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The excellent times of the software industry

I would like to discuss a bit about the old good times of the software industry - at the beginning of the PC revolution, before the Internet was even born.

Man, those were the days!

Doesn't anybody remember WordStar, WordPerfect, Lotus 1-2-3, VisiCalc, dBase, Norton Utilities, PC Tools, Knowledgeman, Lotus AmiPro, ImageStyler, CPAV (Central Point Antivirus), coutless BBS software systems like ProBoard, etc?

They were VERY successful products in there time.

Those were the times when a little company could come up with something like WordPerfect or WordStar (which, of course, was hard to write using assembly language or C mixed with assembly language), sell it at $ 400 per license, and make a lot of money even in it's first year.

Most of the products mentioned above selled well for a few years, and then were outselled by products made by MS, but the people who made them had a GREAT time (because it is great to work on such products, even if it is very hard work), and got lots of money (Mitch Kapor, for instance).

I consider these were the golden times of the software industry - when one could come up with a product idea, work hard on it (without any VC crap), and then make a lot of money with their product, develop the product further, etc.

I don't know if such a thing is possible today.

I am fighting and working hard to make this possible for myself and my company.

In the last year I had my first small successes, but I wonder if it's possible to sell even half of what WordStar Corporation used to sell, for example.

This is my dream - I want my company to become like WordStar or Symantec was, at that time - a success.

I'm not aiming to be like the big fish like MS, or Lotus, but I'd really, really love to have a success similar to the success of, for example, WordStar Corporation (which had another name, at the time).

I and my partner are working hard towards that.

Back in the days of Lotus / WordStar / WordPerfect, the game was fair - you worked hard, made a good product, and got lots of money.

In the last "tech boom", the game was very crooked - fool some VCs, get their money, and spend it or transfer it to the personal account.

This is another reason for which I call that period the golden times of the software industry.

Anyway, back to the point I wanted to make:

Unfortunately, prices dropped - in the golden times, you could sell a word processor for 300 - 400 $, but now for maybe 150 $ you can have a full office suite, and the market is so saturated, that even MS seeks other revenue sources, like software subscriptions.

Prices are likely to drop further - for example, several companies made office suites, and sold them. They invested money (in developing the software), and got their investment back. Now there is no reason NOT to drop prices - so price wars appears, and prices are dropped slowly, but surely.

Unfortunately (for developers) software tends to cost less and less. We start being swamped in free programs and solutions - in this climate, it is very hard to sell software.

Programming, as a profession, will not die, but selling commercial software as boxes may die a slow, but sure death - and this was, unfortunately, my dream - to make a good software which will sell, and become rich.

There was also a lot of consolidation in the software industry: before there were lots of companies, now only MS thrives due to it's success in being the dominant OS and office software maker.

The other successful software companies are successful because they do incredibly complex things: Oracle, SAP, etc.

A single individual or a small group of developers can not start nowadays and say: I shall write an application in my garage, and I shall be the next Oracle, or the next SAP. For such things, billions of dollars in investment are needed.

I belive that in the future, most of the software will be free (as in beer), and only the most complex pieces of software (for example, a very advanced database coupled with a web server featuring advanced server-side scripting and special features like e-commerce - or - something like SAP, etc) will be sold for money.

Many people, and especially non-programmers, like this image, but to me, it is a dark image - a word where my dearest dream is no longer possible.

I wonder if there is a way to have a successful (ie. making a good product and good money) software company in today's IT climate.

A company started by just a few programmers, like 1-2-3 and WordStar were initially written (each was written initially by a single programmer), in the golden times. A company without a huge initial capital investment.

In today's IT, is there still place for a small, but highly successful software company?

Is there at least an example of such a company?

Thank you!

Michael K.
Tuesday, May 06, 2003

Yep, the eighties were the frontier days for software.  I'm still ticked off that I was born ten years too late.

Eric W. Sink
Tuesday, May 06, 2003

I'm ticked off that I wasn't born ten years too late, but I chose to spend the eighties writing text retrieval software in FORTRAN. It seemed like a good idea at the time.

David Clayworth
Tuesday, May 06, 2003

The answer is you can and its probably cheaper to do it now and would be quicker to go mass market if it took off.  Google is a relatively small group of core people, that they are more than just smart with a more than just smart CEO helps.

The hard part is finding an application that the world wants, that is as cheap as duck eggs and easier to handle.

Simon Lucy
Tuesday, May 06, 2003

"is there still place for a small, but highly successful software company?"
Certainly, but success is a dangerous criteria.  Do you need  billion dollars to be successful?  A million?  $100,000?

