The Software Industry in the 1970s

The 1970s saw the contract programming industry continue to grow at a rapid pace.  These companies came to be known as "professional services" firms reflecting the fact that they often provided a broad range of consulting, analysis and design services in addition to programming.

The software products industry became firmly established as a viable source of software for computer users.   If, at the beginning of the 1970s, customers were skeptical that software purchased from a vendor could meet their needs as well as software written in-house, by the end of the decade almost all computer users were buying some portion of their software from software products companies.  As a result of unbundling, the hardware vendors were also major players in the software products field. 

In 1971, ICP held its first annual Million Dollar Awards program recognizing software products that had generated over $1 million in revenue. Twenty-nine software products made the list.  By 1976, the Million Dollar Awards roster had grown to 100 products from 64 software companies.  Fifty-two products had passed $5 million in revenue, 15 had passed $10 million, 4 had passed $20 million, and Cincom’s TOTAL database management system received an award for revenues in excess of $50 million.

The invention of the PC in the mid-1970s led to the founding of the first PC software firms such as Microsoft and Software Arts, which produced the VisiCalc spreadsheet program.

Despite the growth and demonstrated success of the software industry throughout the 1970s, it was not generally recognized as a major investment opportunity.   Funding dried up even for those professional services firms that had gone public in the 1960s and the newly-established software products firms had an extremely difficult time raising capital to fund their growth.  Almost all of their growth was internally financed and many of the company founders extensively leveraged their own personal assets to keep the companies going.  In 1978, a full ten years after its founding, Cullinane Corporation went public, the first software product company to do so.  But the perception of the software business as an investment opportunity was still a number of years away.

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