Software Becomes Premier Tool In Selling Computers

The Wall Street Journal

September 29, 1980

SOFTWARE, ONCE GIVEN AWAY BY INTERNATIONAL BUSINESS MACHINES CORP. AND WHOLLY NEGLECTED BY MINICOMPUTER COMPANIES, HAS BECOME SO CENTRAL THAT IT IS PERHAPS THE DOMINANT FACTOR IN BUYING AND SELLING COMPUTERS.

NCR CORP. ESTIMATES THAT 60% OF ITS RESEARCH AND DEVELOPMENT BUDGET GOES TO SOFTWARE, COMPARED WITH 35% FIVE YEARS AGO. A TEXAS INSTRUMENTS ASSISTANT VICE PRESIDENT, JOHN HANNE, SAYS THAT 20 YEARS AGO SOFTWARE REPRESENTED ONLY 10% OF THE COST OVER THE LIFETIME OF A NORMAL MILITARY COMPUTER PROJECT, WHILE TODAY IT'S 90%. (ABOUT TWO-THIRDS OF THAT IS FOR MAINTAINING THE PROGRAM--UPDATING IT WHEN INFORMATION CHANGES AND FIXING OR DEBUGGING IT WHEN ERRORS ARE FOUND.)

ONE RESULT OF THE CHANGE HAS BEEN A SURGE IN DEMAND FOR PROGRAMMERS. THE BUREAU OF LABOR STATISTICS SAYS THERE ARE 534,000 PROGRAMMERS AND SYSTEMS ANALYSTS IN THE U.S., UP 25% FROM TWO YEARS AGO. THEIR NUMBER ALREADY IS MORE THAN THE BUREAU'S FORECAST FOR 1990, MADE THREE YEARS AGO.

YET BRUCE COLEMAN, VICE PRESIDENT OF SOFTWARE PRODUCTS FOR INFORMATICS INC., SAYS THAT "ONE OUT OF EVERY 10 JOBS IN DATA PROCESSING IS UNFILLED." HE ESTIMATES THAT THE AVERAGE FORTUNE 1000 COMPANY (MOST OF WHICH FIRMS HAVE THEIR OWN PROGRAMMING STAFFS) HAS TWO YEARS OF PROGRAMMING WAITING TO BE DONE.

INTEL CORP. BELIEVES THE ANSWER IS TO PUT THE SO-CALLED UTILITY FUNCTIONS OF SOFTWARE, SUCH AS THE OPERATING SYSTEM, RIGHT ON THE SILICON CHIPS.

MANY COMPANIES, INCLUDING TEXAS INSTRUMENTS, THE BIGGEST SEMICONDUCTOR MAKER, DOUBT THAT THIS IS THE RIGHT WAY TO GO. "YOU COULD PUT A THREE-MILLION-CHARACTER OPERATING SYSTEM ON A CHIP, BUT AT LEAST ONE BIT WOULD PROBABLY BE WRONG," AND IT WOULDN'T BE FIXABLE AS SOFTWARE WOULD, WARNS HANNE OF THE DALLAS COMPANY.

NONETHELESS, COMPUTER MAKERS ARE PUTTING MORE AND MORE CAPABILITY INTO THE OPERATING SYSTEMS THEY WRITE.

THE BUSINESS OF WRITING SPECIFIC PROGRAMS FOR COMPANIES THAT DON'T CARE TO CREATE THEIR OWN IS ALSO GROWING RAPIDLY. THE ASSOCIATION OF DATA PROCESSING SERVICE ORGANIZATION ESTIMATES THAT INDEPENDENT COMPANIES SOLD $1.2 BILLION IN SOFTWARE LAST YEAR. IT SAYS THE BUSINESS IS GROWING 22% A YEAR, ABOUT TWICE AS FAST AS THE MAINFRAME COMPUTER BUSINESS.

COMPUTER MAKERS THEMSELVES ARE CONCENTRATING MORE ON WRITING PROGRAMS THAT WILL BE USED DIRECTLY IN INDUSTRY. HONEYWELL HAS AN EXTENSIVE LIBRARY OF PROGRAMS USED BY GOVERNMENT AGENCIES; BURROUGHS CORP. SELLS MANY BANK AND FINANCE PROGRAMS; SPERRY CORP.'S UNIVAC DIVISION SAYS IT IS EMPHASIZING MANUFACTURING PROGRAMS. MANY OF THESE PROGRAMS ARE BOUGHT FROM CUSTOMERS WHO DEVELOPED THEM FOR THEIR OWN USE.

ANALYSTS SAY THAT THE GROWING IMPORTANCE OF SOFTWARE GIVES IBM, ALREADY THE INDUSTRY GIANT BY FAR, AN ADDED EDGE BECAUSE SOFTWARE DEVELOPED FOR IBM WON'T RUN ON OTHER MANUFACTURERS' COMPUTERS.