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OCR for page 30
Software
Growing at a rate of about 25 percent a year, estimated global revenues from
sales of software exceeded $65 billion in 1989.1 Moreover, when the value of
software developed within businesses and other organizations is taken into
account, the size of the market for software is much larger. Measured by
salaries and other costs, the value of internally generated software in the United
States may range between $150 billion and $200 billion.2
These figures are compelling evidence of the attractiveness of the software
market, which is dominated by U.S. fobs. They also attest to the increasingly
important role that programs and their applications play in enhancing invest-
ments in hardware. Moreover, the growing emphasis on software development
spurs the innovation of new equipment, which in turn creates ideas for new
applications that require new software.
"As software gets developed," explained Alan Perlis of Yale University, "it
exposes opportunities for the application and creation of hardware. The two
work together, and there is no permanent boundary between them. There is a
continuous shift, one way or another." Thus, for example, the emergence of
new processing architectures, notably parallel processing, gives rise to a need
for a whole new body of software which may in turn enhance the develop-
ment of new hardware.
The current situation has changed dramatically in less than 15 years. Prior to
the introduction of the personal computer, software functioned somewhat as a
"loss leader," an often-free inducement for buying and continuing to buy a
particular vendor's computer equipment. Software development was part and
parcel of hardware development, and computer manufacturers were nearly the
30
OCR for page 31
SOFTWARE
31
sole source of programs, which were written to run on their machines only. The
few independent software firms that did exist wrote programs tailored to indi-
vidual vendor's machines. Sales of about a thousand copies were the bench-
mark for a highly successful software package.
Starting with Apple Computer's popularization of the personal computer, the
size of the software market grew immensely, spawning small and large firms
that derive all or most of their revenues from this market. Today a million
copies of popular software packages may be sold. Moreover, increasing but still
modest standardization has made it somewhat easier for developers to adapt
programs for use on the computers of different manufacturers. In addition, even
the largest computer companies recognize that they have neither the financial
resources nor the technical staff necessary to provide the full array of software
support that potential buyers of their machines now demand while larger buy-
ers of software, with similar resource limitations, look to the software industry
to meet their needs affordable.
Out of these seeds grew the burgeoning software industry. Some U.S. soft-
ware fops are now very large, the biggest reporting annual revenues of about
$1 billion, but most are quite small, sometimes consisting of not much more
than one or two people "with a personal computer and an idea." This diverse
collection of U.S. firms accounts for more than 60 percent of world sales of
software.3 At present the U.S. industry enjoys a commanding lead in the world
market, but hindsight suggests that no lead in markets for computers and com-
puter-related parts is secure.
"Assuming some of the dire predictions . . . come true," said Samuel H.
Fuller, vice president for research at the Digital Equipment Corporation, "then a
large part of our hardware twill be] . . . manufactured and eventually designed
outside the United States. Is there the kind of infrastructure and support In the
other industries of the computer sector that they could remain, in fact, healthy
industries in their own right? Can software exist as an industry without the
supporting underlying hardware?" The answers to these questions are not clear-
cut, but Fuller suggested addressing potential problems before they become real
ones. Software "is an area where we have to learn how to remain strong, rather
than take it for granted," he said.
SOFTWARE: A HIGHLY UNUSUAL PRODUCT
Arguably one of the most important products of the age of high technology,
software has properties that make it distinct from all other products. The largest
and most sophisticated sets of programs, such as those written for air traffic
control systems or early-warning defense systems, are among the most complex
of human creations, rivaling the crowning physical achievements of modern
engineering. Yet software development has features that make it more akin to
an art or a craft than to a high-technology enterprise. It is an expensive, slow,
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32
KEEPING THE U.S. COMPUTER INDUSTRY COMPETITIVE
and labor-intensive process that has undergone only incremental improvements
in productivity.4
Another special characteristic of software is that it typically does not remain
constant. Observed Perlis, "The thing that has been missed by software engi-
neering to date, to everyone's great peril, is the concept of evolution that soft-
ware, as soon as it comes to exist, must change. The most successful software
is that which is unstable and incomplete." Perlis explained that "unlike hard-
ware, software gives the illusion that the costs of change are negligible since
they apparently involve only scribblings. This is not so. Software affects its
specification so that both undergo continuous change."
