Introduction

The global software industry is young, large and very dynamic (Mowery, 1996). Markets for software as a commodity independent of computer systems have been established for little more than three decades, while a vast amount of software continues to be produced by firms to meet their own specialized information processing requirements. Revenues from software sales to European companies and individuals amounted to approximately €47.9 billion in 2000 and are expected to continue to grow at double-digit percentage rates in the near future (European Information Technology Observatory [EITO], 2001). At least 2 million European workers (1.35 percent of the European Union labor force) are directly engaged in the production of software as part of their direct job responsibilities.

Software is the collection of instructions that computers follow in executing the tasks of acquiring, storing and processing data and exchanging them with their human operators, as well as the guides and reference information that humans need to specify what can be, should be or is done in these processes. Like food, software can be pre-packaged, constructed from ingredients or served where it is consumed. When it is pre-packaged it is reasonable to think of it as a product, and when it is produced “to order” it may be thought of as a service. The nature of the market for software creation and exchange activities, and the technologies supporting these activities, are shaped by three fundamental issues: the nature of software as an economic commodity; the historical patterns of the division of labor involved in software creation; and distinctions in the design and use of software that define the nature of software markets.