Computer software provides the functionality to do tasks ranging from writing a letter on the computer, to the more complex task of organizing and analyzing large data sets. There are four general types of computer software which includes system software, middleware, application software, and engineering software. Many of the major software companies have been consolidating or acquiring other companies to provide products or services in multiple fields. For instance, rising demand for open source and On-Demand software, has led many larger companies to acquire smaller companies that specialize in these services. Maturity in more traditional software markets such as enterprise software have also contributed to consolidation.
System software provides an interface between the hardware and application software, for example operating systems and network management software.
Middleware is the software that connects different software applications on the users computer.
Application Software is the software used to accomplish a broad range of different tasks with a computer. The primary subcategories of Application Software includes Database Software, Office Suite Software (Word Processing, Presentations, Spreadsheets), and Enterprise Software (Business Intelligence, Content Management, Customer Relationship Management, Data Security, HR Management Knowledge Management, Predictive Analytics/Forecasting, and Price Optimization). Application Software makes up just under half of all packaged software sales in the world.
Engineering software is offered to aid engineering, design or scientific calculation work. The software packages cover 2D/3D design, process or structure simulation, automated electronical or mechanical design and virtual reality.
The IDC, an information market research firm, projected that growth of Linux, an open source operating system, would be about double the growth of windows between 2007 and 2011. As its name sugests, Open source software has source code that is "open" and readily available and can be changed by anyone. Open source software is usually sold for a small license fee, but the majority of open source revenues come from selling support and training. Open source is a much cheaper option than traditional application software offerings, but raises security concerns for many companies. However, major traditional competitors such as Microsoft and Oracle realize the threat of open source and are either developing their own open source software or selling support to existing open source software.
Traditionally, application software is sold for a license fee and installed on the computer. Cloud computing completely changes that. Cloud computing provides On-Demand software, which means a central server would be responsible for the delivery and maintenance of your software over the internet. In most cases, the end user would pay a subscription fee to use this software. Cloud computing eliminates a lot of costs for companies because a company would no longer need to pay for on-site servers, maintenance fees, or licensing fees. Traditional software companies like Oracle (ORCL) , SAP AG (SAP) , and Lawson Software (LWSN) are threatened by the adoption of cloud computing.
Enterprise software sales growth reached its peak in the late 90's, but since 2000 growth has been tempered. Growth started to decline between 2000 and 2003, but has leveled out and stayed in the mid-high single digits since then. In response to the slow growth, software vendors began to consolidate. Buyer's are now purchasing more from single vendors because of the wider product offerings. This gives greater purchasing power to the buyer's and the vendor's are pressured to lower prices to attract these customers. In addition, the growth of On-Demand (or Software as a Service, SAAS) has taken some of the demand from traditional enterprise software. SAP AG (SAP), Oracle (ORCL), CA (CA), and BMC Software (BMC) are few companies that get a lot of their business from enterprise software.
3D CAD modelling and rapid prototype technologies together with the abilty to simulate the physical behaviour of structures are the most important enablers of fast product development cycles in the manufacturing and construction industry. 3D CAD is moving to annotated models which carry all relevant product data available for interfacing to business application software, engineering validation and manufacturing. The software packages are used to create virtual prototypes of the components and assemblies. Progress in simulation science (e.g. Finite Elements) and usability enhancements are adding value to the software packages for the engineering work.
In 2007, a study by the Business Software Alliance and the IDC found that for every $2 of software sold legitimately, $1 was lost to piracy. This translates into about $40B in revenue. Piracy is more of a problem in developing countries, such as China, rather than developed countries like the US.
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