Other major properties that distinguish software, according to Perlis, are net-
working-toward the end of direct communication between programs, and
automation since "it must be the case that most of our programs run essential-
ly independently of us." Finally, Perlis explained that "in the computer, pro-
grams are in a sense live.... They can do things we fold extremely difficult to
do-that is, to keep informed in a broad way about what is going on in the
world."
Perhaps the most complex pieces of software entail integrating isolated col-
lections of computer, communication, and other types of equipment into coher-
ent information-processing systems. Systems-integration software, the means
of accomplishing this complex linkage, often must be customized to meet the
diverse requirements of customers, explained Laszlo A. Belady, vice president
and program director for software research at Microelectronics and Computer
Technology Corporation (MCC). Because of this customization process, soft-
ware development can be considered as much a service activity as a manufac-
turing process.
Software is itself increasingly valuable in the production and modification of
software. Researchers throughout the world are developing productivity-
enhancing tools and methods for specifying, writing, editing, compiling, testing,
and verifying programs. Although many are the proprietary possessions of indi-
vidual companies, the tools already in hand have helped shorten the software
development cycle, particularly for easily specified, straightforward applica-
tions. However, continued leadership in software calls for greater investments
in developing and using software development tools. Noted Lawrence Tester of
Apple Computer, "In order to compete with, say, the Philippines where the labor
costs are lower for programmers, we need to lower our overall cost of produc-
ing software by improving our tools."
In the software industry, low levels of productivity growth are a shared short-
coming, besetting firms in the United States, Japan, Western Europe, and every-
where else. In the United States, the most visible efforts to enhance productivi-
ty in software development, including the software research programs at MCC
and the Software Productivity Consortium (SPC), were encouraged by frus-
trated users, notably defense contractors interested in reducing programming
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SOFTWARE
33
costs. The software industry has not pursued a coherent strategy to improve
software development, not the least because of the implicit costs and uncertainties.
TOWARD A BIFURCATED MARKET
Current trends in particular, the emergence of large-volume markets for
packaged software and the growing demand for customized software-are stim-
ulating a division within the industry, points out Laszlo Belady of MCC. One
segment, he said, will concentrate on software packages that, although varying
in size and complexity, can serve many different customers without major cus-
tomized alterations. "These packages can be produced anywhere," said Belady,
suggesting that U.S. hums serving this market will be most vulnerable to foreign
competition because "everybody has the same chance."
In Belady's second category, systems integration, competition will be deter-
mined by the ability to manage complexity, to develop applications tailored to
the idiosyncrasies of individual enterprises: "What you have to do in order to
make this complex integrated application work is to provide the glue, that is,
additional software, which does the traffic control and holds the pieces togeth-
er." This category, according to Belady, is where the greatest business opportu-
nities may lie and where U.S. firms may have an inherent advantage.
Successful software of this second type can only be developed through
extensive cooperation between the customer and the contractor, Belady empha-
sized, and "it is impossible to come up with a huge computerized integrated
application for an enterprise where the vendor comes and does everything . . . it
cannot be done without team work." For members of such teams, "it is not
enough to teach programming," he said, "but you also have to give real-life
experience, even at school, and teach people how to work together and not just
to excel individually."
Belady explained that if we wish to master the necessary complexity of this
second software category, we must exploit the potential of computers them-
selves in retraining individuals. He described retraining as "an incredible
opportunity, an incredible benefit to the country." Belady stated that retraining
could be invaluable in making this country more flexible and able to cope with
the many new challenges that the "accelerating change of industry and society"
confronts us with.
EDUCATION FOR BETTER SOFTWARE DEVELOPMENT AND USE
The link between education and the ability to stay competitive was made
succinctly by Tester: "If other countries have better-educated populations in
computer science and software engineering, then we will fall behind." Many
colloquium participants commented on the promise for improved education and
training as means to achieve better software and better software development.
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34
KEEPING THE U.S. COMPUTER INDUSTRY COMPETITIVE
Colloquium participants cited university computer science programs as a
particularly valuable asset to the software industry, because they provide needed
personnel. "At times, people will argue that because of our education and
because of our innovative spirit," observed Fuller, "we [the United States] will
continue to hold a commanding lead in the area of software." The proportion of
American-born students enrolled in these programs has dropped substantially,
however. "Whereas it is bothersome that half of our graduate students are from
foreign countries," said James H. Morris of Carnegie Mellon University, "we
should try to make that a competitive advantage and give them every opportuni-
ty and encouragement to stay, both at the graduate and undergraduate level."
