World Of The Computer Software Business example essay topic

Microsoft History Historians categorize blocks of time with the discovery of certain raw materials that humans utilized. The Bronze Age and the Iron Age were two periods in human history that proved through the discovery of artifacts that humans learned to harness these raw materials ingeniously. The Industrial Revolution of the late nineteenth century brought the discoveries of the Bronze and Iron Ages to new heights, and the advent of the locomotive, automobiles, cargo ships and airplanes were the most evident by-products of such raw materials. Use of these by-products from the earth's raw materials dramatically changed the world of business and trade. With the subsequent invention of wire communications (i. e., tapping out Morse code and speaking over telephone lines), business and trade grew exponentially. Wireless communications via the inventions of radio, television, and motion pictures contributed greatly to the advances of the Industrial Revolution.

The need to find better ways of doing business to keep the marketplace fresh and innovative has driven the human race toward the brink of a new era the Information Age. Unlike more tangible qualities of prior ages, the Information Age offers less defined qualities. At the heart of this new age is the advent of the personal home computer. Pumping life into this otherwise material home appliance is software that incorporates the necessary commands to access information stored within the computer's memory.

The company that offered the world its first software manufacturing company was Microsoft Corporation (MSFT on the NASDAQ exchange). At the helm of this young, innovative company are William Gates and Paul Allen, a pair of former high school chums who envisioned a world of home computer technology years before such a dream became even remotely possible. Early Influences Their story begins at Lakeside High, a private high school in Seattle, Washington. The Mothers' Club at Lakeside decided to purchase a computer terminal for the kids with proceeds from bake sales and rummage sales. Students at Lakeside became enthralled with this new toy.

True to their innate curiosity, Gates and Allen began to dabble farther into the workings of the computer; Gates, for example, wrote his first computer program at the age of thirteen Ca version of Tic, Tac, Toe. Because the computer terminal was so slow, one game of Tic, Tac, Toe took up most of a lunch break; if played on paper, a full 30 seconds might have been required. Despite the simplicity of the program, it spawned the creative genius in both young men to tackle more challenging programs in the years ahead. Because the Mothers' Club was unable to afford continued use of computer time at $40 per hour, they decided to make it students' responsibility to purchase their own computer time.

Most students complied by getting jobs outside school. Gates and Allen became programmers in the summers for compensation of computer time and $5000 in cash. In his 1995 book The Road Ahead, Gates describes the mainframe computers of the early 70's as A... temperamental monsters that resided in climate-controlled cocoons... connected by phone lines to clack ety teletype terminals... @ (11) He went on to explain that a personal home computer called the DPD-8 was actually available from Digital Equipment Corporation. According to Gates it was A... an $18,000 personal computer which occupied a rack two feet square and six feet high and had about as much computing capacity as a wristwatch does today... Despite its limitations, it inspired us to indulge in the dream that one day millions of individuals could possess their own computers.

@ (11-12) In the summer of 1973, Paul Allen, who knew more about computer hardware than Bill Gates, shared an article with Gates buried on page 143 in Electronics Magazine. The article described the invention of the 8008 micro-processor chip by a young company called Intel. Paul was surprised to receive the technical manual for the chip in the mail simply upon request. Immediately, he went to work analyzing its capabilities. Due to the lack of transistors, the 8008 chip was very limited in its use, but Allen discovered despite the limitations, the chip was good for repetitive tasks and mathematical data. First Business Venture When Paul Allen entered college at Pullman, Washington, a town on the east side of the state, sixteen-year-old Bill Gates traveled frequently by bus to visit him.

On these long trips across the state, Gates wrote a program that facilitated the reading of traffic information gathered by municipalities through a device set up on the side of certain intersections. A long, rubber tube stretched across the road from one of these devices, and each time a vehicle ran over the tube a punch was made in the roll of paper within the device. People deciphered this crude data by visually inspecting the punch holes and annotating the results. Gates' program relieved humans from such a tedious task, using the technology of the 8008 chip instead. With this program Gates and Allen launched their first company, Traf-O-Data.

The two programmers were full of enthusiasm for the success of their new company; most communities, however, were reluctant to purchase from two kids: consequently, their fledgling company enjoyed only marginal sales. Education Attempt Gates attended Harvard College in 1973 while Allen secured a job in Boston, Massachusetts as a programmer for Honeywell. In 1974 Intel announced the advent of the 8080 chip that boasted 2,700 more tran-sisters than its predecessor. Because of the disappointment they experienced in the hardware side of computing through dismal success in Traf-O-Data, Gates and Allen focused on new opportunities in the software side of computers. With a vision of millions of computers owned by individuals, the pair banked on competition between Japanese and American companies for control of the computer hardware market.