It sounds philosophical, because it is.  Companies like Microsoft or Lotus are one in a hundred million or less. 

More difficult is competing against an entrenched player.  OpenOffice can compete with MS Office, because it is free and the people supporting OpenOffice do so out of personal gratification.  "Mike's Software" would have to really be something extraordinary to compete with MS.  They have billions to spend on people full time.  Same as "Mike's Cars" would have a terrible time competing with General Motors or Ford.

So is all lost? Not at all.  Perhaps the irony here is you are writing this on the "Fog Creek Software" forum.  What you will need is a passion, and to be happy with a niche market.  Will you expand into MS?  Having the desire is the start. 

Mike Gamerland
Tuesday, May 06, 2003

Hi, Mike Gamerland!

Thank you for your reply.

> Certainly, but success is a dangerous criteria.  Do
> you need  billion dollars to be successful?  A million? 
> $100,000?

$ 1M into my personal account :-) LOL!

A nicer office than we have now. Over 5 or 7 smart employees.


> So is all lost? Not at all.  Perhaps the irony here is
> you are writing this on the "Fog Creek Software"
> forum. 

How do we know if Fog Creek Software is successful?

To me, successful means a positive and high cash flow.

Maybe Joel has a lot of money to burn, and Fog Creek Software loses money every day. Maybe they barely survive.

Or maybe they have $ 1 M per day in profits. :-)


> What you will need is a passion, and to be happy
> with a niche market.  Will you expand into MS?
> Having the desire is the start. 

MS is certainly a formidable enemy.

Michael K.
Tuesday, May 06, 2003

Think small, and play fast.
E.g. I wonder how much Greg is making on http://www.newsgator.com
It won't make him the next BillG, but it might bring in some nice extra earnings for a few months.

Just me (Sir to you)
Tuesday, May 06, 2003

I think what a small company has to do is sell into a niche, not try to aim for the mass market. This significantly reduces the Microsoft factor (sure, MS does sell into some niches, but not in general). Off the top of my head I might give Adobe as an example. Though they're pretty big now, they managed to do well by focusing on a niche. And Photoshop still sells at $600.

I'm sure that there are lots of more examples of successful small companies now selling into niches, but I don't know many since I don't operate in those niches. Well, I guess I know software development tools, and there are certainly lots of small companies doing quite well there. Just looking at my taskbar, I see Opera, Musicmatch, SecureCRT and IDEA.

Now, you might say something about the good old days. But I'll point out that, at the time it was first introduced, Wordstar was a niche product. It wasn't the case that everyone who bought a personal computer was naturally going to buy a wordprocessor (as is the case now).

Bill Tomlinson
Tuesday, May 06, 2003

Yes, those were the days:

Sitting in my chair, I just swiveled around and grabbed the following book off the shelf:

The Computer Entrepreneurs 
(1984)

It is stunning to see how small Microsoft was compared to other companies.

Here is a snap shot from companies from that book, remember the year is 1984

Microsoft:  Bill Gates
          Sales 100 million,
          profits 15 million
          620 employees

Atari: Nolan Bushnell
          Sales 2 billion,
          profits (500 million loss)
          250 employees (and falling)

Digital Research: Gary Kildall
          (CP/M, DR Log, Pascal/MT)
          Sales 44.6 million
          665 employees

Apple Computer: Steve Jobs
          Sales 1 billion
          profits 77 million
          4500 employees

Software Arts: Daniel Bricklin
          VisiCalc, TK!Solver
          Sales 10 million
          65 employees

Lotus: Mitch Kapor
          (Lotus 123, Symphony)
          Sales 53 million
          Profits 14 million
          600 employees

Ashtion-Tate: George Tate
          Sales 40 million
          Profits 6 million
          350 employees

MicroPro: Seymour Rubinstien
          (WordStar, SpellStar, MailMerge)
          Sales 45 million
          Profits 4.8 million
          425 employees

Commodore: Jack Tramiel
          Sales 1 billion
          profits 100 million
          2500 employees.

Osborne: Adam Osborne:
          Sales 93 million
          losses 12 million
          (bankruptcy filing Sept 1983)


Gee, as mentioned, it is remarkable how small Microsoft is. Notice that WordPerfect does not even exist yet.  The run down for WordPerfect is:

Dec. 1982
          Satellite Software International ships WordPerfect for DOS for $500.
Apr. 1983
          Microsoft introduces Multi-Tool Word for DOS.
Nov. 1983
          WordPerfect 3.0 for DOS ships at $500.
          Microsoft releases Microsoft Word 1.0 for $375.
Nov. 1984
WordPerfect 4.0 for DOS released.