Getting the most out of software may, as Perlis suggested, entail developing
systems that "get the human being out of the loop," but achieving that end
requires human talent and skill. All colloquium participants had suggestions for
improving educational programs in computer science and software engineering.
Tester, for example, pointed to the need for a practical perspective, commenting
that "in terms of computer science and software education, what I would like to
see coming from the colleges is people with more practical experience . . .
fincluding experience doing] major projects on teams to revise other people's
software, which is what one ends up doing in industry quite a lot." The value of
increasing the exposure of faculty and graduate students to industrial software
problems and development conditions has been noted elsewhere by the
Computer Science and Technology Board.s
A recurring theme was the importance of interdisciplinary training that goes
beyond software and hardware issues per se. Tester related such training to
maintaining a specific competitive advantage: "One thing that I think the
United States can maintain a lead in is human interface design, which makes
application software distinctive, but to do that, our students have to be very
broad in their education. They cannot learn only technology; they have to learn
something about psychology, something about art, and learning to work in
teams with people of other disciplines.... We can stay ahead, particularly in the
Far East, . . . by maintaining these cross-disciplinary development teams."
But participants' concerns about education extended to the general popula-
tion. The health of the entire computer sector and the development of the tech-
nology will depend to a great degree on how society chooses to use computers
and extend their applications. "The important thing to remember," said Yale's
Perlis, "is that software is intended, as is the computer, . . . to make life more
imaginative for all of us." He added that, because of the technology's influence,
society will be changing continually.
Therefore, Perlis and others said, computing must be integrated into all areas
of study. From growing familiarity with the technology among broad segments
of the population, ideas for new applications will emerge, fostering the evolu-
tion of the technology and driving the growth of the software industry and oth-
ers. "The effective use of computing," said Abraham Peled, vice president of
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SOFTWARE
35
systems research and director of computer sciences at IBM's T. J. Watson
Research Center, "will be the key to the industrial competitiveness of the coun-
try as a whole, as products are conceived and developed inside a computer
instead of the laboratory, and integrated directly with manufacturing [and] with
the field force."
Education is an immediate concern. "If we see it as long-term, and therefore
not requiring immediate attention, we will never get around to it," emphasized
Tesler, "and I think that is what we have been doing in this country for the last
20 years."
FOREIGN CHALLENGE
Some erosion of the nation's lead in software markets is inevitable, but if
limited, it could have positive effects, according to Apple Computer's Tesler.
"Some degree of decline is healthy for the world economy," he said, and it will
"stimulate more attention by U.S. software companies to international markets."
Already, noted Tesler, "For routine types of software creation, the sorts of things
that run businesses, . . . people are beginning to find that they can buy software
development services from other countries ten times more cheaply than they can
get them here." Several U.S. feds have already responded to this reality by
establishing software development centers in such countries as Singapore and
Ireland, where they benefit from relatively low labor costs. Domestic compa-
nies also "import" temporary foreign workers to write code for basic, or
standard, software packages. India, for example, advocates exporting its pro-
grammers to work on international software conversion projects. How much of
this activity takes place is not known, but it does involve leading U.S. compa-
nies.
Foreign production of packaged software is also growing. Tesler pointed
out, "Some of the more innovative packages in the personal computer market
have come from other countries, generally in Europe, say, France in particular.
But as I have traveled around the world, I have seen interesting software in
other places."
To enhance their competitive prospects, Japan and Western Europe have con-
cen~ated on developing productivity-enhancing tools and techniques, as well as
methods for verifying the reliability of programs. To remedy gaps in expertise
and to sidestep licensing restrictions, Japanese firms have also established soft-
ware research laboratories in the United States. Other countries that have made
their domestic software industries economic priorities, such as the People's
Republic of China, India, Malaysia, and Taiwan, are focusing, for now, on
large-volume reproduction of basic software rather than on innovation. Some
Grins in developing countries, capitalizing on the low cost of replicating soft-
ware and weak international protection for intellectual property, market imita
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36
KEEPING THE U.S. COMPUTER INDUSTRY COMPETITIVE
live packages.6 Such copied products undercut sales of legitimate products and
drain resources for legal action for copyright infringement.
