Business Aspects of Software
Industry
Prof. Dr. Marc Goldschtein
Paars bestaat uit de slide titels zonder mushroom, dus niet te kennen, maar zeker 1 keer lezen
in de slides zelf, het staat er dus voor volledigheid.
(Doorheen het document wordt telkens met haakjes en schuin geschreven aangeduid wat zelf
is toegevoegd als extra informatie voor concepten uit de slides met dank aan Thomas Terryn
en mezelf)
Grijs is (vermoedelijk) uitleg uit de les, verkregen van een onbekende bron, die de bulletpoints
tot leven brengt.
Oranje vetgedrukt is voor Hoofd en Tussentitels
Blauw vetgedrukt is wat in de slides in het vet stond
1
, Key Concepts
Business Ecosystems
• Markets, segments, niches • Standards
• Vertical markets • Network effects: direct, indirect, negative, two sided
• B2B: market structure, decision making process • (Dis)economies of scale
• Value chains and workflows • Lock-in and switching costs
• The whole product • Clusters
Innovation, ILCs Strategy
• Technology innovations, Business innovations • Core assets:
• Product starters, Technology starters o Classifications
• Radical innovation, Incremental innovation o Uniqueness
• Sustaining innovations, Disruptive innovations o Core assets at start-up
• Competence enhancing innovation vs. competence o Strategies to build core assets
destroying innovation o How market ready?
• Why incumbents often miss the boat o Freedom to operate
• Pervasive innovations • Strategies based on core competencies
• Technology trajectories • Key questions related to customer needs, competition
• Complementary technologies and infrastructure • Performance criteria
• Industry Life Cycle model • Value proposition
o Prehistory and creation • Place in the value chain
o Ferment phase • Typical roles in technology
o Take-off • Services and scalability
o Expansion • Ecosystems maps
o Maturity; Fluid phases • Complementary assets
o Disruption • Strategy based on exclusivity of assets and on
• Dimensions of industry life cycles • complementary assets
o Technology S-curve o Ideas factories
o Entrants and shake-out o Greenfield competition
o Dominant Design o The attacker’s advantage
o Customer typology • The role of industrial partners and outsourcing
▪ Innovators, early adopters, early majority • Business models
▪ The chasm • Key aspects of financial business model
▪ Mission-critical users o Funding needs
o Summary and comments o Revenue model
• Criteria in assessment of projects
Venture Capital • The attractiveness of industries
• Types of investors • Project complexity
• Funding Sources • Project validation
• Venture Capital • Strategies for uncertain markets
o The logic of a VC, Investment criteria, VC deal • Some ways to implement adaptive strategies
making, Exits • The role of opportunism and iteration
• Crowd funding
2
,1. The history of computing and software part I
1.1. Introduction
The first calculator: the Staffelwalze
The Arithmometer
Computers
• To compute = to solve complex mathematical problems
• The word ‘computer’ originally meant a person who solved
equations, only after 1945 the name was carried over to
machinery
• Two sets of uses:
o Scientific: complex calculations on limited set of data
o Business: repetitive, simple calculations, on large volume
of data; lots of sorting processes
Tabulation
• Tabulation: all information regarding a particular entity is encoded on a
single punch card
o E.g.: sales transactions, payroll...
• It runs through different pieces of equipment, each performing specific task
o E.g.: sorting, additions, printing...
• Architecture: different machines performing specific tasks on punch cards,
but there was still quite a lot of a-manual work involved, people bringing
punch cards from one machine to the next
• Next step: automated link between different tabulation machines
Automatic reproducing punch
The Knowledge worker…
1.2. World War II
The Military
• It was not until WWII before real technological advances were made. Throughout history defence
has been a major driving force in technological development.
• The Military:
o In times of war the army is the single most important concern and all that matters is being
the first with a new weapon/breakthrough.
o It’s a race!
o Cost, resources are not an issue
o Secrecy is important as well as,
o Long term vision...
o And sense of urgency, result-driven decision making
• The many computing needs of the military were: Engineering, Firing tables, Logistics, resource
planning, Finance, Atomic Energy Commission (AEC)
Funding for electronic digital computing during WWII 3
,ENIAC
• Military project
• Developed at the University of Pennsylvania Moore School of Electrical engineering
• Ready end of 1945
• It had the capability to be ‘programmed’ or to ‘set up’: to plug and unplug a maze of cables and
set arrays of switches.
