The economic value of software

2009NOV271101

“… When asking about “How do you value a company?” circa 1997, most major investors would be worried about the internet. They felt it was some sort of lifechanging power about information and its movement, and they heavily invested in companies that They felt it was a major change in how they did business. …In reality, part of the market’s conception of how to value a company did change with the advent of the dotcom boom and bust; by the end it became clear that services would come to dominate the future. It also became very unclear how to measure the value of a service, a problem that remains to this day. …” [0]

Most big companies were clueless

During the Internet boom of the mid to late 90’s most existing fortune 500 companies didn’t really have a clue what was going on. [1]

Why?

Something big

It was obvious to me the Internet was something big. It simply let you find “stuff”. Stuff you would never find in the library, the specialist book shops. The knowledge and depth of what you could find would trump even the nerdiest of individuals. But there was one problem. It was sort of hard to use. That’s a bit of an understatement. Want to find something you had to be familiar with command line driven software like “Veronica” [ref req], “Jughead” [ref req], “Archie” [ref req] or “Gopher”. [ref req] But who in their right mind in business had the need to find this information or the time to master the arcane software. Everything was going graphical and Microsoft Windows 3.1 was so hot, next stop would be world domination.

Unless you happened to be at University at the time, like I was you would have missed the birth of the World Wide Web (WWW), Web or what the youth of today call the “Internet”. At school you couldn’t miss it. It ran over you like a truck. It was that significant. In 1994, Mozilla was born [nice ref explaining back story] and suddenly using “Archie”, “Veronica” and “Jughead” to navigate the Internet was as old fashioned as their 1950’s cartoon characters namesakes.

The heart of the revolution

At the heart of this revolution lies three simple ideas. The first is software, lines of code that tell computers what to do. The second, the graphical user interface or GUI. The GUI is also software. It’s a thin smear of pixels making it easier for users to interact with information on the screen with a mouse and keyboard. You no longer had to type, you could also point and drag information across the screen. Instead of blinking cursors and keyboards using software now borrowed visual metaphors from the office. [parc zerox ref] And the third networking. Networking allowed lots of computers to be connected at once allowing you to navigate across machines. [quick explan of why]

The Web capitalised on all three of these ideas at once. Now you could navigate from website to website with something called a browser. But what did you look at? More importantly how could you make something browsers could look at?

Got a problem, make a tool

In 1995 in Melbourne, where I’m from, the county was recovering from a recession. So I’d spent the previous two years at school studying software development. I’d seen the boom in growth and decided to look out for any software companies working in this area. You have to remember that until the Internet boom most software application development was almost non-existent. [Or custom MS Windows applications, certainly not Internet related] So I was surprised when I found an advertisement for development work in an Internet software Startup. The photo above shows the first office above a hairdresser. [the first of many moves]

Why did the company start in the first place?

The founder [reference to Steve] noticed lots of people wanted or had to build web pages using HTML and there where no tools that did it well. So an application was created using Microsoft Basic V3.0 for Windows 3.1 users. Simply add a Sun Sparc station [remember these pizza boxes?] in the US with an FTP site to download, a website  to explain the product and a mechanism to extract payment for the product. The shareware concept popular with computer desktop games was used so users could try the product for 30 days and if they wanted to continue they would “cough up the bucks” and create these new things called web pages. The demand from users was enough for a small company of 21 to generate $100,000 per month. Two years later the company listed on the Australian Stock Exchange and at it’s height had over 1000 employees. The value of this technology diminished over time as other software companies built rival software. It took Microsoft another two years to align their entire product line around the Internet. [verify]

Creating software, selling software

There is a dollar value that can be associated with creating new technology, especially if you let users create something of value to them. What big business still has problems understanding is that business on the Internet has software and software development at it’s core. Aligning software with what users want and are willing to pay for is also a recipe for profit.

Reference

[0] shanacarp.com, Shana Carp, “The Paper” [Accessed Friday, November 27th, 2009] http://www.shanacarp.com/essays/the-paper

[1] In fact even academics didn’t have a clue. I remember sitting in a computer lab where 2 academics where discussing what you could and couldn’t do on the Internet. Apparently you couldn’t download. But at the same time I was downloading some software using FTP in Korn shell to my University account. Maybe they meant they couldn’t download via Chello, a popular browser at the time on Windows 3.11.

more to come…

Comment

  • HN

    • Ask HN: Please review my Twitter dating app 😉

      “Newest Members”

      Is there anything stopping the location having a hyperlink linking to a page with people by location? I like the authorisation using oauth – the simplest way for existing twitter users to sign-up. Do you think it’s worth adding your own authorise system or are you sticking with using Twitter authorisation?

  • Twitter

    • @shanacarp “explain back to me what you think is important” working on it ~ 30m, max less than 5 seconds ago@shanacarp “explain back to me what you think is important” working on it ~ 30m, max #

    • my #ubuntu 8.04 #hardy box is so #lame it cant recognise or play music CD’s #

    • FireOp redux: redirect 1000Ltr somewhere it’s needed (vid, approx 10s) #bushfires #kinglakewest ~ http://flic.kr/p/7i2P79

    • FireOp redux: don’t waste water, flood the house, redirect 1000Ltr somewhere it’s needed #bushfires #kinglakewest ~ http://flic.kr/p/7i2P77 #

    • FireOp redux: instead of wasting the water & flooding the house, redirect the 1000Ltr somewhere it’s needed #bushfires #kinglakewest ~ http://flic.kr/p/7i2P77 #

    • FireOp redux: Stilsons and pump fittings #bushfires #kinglakewest ~ http://flic.kr/p/7i2P71 #

    • FireOp redux: go away dog (minnie), there is work to do #bushfires #kinglakewest ~ http://flic.kr/p/7i1neS #

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    • FireOp redux: #shutz 1000Ltr on LH, #pallacon 1000L RH is being packed up / without them, no water post fires ~ http://flic.kr/p/7i15VQ #

    • FireOp redux: smokey the #cat survivor, found at #kinglakewest firestation #bushfires ~ http://flic.kr/p/7i15VN #

    • FireOp redux: as I get to old mans place I’m reminded of the height of flames above house #bushfires #kinglakewest ~ http://flic.kr/p/7hZfMh #

    • FireOp redux: blurry wheels, #bike race near #yea / KLW turnoff #bushfires #kinglakewest ~ http://flic.kr/p/7hY21b #

    • FireOp redux: stopped the car to view #bike race go by near #yea / KLW turnoff #bushfires #kinglakewest ~ http://flic.kr/p/7hY21W #

    • FireOp redux: stopped the car to view #bike race go by #bushfires #kinglakewest ~ http://flic.kr/p/7hTQLH #

    • @shanacarp read 1st & re-read, going thru 2nd / reply PM, few typos & 1 idea I haven’t seen, importance of “software” in economy, elab later #

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