The impacts of Japan's most visible efforts to achieve parity in software mar-
kets are uncertain. Colloquium participants saw neither the Japanese Fifth-
Generation Computer project nor The Real-Time Operating System Nucleus
(TRON) project as yielding breakthroughs that could threaten the U.S. software
lead. They were more cautious in their appraisal of a cooperative effort involv-
ing government and industry to develop Software Industrialized Generator and
Maintenance Aids (the SIGMA project). SIGMA "is a software production and
industrialization system developed for the purpose of improving the fundamen-
tal environment for software development in Japan,"7 building on AT&T's
UNIX operating system. UNIX, developed by AT&T, is one of the leading can-
didates for a standardized computer operating system for the entire industry.
The some 40 Japanese companies participating in the SIGMA project have all
agreed to use a specific version of UNIX. With a standard operating system,
according to one line of reasoning behind SIGMA, Japan could be able to
address deficiencies in software development.
"The openness of UNIX," Morris of Carnegie Mellon warned, "makes it an
ideal place for the Japanese to enter the U.S. software market. Look out."
While ongoing developments clearly indicate a Japanese push to penetrate
U.S.-dominated software markets, these efforts may not pose the most
formidable challenge to U.S. firms. "The real software competitor is Europe,
not Japan," MCC's Belady maintained. "'Europe 1992' will reinforce the suc-
cesses of [the cooperative research program] ESPRIT in the area of standardiza-
tion and formal methods 'creeping' into industrial applications."8
The European Community has also emphasized development of so-called
formal methods for software engineering. If successful, formal methods could
make some software development more systematic and less craftlike.
Moreover, formal methods can also enhance software quality by giving more
assurance that software does not contain errors and will perform as specified.
Foreign competition has been constrained by U.S. dominance in computers,
which has fed U.S. prominence in software. Although machine compatibility is
increasing, getting the software developed for one vendor to work on the com-
puters of another is far from effortless, and users are reluctant to switch to new
hardware vendors and an associated new set of software vendors. Increasing
standardization and, as has been the rule for three decades, continuing declines
in the cost of hardware for a given level of performance could eliminate this
barrier and open the door for increased foreign competition in software markets.
Under these circumstances, it is imperative that U.S. software developers under-
stand before their competition how to program computing structures that will
emerge to achieve higher performance (e.g., multicomputers-distributed pro-
cessing-and multiprocessors).
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SOFTWARE
37
STANDARDIZATION
Software research in Europe and Japan has a common thread, a push toward
standardization. Underlying this push is the undisputed assumption that stan-
dardization will improve productivity, lower the cost of software development,
and increase competition. Virtually all software firms are advocates of these
ends, but they disagree on whether standardization is the best means to achieve
them. Discussions among colloquium participants were representative of this
disagreement.
Comments by Apple's Tesler characterize one view of the issue. "Any stan-
dard that has to do with data communications with exchange of data between
computers is absolutely critical," he said. He maintained that to standardize
beyond that point would encourage competition from imitator feds and slow
the rate of innovation in software and hardware.
"Standards and what goes on inside a computer are another matter," Tesler
said. "Standardizing processor designs by standardizing operating systems, my
company feels, twill make the] United States very vulnerable to competition
from abroad.... Japan and [South] Korea do very well when they can find
something that has been standardized, or [they] create a standard and then lever-
age that to reduce costs, reduce prices, and gain market share and take the mar-
ket away."
Tesler continued, "One thing that we [at Apple] have done is very carefully
protect the insides of our computer, both the operating systems software and the
hardware designs, so that they cannot be copied. We are very bothered by the
fact that there are moves in the industry to try to standardize on those sorts of
things, because we think . . . that is basically giving away the show to the com-
petition from the Far East."
Others in the industry are not bothered by the movement for a standardized
operating system. As MCC's Belady noted, "Many people believe that stan-
dardization is necessary for progress." According to this view, standards estab-
lish a base level of conformance for well~eveloped technologies, freeing the
industry to concentrate on areas where advances are likely to have a greater
impact on the capabilities and applications of computers.