Note also that by 1984, these companies were not exaclity being run from a gararge!, nor were they one-man companies either.

Ok, enough of that

There are many products that can still be created, and sold.

Viso drawing was a nice example (ms bought it eventually)

Quicken accounting is another nice example. While they are now 20 years old now, their sales have climbed to over 1 billion. Their Canadian headquarters is in my City. Intuit was just being started in 1984, and thus did even make the book list.

And, even Microsoft has a new product that seems really posed to take off, and its so simple, that everyone who sees the product goes “DUH”, why did I not think of that?. That new MS product is OneNote. Check out the little demo at:

  http://www.microsoft.com/office/preview/onenote/default.asp

The above is really the result of tablet pc’s, but after looking at all my scribble notes on my paper notepad, it is just so obvious to bring this technology to the desktop also. Talk about an idea that has been in front of our Noises. Gosh! This is a must see product.

On the other hand, an past acquaintance of mine just sold his forms software for 8.5 million. If he had sold during the internet boom, I am sure that figure would have been easily 30 million. (maybe he sold due to knowledge of OneNote coming). But, for whatever reasons, he has had a very good 15 year run.

His home page:
http://www.shana.com/

Another acquaintance of mine did raise 110 million for a company that provides electronic statement delivery software for billing and other confidential documents. His home page:
http://www.messagingdirect.com/

Interesting enough those above home pages I just listed don’t go to the original sites anymore, since they have been bought out.

Another good acquaintance of mine created code base. Another very successful product. (a c++ dbase file library of all things, and he still does very well to day with that product). It is amazing that a such a simple little code library product can grow into such a successful company. His home page:
www.codebase.com

The above pages on just from my City. I live in a small cold Canadian city. (less then 1 million people in size).

There are several other companies I know of locally that have done very well. The last few years I been so busy, that I am not involved in the local software society anymore, thus I not really up to date as to what is going on.

No doubt that larger cities have even more companies that have done even better then the small sampling above. In other words, if you are involved in your local software association or Society, then you no doubt have heard your local success stories. If you not heard what your local companies are doing, then you should probably spend a little more time away from the computer.

There is no doubt that the group of people I know from the mid 80’s all were trying to work the industry in some what of a pioneer type spirit.  Some (a lot actually) the products were real misses, but some did hit the mark very well.

I also think there are some real nice areas in the market that are un-tapped, and I am currently working on a new product right now that I think has a very large potential, but like always…mum is the word until we get further down the road.

Albert D. Kallal
Edmonton, Alberta Canada
kallal@msn.com
http://www.attcanada.net/~kallal.msn

Albert D. Kallal
Tuesday, May 06, 2003

Ashtion-Tate: George Tate
          Sales 40 million
          Profits 6 million
          350 employees
That compnay product was dbase just in case anyone does not know..

Albert D. Kallal
Tuesday, May 06, 2003

The problem is that all of the simple stuff has been written and/or abstracted away. :/

And everybody knows how to download software, so they actually find free stuff that people write, instead of always going to the software store to get something.

I just regret that I didn't learn about 3 or 4 lessons about how my head works earlier. 

Flamebait Sr.
Tuesday, May 06, 2003

Back in college one of my roommates was a journalism major.  He went to a speech given by an editor of a large newspaper (I forget which one).  The editor said that if you want to be a journalist, don't major in journalism.

His point was that journalists don't write about journalism, they write about other subjects, so it's better to be an expert in the subject matter that you want to write about.

I've been wondering lately if that could be a future trend for many types of consumer and business software (i.e., not OS's, developer tools, etc.).  This is nothing new, of course, since there are many EE's, physicists, accountants, et al. that write domain-specific software.  But will it be even more so, as the profitable niches become more and more specialized?

Nick
Tuesday, May 06, 2003

Prices are a lot less now in cash terms, let alone real terms, but the market is maybe a hundred times bigger.

Look at Netscape, Yahoo, Napster and Google, and it's clear that the opportunities were the same in the 90's as in the eighties. You just had to get it to work.

Remember that the PC was not the platform of choice at the beginning of the eighties. People who developed for it either had vision or struck lucky depending on how cynical you are.

New ideas staring you in the face one guy alone can make a fortune out of? The last one I know of was predictive text messaging for mobile phones. One guy sold the program to Nokia and made a small fortune.

Stephen Jones
Tuesday, May 06, 2003

Is the problem now that software is something of a commodity?

