The Software Industry in the 1960s

The number of computers in use and their size and speed expanded rapidly in the 1960s escalating the demand for software to support the numerous tasks for which computers were now being used.  This provided enormous opportunities for entrepreneurs to create new companies to serve this expanding market.  Some of the companies founded in the early 1960s were Informatics, Electronic Data Systems (EDS) and California Analysis Center, Inc. (CACI) in 1962, Management Science America (MSA) in 1963, and Keane, Inc. in 1965. 

By 1965, there were an estimated 45 major software contractors in the U.S, some employing more than a hundred programmers and with annual revenues as much as $100 million.  In addition, there were hundreds of small firms, typically with just a few programmers.  In 1967, it was estimated that there were 2,800 software services firms in the U.S.  By the end of the 1960s, a number of these firms, such as Informatics, ADR, and CSC, were publicly held.

By the early 1960s, a customer of any of the major hardware manufacturers could expect to have access to a library of software which was included (bundled) in the cost of the computer.  This software included the computer’s operating system, of course, but also utility programs (such as sort programs), compilers for languages such as COBOL and FORTRAN, and a growing library of programs written to handle specific applications.  IBM, for example, maintained a library of application programs written by its programmers to meet the needs of  specific customers but which were then made available at no cost to other IBM customers.

Computer users had the choice of getting the software they needed from their hardware vendor or having it custom-built for their needs by their own programmers or by a contract programming firm.    Many of the executives in the software industry didn’t believe that there would ever be a viable market for software products--it was too difficult to compete against free software from the hardware manufacturers. 

But early in the 1960s, some contract programming firms began to see opportunities, when there was no comparable product available from the hardware vendor, to sell programs they had written to more than one customer. For example, CACI began selling SIMSCRIPT, a simulation language, in 1962, and ADPAC Corporation made several sales of its ADPAC compiler in 1964 to customers who had seen it used by ADPAC programmers and wanted it available to their own programmers.

In 1965, ADR released AUTOFLOW, a program which automatically produced program flowcharts by reading the program source code, and which ultimately was sold to thousands of customers. And in November, 1967, Informatics released MARK IV, a generalized file management and report generation program, which surpassed $1 million in revenues within 12 months after its formal announcement.

ADR and Informatics, both very successful contract programming firms, were the first companies to set up the kind of organizations needed to market and support software products and therefore to become true software product companies.

In the late 1960s, the concept of software as a product began to take hold despite the environment where customers were used to getting their software for free.  In January, 1967, International Computer Programs, Inc. (ICP) published the first issue of its ICP Quarterly, a catalog of software programs that were available for sale.  Forty-nine programs were offered in that first issue but by the end of 1969, each issue of the ICP Quarterly listed hundreds of software products (often called “software packages”).

Among the numerous firms founded in the late 1960s were Phillip Hankins, Inc. (PHI) and Information Science, Inc. (InSci) in 1965, AGS Computer Systems, turnkey systems, inc. (TSI), and Boole and Babbage in 1967, Cincom, Cullinane Corporation and Atlantic Software in 1968, and Pansophic Systems, Inc., McCormack & Dodge, Dylakor and Syncsort in 1969. 

On June 30, 1969, IBM announced that, effective January 1, 1970, it would begin to unbundle (charge separately for) some of its software effectively ending the expectation of its customers that they would always be able to get all the software they needed from IBM for free.

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