track of their patients' medical records, for teachers to contact parents and students, and for investors to trade stocks. Because of software, businesses and individuals have become increasingly dependent on computers to store and manage information.
On the internet, software is what makes it possible for people to communicate online. Web designers use software to create websites and online content, and web browsers allow users easy access to nearly unlimited amounts of information in a plethora of formats, including social networking sites, newspapers, online government records, and e-mail. However, the popularity of the internet has also caused a skyrocketing number of dangerous computer viruses, malware, and spyware. Individuals may hack into home networks, businesses intranets, and school and government records, often in an attempt to change records, defraud banks, or launch denial-of-service attacks, which have crippled numerous websites and led to many instances of identity theft. These malicious activities have led to the growth of many companies such as Norton, McAfee, and Trend Micro that specialize in antivirus software designed to block and remove malicious programs while repairing infected files. Such companies also provide software designed to protect businesses and users from hacking attacks that may disrupt computer systems or allow malicious access to personal or confidential information.
Software is sold in many different retail outlets, including electronics, office-supply, and video-game stores. Most new computers come with some software preinstalled, including the operating system, web browsers, and word processors, as well as trial versions of premium software products such as Microsoft Office. In addition, countless software companies and individual entrepreneurs offer their products online. Some individuals create software as a hobby in their spare time, and commonly distribute it online either for free, for a one-time fee, or for an ongoing subscription. Proprietary software that can be downloaded and tried out for free, sometimes in a limited or trial version, is known as shareware.
The first decades of the twenty-first century have also seen the growth of open-source software, including such popular programs as Linux and Firefox. Open-source software is software whose source code is made freely available for use, study, and modification. As a result, it is developed and improved by an extended community of programmers that may include company employees, hobbyists, and professionals working in their spare time. Even profitable companies such as Google have developed and released free open-source software, such as Google's Chromium project, which includes much of the code behind the company's free Chrome web browser. Major corporations also make use of open-source software developed elsewhere. For example, Mac OS X includes code taken from FreeBSD, an open-source version of UNIX.
The development of cloud computing (a model for delivering hosted services over the internet) has also altered the software landscape. Companies such as Google and Microsoft can offer users the ability to access software programs directly through the internet, including database software and word processors. Users can also store information in a fashion that makes it available through the "cloud." Thus, cloud computing makes available, at any site with internet access, both users' information and software capable of manipulating that information. This availability frees users from needing to use a dedicated machine or to carry their data with them. For example, students writing essays can use Google Docs to write and edit their work, accessing their documents from computers at their local libraries, homes, or schools. They need not worry about whether these computers utilize particular software applications, nor must they carry data-storage devices to transport their files. As long as a computer is installed with a relatively current version of a common Web browser, it can access and modify the students' files.
Other companies offered cloud computing software for specialized applications and businesses, including human resources software and accounting programs. This software has made it much easier for employees and small-business owners to access their data at any time. A local contractor, for example, can access spreadsheets with account information from an office computer, a laptop, or even a smartphone while on a job site. Cloud computing as a technology is still relatively young, but it has already experienced wide adoption by many different types of users, and creative software programmers can take advantage of this evolving technology to create new and unique programs.
Industry Outlook
Overview
Software has grown to control many aspects of the technology people use daily. The software industry plays a tremendous role in nearly every other industry, in schools and governments, and, increasingly, in daily life. As computer use continues to grow, software will remain necessary to allow users access to the information encoded within. Thus, computer software is closely tied to most economic activities in the Information Age, including both business and leisure. As a result, despite periodic alterations in revenue models that may cause temporary deviations, the software industry is expected to continue its rapid growth.
Software offerings have become increasingly robust, and many new programs are being created for specialized purposes within specific industries. For example, architectural firms use computer-aided design (CAD) software to design new homes; artists, photographers, and graphic designers use image-editing software such as Photoshop; and filmmakers use programs such as Final Cut Pro to edit films. In addition, many businesses employ software programmers or hire external firms and consultants to develop specialized software to meet each company's individual needs. This is especially true for internet-based businesses and companies engaged in extensive e-commerce transactions, which have grown to be a major part of virtually all kinds of retail operations and many other kinds of sales.