With this in mind, and with the introduction of the 8080 microprocessor chip (and inevitable successors to the chip), Gates and Allen determined that their future lay in developing software for these computers. The Motivational Side of Fear During a cold, New England morning outside a newsstand in Harvard Square during one of his frequent visits to Bill Gates, Paul Allen picked up a copy of the January issue of Popular Electronics magazine. The cover photo pictured a small computer kit called the Altair 8800. It sold for a mere $397, and had 4,000 characters of memory.

Panic struck Gates: A Oh no! It's happening without us! People are going to go write real software for this chip. ' I was sure it would happen sooner than later, and I wanted to be involved form the beginning. The chance to get in on the first stages of the PC revolution seemed the opportunity of a lifetime, and I seized it. @ (Gates, 16).

Driven by fear of someone writing software for the Altair 8800 personal computer before his own software was complete, Gates scrambled feverishly in his Harvard College dormitory forgoing a decent night's rest. Five weeks later, a version of BASIC became the impetus for Athe world's first microcomputer software company... In time we named it Microsoft. ' @ (Gates, 17) In the spring of 1975, Allen quit his job with Honeywell; Gates decided to take an indefinite leave of absence from college (never intending to forgo a degree). Both young men planned to dive into the world of the computer software business at its very beginning stages.

Allen was twenty-two years young and Gates was only nineteen. They set up operations in Albuquerque, New Mexico because the city was home to MITS, creator of the first inexpensive personal computer to be offered to the general pubic the Altair 8800. Microsoft provided BASIC language because it allowed a format for computer users to write their own programs instead of having to rely on scarce, packaged software. Immediately, the MITS Altair 8800 faced strong competition from computer makers such as Apple, Commodore, and Radio Shack who entered the personal computer market in 1977. The strategy at Microsoft was to convince computer manufacturers to buy licenses to A bundle@ Microsoft software with their computers. Royalties would then be paid to Microsoft on each computer sale.

Aside from the antics of early software pirates and lack of government laws preventing such activities, this strategy of selling licenses for the use of their software worked well for Microsoft. A Japanese Connection By 1979 half of Microsoft's business came from Japan. This was due in large part to A sweat equity@ of one man in particular. His name is Kazuhiro (Kay) Nishi.

Kay telephoned Gates in 1978 after discovering Microsoft in a newspaper article. Both Gates and Nishi were only twenty-two at the time and shared many similarities despite cultural and language differences. They met shortly after the phone call at an electronics con-vs. ention in southern California. Without attorneys, they signed a 12 page contract which gave Nishi exclusive distribution rights to Microsoft's BASIC language in East Asia. Eventually, their original expectation of $15 million was realized ten-fold through sales asa result of that contract. Microsoft moved from Albuquerque, New Mexico to its present home in Redmond, Washington in 1979 with most of its twelve employees.

According to Gates, the mission of Microsoft was Ato write and supply software for most personal computers without getting directly involved in making or selling computer hardware. @ (44) The programming team adapted programs to each machine and were Avery responsive to all the hardware manufacturers... we wanted choosing Microsoft software to be a no brain er... along the way, Microsoft BASIC became an industry standard., @ Gates was quoted. (44) IBM Influence By 1980, International Business Machines (IBM) enjoyed an 80% market share of large computer hardware, but only marginal success with the smaller personal computer (PC) market. The Apple II computer appeared poised to take the business market, thanks in part to a popular spreadsheet program called Visi Calc. Based on Apple's success, IBM decided to enter the PC market. In the summer of 1980, two emissaries from IBM met with Gates to discuss IBM's plans for a full-market assault, with components already available off-the-shelf.

IBM's plan was to utilize Intel's microprocessor chip and to use Microsoft's programming expertise, rather than create its own software. As a result of this meeting, Microsoft hired Tim Paterson, from a Seattle, Washington firm, who became responsible for creating the Disc Operating System (DOS) for IBM compatible computers. Survival of the Fittest The first IBM PCs hit the market in August of 1981 with a choice of three operating systems: Microsoft's DOS, UCSD-Pascal, and CP / M 86. Gates realized that only one operating system could survive, just as only one video cassette recorder survived their market previously (VHS beat out Beta Max). Gates developed a three-part plan to come out on top of the competition: make Microsoft DOS the best product of the three help other software companies write MS-DOS based software ensure MS-DOS to be inexpensive. A Crucial Deal With these objectives in mind, Gates offered IBM an attractive deal.