Can you no longer sell the best software, but instead only the cheapest?

And what about saturation? There is almost no way you can succeed by creating yet another word processor. Niche markets, like attorneys and other professionals, might have some room for more players.

DrAwesome
Tuesday, May 06, 2003

Q: How do you make a small fortune with a new software company?

A: Start with a large fortune.

But seriously if you want to build a highly successful company, why limit yourself to being a "software" company...  Ultimately (as far as paying customers is concerned) software is a tool and not an end in itself.

Just my 2 cents.

anon
Tuesday, May 06, 2003

A couple of thoughts here:

First, most big companies started with large initial investments -- Microsoft included.  They didn't start as just a small core of people making $30K; many received hundreds of thousands or millions of dollars in venture capital.

Second, people are used to free software now.  Most people won't pay for mediocre software, whereas in the 80's you could release a piece of junk and you'd still get at least *some* revenue.

Third, we haven't run out of ideas.  Look at Konfabulator; fairly simple concept, wildly popular.

Fourth, as Stephen Jones pointed out, the market has shifted; software was more expensive but sold to fewer customers in the 80's.  This suggests that one needs to sell something relatively cheap that *many* people will want/buy.  Like FogBUGZ.  IOW, I don't think that niche markets are as effective as they were in the 80's.

Unfortunately, I can't think of any conclusions to this.  Personally, I'm just making games.

Brent P. Newhall
Tuesday, May 06, 2003

Fair schmair. The 80s were as much an aberration as the 90s. Don't beat yourself up with the past. There are plenty of opportunities out there.

doobius
Tuesday, May 06, 2003

There are still stacks of opportunities.

Regarding open source software, governments, journalists and others will slowly realise open source software is essentially *amateur* software and, just as amateur writing, movies or art is sometimes useful, mostly it's not. Mostly it's mediocre or garbage.

Open source will never solve emerging challenges for companies, and that's why the market for professional software engineers will be strong.

Linux, apache and others are useful, just as occasional paintings or plays by amateurs are useful. However that value doesn't automatically extent to all open source.

.
Tuesday, May 06, 2003

People always want to talk about the good old days, as thought times were easy then and nothing is left for us today. The fact is, the companies in the 80s were working just as hard, and there were tons of failures. It was not a slam dunk to be in software back then, just as it isn't today.

On the flip side, there are tons of opportunities today to grow from nothing into a huge company. Right now there are people you've never heard of working on ideas you'll wish you had thought of who will eventually be worth billions of dollars doing stuff you could have done had you been there with them. Tough.

Figure out what makes you happy, and then figure out how to make enough money doing it so that you can keep doing it and avoid the rest of the stuff that you don't like. Once you do that, the rest is just details. If that doesn't sound hard, you're lucky. If it does, that's because it is, but it's worth it, and you shouldn't give up trying.

Matt
Tuesday, May 06, 2003

There was a set of mutually exclusive conditions back in the 1980s that precluded many of us from profiting from the early PC application boom. Basically, if you were capable of doing that sort of work (bare metal PC development on 8088 and 286 class hardware) you probably wanted to hold out for a "good" job in a name company.

I got into microcomputers as a side effect of working at a computer store in college in the late 70s. I was going for an EE degree at the time. What I recall is basically this: if you had a professional technology background, there just didn't seem to any real money or stability in PCs.

My perspective in those days was pretty much the following: low end microcomputers were all unreliable, low power junk that could only be used for trivial applications. The development tools were aggravating, stunted sh*t. Forget linkers and text editors, and forget even hard disks in the very early days. We're talking interpreted BASIC, or an EXTREMELY slow compiled (P-code) BASIC called CBASIC. I recall trying to develop a large multiple module application using North Star BASIC, and I kept losing work because one app would 'chain' into another from disk and the caller's source code would be lost!

Computer stores were basically employment opportunities for burnouts and D&D cult types. The local consulting opportunities at the time  seemed non existent - you couldn't really promise any degree of reliability for a solution unless the client was willing to spend $10s of Ks for hardware.

I think my early exposure to micros soured me unnecessarily. Messing with IMSAIs with smoking power supplies and pathetic development tools was a red herring. That Z80/8080 platform stuff died out by the early 80s. The IBM PC and the early PC clones were capable of doing "real" work. But, I ignored micros competely, still snobbily deeming them "amateur wanna be" grade stuff by association. 