As e-commerce has grown, online criminal activity has grown alongside it. This has led in turn to robust growth in the cybersecurity industry, which is engaged in blocking hacker attacks, e-mail spam, and industrial espionage and in deleting or repairing infected computer files. Antivirus software is widely used by businesses, governments, schools, and individuals and is poised to continue to grow along with general online activity.
Many new software firms are created every year. As the price of developing software has fallen for many firms, individual entrepreneurs, software publishers, and hardware manufacturers have continued to develop innovative new technologies. At the same time, however, major operating systems and professional-grade business suites have become extremely complex. A major new release of the Mac OS or Windows requires years of effort and untold millions of dollars in development costs. Thus, even as much of the software market has become more accessible to start-ups, some segments remain dominated by large companies. Nevertheless, many computer hardware companies, software publishers, internet firms, and even cell-phone manufacturers release specialized software development kits to encourage software engineers to develop new products and services, since they know that a platform is only as good as the software that runs on it.
New software products are increasingly being released through open-source platforms and nonprofit organizations such as the Mozilla Foundation. These groups release free, open-source software online. They have very few paid employees, and instead rely on an army of volunteer programmers, software engineers, and beta testers to perfect and refine their software offerings. Even without a focus on profits, many free software products have become extremely popular.
Software has become a global enterprise. Many software companies, including large firms such as Microsoft, have opened overseas development, testing, and customer-support facilities. Other companies outsource duties such as beta testing and technical support to overseas firms. At the same time, as computer usage expands—especially in the developing world—many new overseas companies are being formed to meet the specific needs of their home countries. The demand for software will undoubtedly continue to expand as people become more dependent on computer technology. Software is also increasingly used for educational purposes, with schools and universities offering many Web-based software options, as well as traditional software programs that help students learn important new skills.
New growth in the software industry is also taking place in the field of video games and mobile phone services. Smart phones such as the Motorola Droid, which uses Google's Android operating system, and Apple's iPhone, which uses a modified operating system similar to Mac OS X, offer entrepreneurs new avenues to develop and market software. Such offerings frequently include mobile games, as well as music players, browsers, e-mail clients, and maps. They also include business tools, such as software allowing users to accept credit card payments directly from their smartphone. Mobile platforms such as smartphones, tablets, and laptops are also increasingly used to distribute educational software. Another area of growth is applications that provide workers in the health care industry with important information, including medical dictionaries, anatomy guides, and diagnosis codes.
The software industry will continue to grow, with many opportunities for entrepreneurs to develop successful new software. As the barriers for entry into the lucrative industry continue to fall away, many new software companies will be founded by innovative programmers. Anybody with the right dedication and imagination can learn software programming and, with the right mix of innovative creativity, hard work, and a little luck, can prosper in the computer software industry.
Employment Advantages
The computer software industry is expected to continue its rapid growth in the coming years. Growth projections for the industry are high; Statista predicted 6.5 percent growth predicted in worldwide between 2022 and 2027. It is expected that employment opportunities in the software industry as a whole will be higher than average. The number of jobs for software developers, quality assurance analysts, and testers is expected to increase especially fast, with the Bureau of Labor Statistics (BLS) forecasting 25 percent growth from 2022 to 2032.
It should be noted that some jobs in the computer and IT industry are expected to experience a decline in US-based employment. In particular, the number of jobs for computer programmers was predicted to decrease by 10 percent from 2022 to 2033. The BLS attributes this to the fact that computer programming can be done remotely, so US-based employers may hire programmers in other countries to take advantage of lower wages.
Prospective employees in the computer software industry are usually professionals with advanced degrees, although few jobs require more than a bachelor's degree for an entry-level position, and entrepreneurs of every educational background can find success by developing innovative software on their own. In either case, people working in this field should pursue educational opportunities as part of their efforts to keep up with the constant evolution of software technology.
Annual Earnings
Software companies frequently offer more generous benefits and salaries than do companies in other industries. According to the BLS, the median annual salary for nonmanagerial employees in the computer and IT industry was $100,530 as of May 2022, much higher than the median wage of $46,310 for occupations in all industries. Software developers in particular earned even higher wages in 2022, with a median annual salary of $127,260.
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