Raj Reddy, professor of computer science at Carnegie Mellon University,
argued that failure to achieve some standardization of operating systems would
be counterproductive, diluting the efforts of programmers, who are already in
short supply, and draining financial resources. "I think we should be standard-
izing routine things, including operating systems, and trying to use our creativi-
ty at higher levels," Reddy said.
Preventing the adoption of standards is not the answer to maintaining com-
petitive U.S. software and hardware industries, he maintained. If, in the future,
foreign firms can produce powerful yet inexpensive workstations and U.S.
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38
KEEPING THE U.S. COMPUTER INDUSTRY COMPETITIVE
companies cannot, Reddy argued, the disparity will stem from a problem that is
more fundamental than standardization.
The implications are similar for firms that develop software only. By foster-
ing high levels of compatibility among the computers of different vendors, stan-
dardization would greatly expand software markets, uniting a fragmented cus-
tomer base and eliminating the need to write unique code for each of the many
operating systems that now exist. As for hardware manufacturers, efficiency of
production would be a key determinant of the market success of software com
panles.
Fuller of DEC warned of a proliferation of standards and called for a more
deliberate approach to the issue. "EW]ith too many standards, I believe, we will
tie the hands of developers and inhibit innovation," he said. The challenge, as
Fuller described it, is to develop a "set of well-selected standards" for hardware,
software, and communication areas that are at a mature stage of technological
evolution. "The rest of the playing field," areas where ideas and technology are
changing rapidly, should be left "open for innovation," according to Fuller.
The questions of what to standardize and when to do it are as contentious as
the issue of what the specifications for particular standards should be. Are
operating systems at a mature stage of evolution, for example, or do significant
advances lie ahead? Once in place, would standards make it difficult for new,
superior ideas and technologies to gain acceptance and, ultimately, market
share? Fuller suggested that effective standardization by many users on UNIX
illustrates the mixed consequences of standardization.
Tester noted, however, that reducing the cost of equipment is only one factor
to be considered in decisions to develop or encourage standards. Noting that the
cost-effectiveness of standards will decrease as they age and technology
improves, Tester said that companies that"leap ahead" of the standard will be
excluded from a major segment of the market the federal government and,
perhaps, its contractors.
Debates over standardization will continue in domestic and international are-
nas. But if the push for standards continues to gain momentum, standardization
will greatly influence the business strategies of software companies. Perhaps
the only choice for U.S. firms, several speakers suggested, is to join forces and
develop U.S. standards that are superior to those now under consideration.
"If the Japanese are getting together and making a standard," Reddy asked,
"why do we not get together and make a better standard than they do, and
always stay one step ahead of the competition?"
NOTES
1.
U.S. Department of Commerce. 'Computer Equipment and Software," 1990 U"S.
Industrial Outlook (Washington, D.C., 1990~; figure provided via personal commu-
nication with a Department of Commerce analyst.
OCR for page 39
SOFTWARE
39
2. Dertouzos, Michael L. Richard K. Lester, Robert M. Solow, MIT Commission on
Industrial Productivity. Made in America: Regaining the Productive Edge
(Cambridge, Mass.: MIT Press, 1989), p. 264.
3. U.S. Department of Commerce. "Computer Equipment and Software," 1989 U5.
Industrial Outlook (Washington, D.C., 1989), p. 26-3.
Computer Science and Technology Board, National Research Council. Scaling Up:
A Research Agenda for Software Engineering, (Washington, D.C.: National
Academy Press, 1989~.
5. Computer Science and Technology Board, Scaling Up: A Research Agenda for
Software Engineering, 1989.
The CSTB has explored intellectual property issues in software through a workshop
and forum in the fall of 1989. A report will be issued in mid-1990.
National Technical Information Service. "Foreign Technology," Abstract No. 37,
031, September 13, 1988.
ESPRIT, the European Strategic Program for Research and Development in
Information Technology, is an umbrella program that encompasses some 200 spe-
cialized projects. One product that has emerged from ESPRIT is the Portable
Common Tool Environment (PCTE), a standardized substrate, or foundation, for
developing software for large systems. PCrE accommodates existing and emerging
software engineering tools, which permits programmers to exchange tools and
researchers to develop new ones that enhance the utility of the software substrate.
Eureka, a European Community research and development program focused on
commercially promising technologies and innovations, has provided funding for a
software factory based on PCTE.
8.
Representative terms from entire chapter:
software engineering