• The machine had to be rebuilt for each new problem it was to solve
*(De ENIAC was een computer gebouwd voor het
Amerikaanse leger. De bouw begon in 1943 en de
computer werd onthuld op 14 februari 1946. Daarmee
was de ENIAC de tweede elektronische computer die
gebouwd werd, na de Britse Colossus. De naam is een
acroniem en staat voor Electronic Numerical Integrator
And Computer. De ENIAC kostte indertijd bijna 500.000
dollar. Het bestond uit 19.000 radiobuizen en was mede
daardoor gigantisch groot. De ENIAC woog 30 ton. Pas veel later werden computers kleiner en lichter toen de
radiobuizen werden vervangen door transistors en nog weer later door microchips.)
The Imitation Game
• Alan Turing cracked codes, produced by the German
military’s seemingly unbreakable Enigma machine,
during World War II, using math, engineering and still-
to-be-invented computer science.
EDVAC
• Developed on June 30, 1945
• Often called the founding document of modern computing
• It used the ‘Von Neumann architecture’, with the following principles:
o Instructions and numerical data should be stored in exactly the same sort of memory device
o Units that process information are different from those store it
o It was easier to design storage cells that did not also have to be able to perform arithmetic
on their contents
o ‘very neary an all-purpose machine’: science & business
*(ENIAC inventors John Mauchly and J. Presper Eckert proposed EDVAC's construction in August 1944, and design
work for EDVAC commenced before ENIAC was fully operational. The design would implement a number of
important architectural and logical improvements conceived during the ENIAC's construction and would
incorporate a high-speed serial-access memory. Like the ENIAC, the EDVAC was built for the U.S. Army's Ballistics
Research Laboratory at the Aberdeen Proving Ground by the University of Pennsylvania's Moore School of
Electrical Engineering. Eckert and Mauchly and the other ENIAC designers were joined by John von Neumann in
a consulting role; von Neumann summarized and discussed logical design developments in the 1945 First Draft
of a Report on the EDVAC)
*(EDVAC (Electronic Discrete Variable Automatic Computer) was one of the earliest electronic computers. Unlike
its predecessor the ENIAC, it was binary rather than decimal, and was designed to be a stored-program computer.
ENIAC inventors John Mauchly and J. Presper Eckert proposed the EDVAC's construction in August 1944. A
contract to build the new computer was signed in April 1946 with an initial budget of US$100,000. EDVAC was
delivered to the Ballistics Research Laboratory in 1949. The Ballistic Research Laboratory became a part of
the US Army Research Laboratory in 1952. Functionally, EDVAC was a binary serial computer with automatic
addition, subtraction, multiplication, programmed division and automatic checking with an ultrasonic serial
memory capacity of 1,000 34-bit words. EDVAC's average addition time was 864 microseconds and its average4
multiplication time was 2,900 microseconds.)
,The first computing course
Presper Eckert and John Mauchly
• Inventors of UNIVAC
• Professors at Moore School University of Pennsylvania
• The first computer company: the ‘Eckert-Mauchly Computer Corporation’
• Later absorbed by Remington Rand
*(Presper Eckert and John Mauchly, both founders and investors in
the: The Eckert– Mauchly Computer Corporation (EMCC). After
building the ENIAC at the University of Pennsylvania, Eckert and
Mauchly formed EMCC to build new computer designs for
commercial and military applications. The company was initially
called the Electronic Control Company, changing its name to Eckert–
Mauchly Computer Corporation when it was incorporated.)
