Chapter 3

Structure and Competitive Dynamics of the Software Industry

The software industry has a unique structure and intense competitive pressures. A few companies tend to dominate segments within the industry, and there are thousands of smaller companies. Although almost any talented individual with a computer can enter the industry, there is a very high rate of failure. For example, from 1995 to 2007, 16 percent of companies in the software industry failed, whereas only 11 percent in the computer hardware industry and 5 percent in the pharmaceutical industry failed during the same time period.1

Consider Visicalc. Remember Visicalc? Visicalc was the first electronic spreadsheet. Personal Software (later renamed Visicorp), the company that ...

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