Microsoft would allow IBM to use DOS (called IBM- or PC-DOS to distinguish itself from the nearly identical MS-DOS) for a low one-time fee for as many PC's IBM could sell. This deal gave IBM the incentive to push DOS, rather than the other trooper-a ting systems, whose manufacturers received royalties for each PC sale with their respective operating systems installed. Hence, IBM sold UCSD Pascal P-system for $450 and CP / M-86 for $175 while DOS was offered at only $60. Gates's strategy worked as he stated: Our goal was not to make money directly from IBM, but to profit from licensing MS-DOS to computer companies that wanted to offer machines more or less compatible with the IBM PC.

IBM could use our software for free, but it did not have an exclusive license or control of future enhancements. This put Microsoft in the business of licensing a software platform to the PC industry. AConsumersbought the IBM PC with confidence... each new customer... added to the IBMPC's strength as a potential de facto standard for the industry... A... the availability of software and hardware add-ons sold PCs at a far greater rate than IBM had antic i-patedCby a factor of millions, @ which meant A billions of dollars for IBM. @ (Gates, 49-50) Competition Errors After three years of competition blitzing, all competing standards for personal computers had di sap-pea red with the exception of Apple's Apple II and Macintosh. A Hewlett Packard, DEC, Texas Instruments, and Xerox, despite their technologies, reputations, and customer bases, failed in the PC market in the early 1980's because their machines weren't compatible and didn't offer significant enough improvements over the IBM architecture. @ (Gates 50) Only Commodore Corporation fared well through the eighties in the PC market, due substantially to lower cost of models 64 and 128, and the superb graphics of the Commodore Amiga, still used today by some commercial movie studios.

Gates defends IBM against certain revisionist historians who conclude A... IBM made a mistake working with Intel and Microsoft to create its PC. They argue that IBM should have kept the PC architecture proprietary, and that Intel and Microsoft somehow got the better of IBM. But the revisionists are missing the point. IBM became the central force in the PC industry precisely because it was able to harness an incredible amount of innovative talent and entrepreneurial energy and use it to promote its open architecture. IBM set the standards.

@ (Gates, 50) Birth of Windows Because of the character-based commands that users of DOS needed to type intothe computer from a keyboard peripheral, Gates saw the potential of losing Microsoft's leading software position if it stayed with the MS-DOS format. Researchers at Xerox's Palo Alto, CA Research Center studied human-computer interaction and found that computer users could more easily instruct the computer if users were allowed to point to commands, via a device called aA mouse, @ as opposed to typing commands, via a QWERTY keyboard. According to Gates, AXerox did a poor job of taking commercial advantage of this groundbreaking idea, because its machines were expensive and didn't use standard microprocessors. Getting great research to translate into products that sell is still a big problem for many companies. @ (53) The process of using pictures CiconsCto command a computer, rather than typed characters, is called graphical technology.

The screen which molds graphical technology into the character-based operating system format is called a Graphical User Interface (GUI). In 1983, Microsoft announced its version of a GUI called Windows 7. The Apple Lisa and Xerox Star were GUIs already available to consumers, but both, in Gates' view, A... were expensive, limited incapability, and built on proprietary hardware architectures. @ (53) This meant that other hardware companies could not license the operating systems to build compatible systems. The same was true for software companies, and this hindered the creation of new applications for the Star and Lisa GUIs by outside companies. MISSION STATEMENT AND ANALYSIS At Microsoft, our long held vision of a computer on every desk and in every home continues to be the core of everything we do.

We are committed to the belief that software is the tool that empowers people both at work and at home. Since our company was founded in 1975, our charter has been to deliver on this vision of the power of personal computing. As the world's leading software provider, we strive to continually produce innovative products that meet the evolving needs of our customers. Ourectensive commitment to research and development is coupled with dedicated responsiveness to customer feedback. This allows us to explore future technological advancements, while assuring that our customers today receive the highest quality software products. A good mission statement attempts to answer some key questions about the company and the industry.

These questions are Who are we? , What business are we in? , and Where are we headed? In Microsoft's mission statement they tell who they are, as well as what there business is. They's tess their goals and where they are headed very well. My biggest problem with this mission statement is the fact that Microsoft is to worried about being on top and will do what ever is necessary. INDUSTRY AND COMPETITIVE ANALYSIS Dominant Economic Characteristics Market Differentiation The first popular graphical platform came to market in 1984 with Apple " macintosh.