University of Pennsylvania
• But the U.o.P. decided to ban commercial interests at university
• They forced Eckert & Mauchly to sign paper that would prevent them from receiving patent
royalties
• They refused this and resigned, which lead to 2 big consequences:
o University of Pennsylvania is not Stanford University
o Philadelphia-Princeton region is not Silicon Valley
5
,National Research Council stated:
• “You... fellows ought to go back and change your programs entirely, stop this...foolishness with
Eckert and Mauchly”
• A member of this council said: "There is a market for perhaps five or six such machines"
o Howard Aiken, Harvard mathematician, member of NRC 1948
UNIVAC
• Universal Automatic Computer, released 1951
• Vacuum tubes, data stored on tape
• ‘Stored program computer’
• Words: numbers, characters, instructions
• Add two numbers in half a millisecond
Fertile ground…
6
,General Electric, the innovator
• They were the first commercial user of a computer, in 1954
• For 4 specific tasks
o Payroll
o Material scheduling and inventory control
o Order service and billing
o General cost accounting
• They set up separate plant, in Kentucky, far away from traditional administrative centre:
o To avoid entrenched habits and unions
• ‘future developments’ for using the computer were:
o Market forecasting using demographical data
o Revamp/Renewing the production processes to reduce inventory
• The analysis of the UNIVAC benefits: was almost entirely cast in terms of its ability to replace
salaried clerks and their overhead cost
• First automated payroll run on a computer was on October 15, 1954
o Remington Rand promised to ship tapes to other customer if the machine broke down
1.3. IBM
IBM
• Was a tabulation machines giant
• In 1934: Thomas J Watson Computing Bureau; Colombia University NY
• Responded to UNIVAC with their own machine, the IBM 701
o Therefore they hired John Von Neumann as consultant
o Their first customer: nuclear weapons laboratory
o Memory MTBF: 20 minutes
o 2.000 multiplications per second
o In total: 19 unit installed, nearly all @ defence
o Use of a computer was still classified: weapons design, spacecraft trajectories, cryptanalysis
o Later also logistics, payroll, finance,
• Rental fee $15.000 per month
o Machine could not be bought
• The Antitrust Consent Decree made it possible for IBM to…
o IBM was to allow customers to purchase its computers
IBM and the army, SAGE (see picture first):
• Was able to combine computers, radar, aircraft, telephone lines, radio links and ships
• And to detect, identify and assist in the interception of enemy aircraft attempting to penetrate
the skies of the United States
• $500 million
• Volume manufacturing of core memory
• -> a ‘system’
7
,*(The Semi-Automatic Ground Environment (SAGE) was a system of large computers and associated
networking equipment that coordinated data from many radar sites and processed it to produce a
single unified image of the airspace over a wide area. SAGE directed and controlled the NORAD
response to a Soviet air attack, operating in this role from the late 1950s into the 1980s. Its enormous
computers and huge displays remain a part of cold war lore, and a common prop in movies such as Dr.
Strangelove and Colossus.)
IBM the giant
• Thanks to their superior in-house manufacturing and field service
• and Aggressive and professional sales and marketing
• they had a 70% market share
• This lead to the following nicknames:
“IBM and the seven dwarfs”, “Big Blue”
*(the reality is that several manufacturers produced mainframe computers from the late 1950s
through the 1970s. The group of manufacturers was often referred to as "Snow White and the
Seven Dwarfs". In that context, Snow White was IBM and the seven dwarfs were Burroughs,
UNIVAC, NCR, Control Data Corporation, Honeywell, General Electric and RCA. IBM will likely be a
major player in the emerging generation of mainframe computing)
*(Big Blue is another nickname used since the 1980s for the International Business Machines
Corporation (IBM). The moniker may have arisen from the blue tint of its early computer displays,
or from the deep blue colour of its corporate logo.)
*** (The BUNCH was the nickname for the group of mainframe computer competitors of IBM in the 1970s.
The name is derived from the names of the five companies: Burroughs, UNIVAC, NCR, Control Data
Corporation (CDC), and Honeywell. These companies were grouped together because the market share of
IBM was much higher than all of its competitors put together. During the 1960s, IBM and these five computer
manufacturers, along with RCA and General Electric, had been known as "IBM and the Seven Dwarfs". The
description of IBM's competitors changed after GE's 1970 sale of its computer business to Honeywell and
RCA's 1971 sale of its computer business to Sperry, leaving only five "dwarves". The companies' initials thus
lent themselves to a new acronym, BUNCH.)