So, the conventional wisdom, which I followed in my first jobs, said that "anyone" with class would perservere, get a degree, and go work for a Bell Telephone Labs or HP or IBM - so I thought. In my classes in college, I didn't know one person who had any interest in PCs, myself included.  There just seemed to be too many barriers to entry, too many problems with the technology, to make it worth bothering with. PCs were the junior tech college route; mainframes and minis and implementation of new processors at big stratified companies were the things that "winners" did.

In reality, the PC application market was "latent", not at all well supplied with good application software at reasonable prices, well into the late 1980s. There was indeed a *lot* of money to be made. I recall paying $300 for Workperfect 5.1 for DOS and $300 for MSC 5.1 back in 1989 and feeling that I had gotten a very good deal. Vertical market software likewise was a virgin territory in the early to mid 90s. Today both niches are pretty well saturated.

In reality, the opportunities at the time just took some digging  - to which anyone that was chasing everyone else's view of "desirable" occupation at the time was totally oblivious.

Don Wallace
Tuesday, May 06, 2003

I think things are extremely different for developers, and I for one am glad it's 2003 and not 1983. Look at the number of things PC developers had to know in the 1980s compared to now. Very few applications used databases. Almost nobody had networks, and those that did were file sharing, not running client/server apps. No Internet. Graphics and GUI were basically unheard of. You had to know some interrupts to talk to DOS and the BIOS, and C to write code using the standard libraries.

Talk about limiting and boring! :)

Brad Wilson (dotnetguy.techieswithcats.com)
Wednesday, May 07, 2003

>> Talk about limiting and boring! :)

I agree, and that's what I thought at the time. "How demeaning, to have to dig so hard just to program this toy. Yawn, headhunter calling, I have another big company to interview.... "

Now look at where Bill Gates is today, and where the rest of us are. He didn't mind working with that crappy x86 segmented register memory model, BIOS and DOS interrupts, weak development tools, etc etc.... Oh, yeah, I forgot one thing in the dissertation above, I had seen the 68000 type CPU architecture (flat address space) so it was self evident to me that PCs would die off due to their technical inferiority, IE, they were a PITA to program... yeah right, I knew SO much... LOL

The point of this thread was the 'honest' gold rush of the early 1980s in PC development. I think the argument can be made that this "gold rush" was so big and the market was so accepting because the tools and the machines were so weak. It just wasn't *fun* to develop for PCs back then, and there was no VC community around that really cared about PCs. So the only thing that counted  was programming brawn and sweat equity, and you had few competitors if you perservered.

Don Wallace
Wednesday, May 07, 2003

No.  TODAY is the best of times, and software is the best of businesses.  You forget that back then there was no way to get your product to customers except through the computer stores at the local mall.  The internet is the most open sales channel imaginable, linking producer of IP to customer directly.  Those old timers had it hard. 

No matter how endless the possibilities and bountiful the opportunities, there will always be those whose covetous eyes are drawn to the crowded streets of exploited opportunities instead of the open blue yonder of infinite possibilities.  If this is you, please, start exercising the creative parts of your brain, build some castles in the sky, and stop underestimating your own potential to build something new.   
   

Ethan Herdrick
Wednesday, May 07, 2003

So, MS finally decided to make a product out of Scribble.

Simon Lucy
Wednesday, May 07, 2003

I don't know about Scribble, from the FAQ it looks more like Notepad and a file system to me.


Wednesday, May 07, 2003

Scribble, with stroke and letter recognition would be more useful.

Simon Lucy
Wednesday, May 07, 2003

I started my company, GraphPad Software ( http://www.graphpad.com) in the late 80s. There was no internet. We had to mail brochures to do marketing. Then mail demo disks. Then mail update disks. Then mail more disks to beta testers. Support by telephone or fax. The internet has changed everything, making it much easier to start and run a small software company.

I started GraphPad, because as a scientist I was frustrated by the lack of decent tools to analyze and graph data. So I wrote my own. I am sure there are thousands of small niche products just waiting to be created....

Harvey Motulsky
Wednesday, May 07, 2003

IMO, such things are still possible today.

Three years ago I started developing a Windows application (tool for developers). It's now on version 4 (V5 by the end of this year) and generates 1 million dollars in revenue per year.

Fred
Friday, May 09, 2003

By the way, the following is not a joke. Our product generates 1 million dollars in revenue per year and ComponentSource will be removing our product from their web site <g>.

The "Managing Director" told us:

"We have recently undertaken both a commercial and technical review of your products on our web site and we feel that due to the low value of our sales for your product(s) it is not in either party's best interests to continue our relationship. If you would like to discuss our findings please contact us and we will be happy to explain our reasoning behind this decision.

Fred
Friday, May 09, 2003

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