It was an instant success as the GUI platform of Macintosh eliminated the need for obscure character commands. Gates worked closely with Steve Jobs, who was the leader of the Macintosh team, in order to create Microsoft's competing GUI version of the Mac called Windows. The major difference that Microsoft held over Apple was its willingness to allow other software developers open access to the Windows format. Apple restricted its GUI to Macintosh computers only. That difference helped to elevate Microsoft eventually to the software industry leaderCbar none. Gates devotes pages of explanations of why such a A great company@ as IBM failed in its attempts to finally create its own software operating system.

He apologetically cites the specific decisions that IBM made with the development of its OS/2 operating system. His reason for the disappointing results of IBM's attempts are chiefly due to the fact that graphical computing could have found mainstream success if IBM had been more cooperation with Microsoft in developing a general application of GUI software to be used with existing hardware rather than insisting on developing a whole new application. When Microsoft went public in 1986, Gates offered IBM 30% of MSFT stock in order that IBM could share in the fortune, be it good or bad, of Microsoft. IBM declined.

This was Microsoft's attempt at keeping IBM close to Microsoft as IBM was instrumental in the success of Microsoft. Despite not seeing eye to eye with IBM in the development of Windows, Gates saw the GUI application as the progressive alternative to DOS and continued to create improvements on the existing applications. In the weeks prior to the release of Windows 3.17, May 1990, Gates A... tried to reach an agreement with IBM for it to license Windows to use on its personal computers. We told IBM we thought that although OS/2 would work out over time, for the moment Windows was going to be a success and OS/2 would find its niche slowly. @ (62) IBM again refused to cooperate with Microsoft insisting total dedication to the development of OS/2 which was eventually doomed to an ignominious future.

AIBMhas proven conclusively through the years that it has no idea of how to create or market software. Examples are Display write word processing; the PC Jr, IBM Personal Typing System, and the PS-1, all with proprietary software; OS/2 as mentioned above, and feeble attempts at networking. Now, with the purchase of Lotus, the software giant should request last rites. @] According to Gates, AIf IBM and Microsoft had found a way to work together, thousands of people-yearsCthe best years of some of the best employees at both companiesCwould not have been wasted.

If OS/2 and Windows had been compatible, graphical computing would have become mainstream years sooner. @ (62) Pace of technological change In its twentieth fiscal year (July 1 B June 30) since incorporation, Microsoft leads the software industry with revenues of $5,937,000,000 as of June 30, 1995. It is the unequaled standard bearer for software manufactures and with its release of Windows 957, a total graphical operating system, should remain at the top for years to come. Despite its current position, Microsoft is still faced with new challenges as with the progression of any high-tech industry. The most recent challenges facing Microsoft are its applications to the Internet and its commitment to the development of the information super highway. In 1989 the U.S. Government decided to cease funding its 1960's project ARPANET and allow the project to be succeeded by the commercial equivalent Internet.

@In its beginning stages, the Internet picked up where ARPANET left off. Its primary function was to provide electronic communications, or e-mail, solely between computer science projects and engineering projects. Its popularity increased as it became commercially available to PC users. To fully appreciate the significance of e-mail and the transmission of electronic data consider the evolution of the printed language. Advances to the Printed Word When Johann Gutenberg introduced the printing press to Europe in 1450, the method of copying the printed word was revolutionized.

Before the advent of the printing press there was an estimated 30,000 books available on the earth, most were hand written by monks. Although it took two years to complete the movable type for Gutenberg's Bible, once completed, multiple copies could be made rather quickly. Almost 500 years later, Chester Carlson, frustrated by the length of time involved in preparing patent applications, set out to invent an easier way to duplicate information in small quantities. What resulted was a process he called A xerography@ when he patented it in 1940. In 1959, Carlson aligned with Xerox Corporation as a means of manufacturing and distributing AXerox@ copying machines. Xerox projected sales of perhaps 3000 units.

Much to their surprise, they placed orders for 200,000 units, and one year later reported nearly 50 million copies a month were being processed. By 1986, that figure increased to 200 billion copies per month and has steadily increased ever since. The advent of xerography allowed small groups to participate in the capabilities of a printing press for a fraction of the cost and in a fraction of the time a conventional printer would take. The market size for the computer industry is very large, this past year it totaled $238.7 billion dollars. It is expected to rise considerably in the next few years.