• IBM and disk storage
o Research centre in Silicon Valley
o 1957: markets the first spinning disk: IBM 350 RAMAC Disk storage unit
o Stack of fifty aluminium disks 24 inch in diameter, 1200 rpm
o Five million characters
o Exhibited on the 1958 Brussels World Fair
*(The IBM 350 Disk Storage Unit was rolled out in 1956 to be used with the IBM 305 RAMAC to provide
storage capacities of five, 10, 15 or 20 million characters. It was configured with 50 magnetic disks
containing 50,000 sectors, each of which held 100 alphanumeric characters.)
*(The IBM 305 RAMAC was the first commercial computer that used a moving-head hard disk drive
(magnetic disk storage) for secondary storage. The IBM 350 disk system stored 5 million alphanumeric
characters recorded as six data bits, one parity bit and one space bit for eight bits recorded per character.
It had fifty 24-inch-diameter (610 mm) disks. Two independent access arms moved up and down to select a
disk, and in and out to select a recording track, all under servo control. Average time to locate a single
record was 600 milliseconds. Several improved models were added in the 1950s. The IBM RAMAC 305
system with 350 disk storage leased for US$3,200 (equivalent to $28,546 in 2018) per month.)
8
,Early competition (no mushroom)
• Remington Rand
o Owned two of the first computer manufacturers:
▪ Eckert & Mauchly
▪ Engineering Research associates
o Tried but failed
• General Electric?
o In 1955: 210.000 employees (>< IBM 46.500)
o US leading electronics firm
o Produced early computer 1953 for military
o Decided against entering computing market
o Focus on jet engines, nuclear power..
o IBM was GE’s largest customer of vacuum tubes
IBM mainframe
• IBM 7094
o 1960
o The full works: computer room, tilted floor, airco; operators
o Switches
o 150 kilobyte core memory
o About as fast as PC in late 1980’s
o Set of disks, tape
o Rented for about $ 30.000 per month
o Purchase price $ 1,6 million
• The process
o Submit a desk of cards to an operator through a window
o Batch processing
o Receive a listing of computer paper as readout
First generation computers
• The architecture of a computer:
• Von Neumann architecture: memory, processor, input, output
• Functional building blocks, which carry out logical operators
o and, or, not, exclusive or, and a few others
• Circuits of up to a dozen tubes, resistors, capacitors, inductors, wire
• -> assemble components into standard modules
o IBM: up to 2000 circuit modules
o Plugged on circuit boards
9
, Then came the transistors (niet perse te kennen volgens Thomas Terryn)
• The next big invention are the transistors, which served as a replacement for unreliable & big
vacuum tubes.
• 1947: John Bardeen, Walter Brattain and William Shockley invented the point-contact bipolar
transistor at Bell Laboratories
by the end of the 1950s: transistors had replaced vacuum tubes in all applications
eventually revolutionized the entire electronics industry
Shockley, Bardain and Brittain were rewarded the 1956 Nobel Prize in Physics
No mushroom
Shockley Transistor Corp.
• 1956 Dr. William Shockley leaves Bell labs to found Shockley Transistor Corporation to produce
semiconductor-based transistors to replace unreliable vacuum tubes.
*** De Bell Telephone Laboratories of Bell Labs waren oorspronkelijk de onderzoeks- en
ontwikkelingslaboratoria van AT&T, het Amerikaanse nationale telefoonbedrijf dat ook wel Bell
System werd genoemd. Het was in die tijd de eerste centraal georganiseerde onderzoekstak binnen
een bedrijf en heeft belangrijke bijdragen geleverd aan een scala van revolutionaire technologieën,
van telefooncentrales tot speciale bekledingen voor telefoonkabels, de transistor en meer in het
algemeen de telecommunicatie en informatietheorie.
• This made them the first semiconductor company in Silicon Valley
*** A semiconductor device is an electronic component that relies on the
electronic properties of a semiconductor material (primarily silicon,
germanium, and gallium arsenide, as well as organic semiconductors) for its function.
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