The competitive scope for the computer industry globally is very strong, microsoft is worldwide. The Japenese are very big competitors, but Microsoft is to powerful to compete with. Ease of entry is very hard, the computer industry is a costly industry to enter. To compete with large companies you would need millions of dollars to even consider getting started.

One could start a small computer business focusing on one area without the cost being overly expensive. An example would be if you wanted to focus one the accounting industry you need not worry about anything else. The life of the product depends totally on your needs, as well as the increases in technology. Microsoft comes out with new products all the time, but you don't necessary need to buy them.

Sometimes a computer program can lasts companies for years. It is very difficult to enter the computer industry due to the large capital requirements and the rapid technological changes, so either backward or forward integration would be very difficult. Driving Forces There are several driving forces in the computer industry. 1) Increased efficiency due to economies of scale 2) Change in the industry growth rate 3) Product innovation due to the rapid increases in technological advancements 4) The need to be the first to develop the new program The newest driving force for the computer industry was the internet or super highway. The following describes both along with the advantages they brought. The Internet The Internet offers even more advantages than Xeroxed copiers where information can be accessed and / or distributed to all interested parties (with a PC) via the electronic transmission of data.

As defined by Gates, the Internet is Aa group of computers connected together, using standard protocols' (descriptions of technologies) to exchange information. @ (94) Electronic massages are sent via phone lines from one computer to another and stored in the electronic A mailbox@of the another computer until the message is Adown-loaded@ by the user. Another advantage to the Internet is AWeb browsing@ on the World Wide Web (.) or simply AWeb. @ Server companies offer graphical pages of information to be accessed by subscribers of their service. From the Home@ page of a topic, one can activate subsequent hyperlinks for further information on given topics by clicking the mouse device of most PCs. Although Gates admits that Microsoft was surprised at the commercial success of the Internet, he has begun work on software applications to make the Internet easier to access for PC owners with limited computer knowledge.

Some people may confuse the subscriptions to companies on the Internet, such as CompuServe, Prodigy, and America On-line with the creation of the information super highway, but according to Gates, the Internet is simply a A precursor to the information highway. @ (90) Comparing the information highway with the Internet is like comparing a country lane with the Eisenhower Highway System. Even that analogy would not do justice to the information highway as it will look in twenty or more years. The limitations of the Internet must first be expanded before anything resembling the actual information highway exists. One challenge that Micro-soft and other companies have is to convince the phone companies and cable companies to replace the coaxial lines that serve homes and businesses with fiber optic cables.

Fiber optics will expand the bandwidth necessary for the immense amount of information sent on the highway. Two technologies currently in the works toward this transformation of trunk lines are DVD and ISDN. Digital simultaneous voice data can be used with existing phone lines, but does not provide a sufficient bandwidth to handle video transmissions; hence, new lines must be laid for this application to reach full capacity. Even with the current integrated services digital networktechnologyCwhich incorporates a wider bandwidth but requires the laying of newlinesCthe clarity of full motion picture images still leaves much to be desired. Add-in cards which upgrade the PC Ato support ISDN costs $500 in 1995, but the price should drop to less than $200 over the next few years. The line costs vary by location but are generally about $50 per month in the United States.

I expect this will drop to less than $20, not much more than a regular phone connection. @ (Gates, 101) The Information Highway Once more and more PC owners hook up to the Internet with ISDN lines, the groundwork for further progress towards the information highway will be laid. The information highway was coined by then-Senator Al Gore A whose father sponsored the 1956 Federal Aid Highway Act@ (Gates, 5) during the Eisenhower Administration. According to Gates, this terminology is flawed.

It connotes the following of routes with distance between two points. It implies traveling from one place to another when the actual information highway will be free of such limitations. Some people also confuse the information highway with a massive government project which, Gates feels, A... would be a massive mistake for most countries... @ (6) Just as Microsoft's mission in 1975 was Aa computer on every desk and in every home, @ (Gates, 14) so it is with Microsoft progressing towards A... information at your fingertips' which extols a benefit rather than the network itself. @ (Gates, 6) Key success factors 1) The high degree of expertise and product innovation 2) Being able to stay on the cutting edge of technology 3) Companies need to have a low degree of glitches in there programs 4) A very strong customer support system (user friendly) 5) Must be able to meet the customer needs The computer industry is a strong leader in technology.

To compete you must stay one step ahead of the rest. Microsoft has proven how devoted they are to computer program developing by always being one step ahead of the rest. When one is dealing with the computer industry it is very important to employees working for you..