Food on the table – the rise of business software

Soon after it was recognised as an industry in its own right, software would be co-opted by businesses and individuals to help them work faster and smarter.
1 November 2007

Business software applications are almost impossible to separate from our daily lives. Every day, each one of us uses one or more of an ATM, a spreadsheet, an application that connects to a database system, a booking system or an accounting package. Companies that provide us with services send us bills and notifications produced by their own computerised back-end systems. From the first contractors and independent software vendors (ISVs) that started providing customised software to owners of IBM systems, the business software market has grown into one of the largest sectors of the US economy.

In countries like India, the impact of software development has been even greater – and has happened a great deal faster than the 30 years it took in the West. Business software is changing again as the internet becomes the preferred medium for development and delivery of business services. One of the oldest providers of business applications – SAP AG – makes its flagship tool available via a web browser rather than a custom front-end, and providers of all sizes have seen the future in the web and are adapting their models accordingly.

The most influential software ever

IBM's CICS and SAP R/3 may very well be the most influential software ever developed.
With more than 90 percent of the world's desktop computers, it might be obvious to conclude that Microsoft produces the most significant software in the industry. But Martin Campbell-Kelly, author of From Airline Reservations to Sonic the Hedgehog, makes a strong case for another package which, although invisible to the ordinary consumer of software, is actually far more important: IBM's Customer Information Control System, or CICS.
CICS has been around since the early 1980s - just when the market packaged software on the personal computer was getting going - and is still actively developed by IBM (the latest version - 3.2 - runs on IBM's zOS mainframe operating system in its most popular incarnation). Large financial institutions, governments and 90 percent of the Fortune 500 use CICS in one way or another. The ordinary user makes use of CICS when transferring funds, using an ATM, buying insurance or paying for something via credit card. CICS was so revolutionary in its day that early work on it won its developers a Queens Award for technological innovation.
Campbell-Kelly says that to rip out and replace windows would be painful but not impossible: too many business and too many transactions rely on it many times every second around the world. He also notes that SAP R/3 could not be replaced either: too many industries depend on it. It's not an exaggeration to say that these two packages are are the lifeblood of the global economy.


One of the first business applications ever developed was an airline booking system. With ticket offices all over the country and long waiting lists for the then nascent industry of commercial air travel in the mid 1950s, American Airlines noted that it was inevitable that there were going to be mistakes and delays correlating the two. So it wrote the Sabre system with IBM to solve the problem. Sabre took ten years and $30 million to develop, but when it was done, it could match up free seats to waiting lists, giving the airline an enormous advantage in the market.

Computing power started to be seen as a weapon with which businesses could compete rather than merely an academic or military discipline reserved for code-breaking or trajectory analysis. But the term ‘software` wasn`t really understood and it wouldn`t be until the 1960s when IBM released its groundbreaking System/360 series – which clearly separated hardware from software – that the need for programmers to actually write it would become apparent.

In 1966, Business Week ran an article entitled ‘The Software Gap` identifying that programmers were needed to write software and that there weren`t enough of them (it would reprise the article 15 years later and draw much the same conclusion). By 1969, the need for programmers who dealt purely in software had become so large that IBM spun off its own internal software division as an entirely separate entity. Within a couple of years, IBM employees would be leaving the company to form their own start-ups focused on providing business software to customers who used IBM systems.

In 1972, five former IBM employees – Dietmar Hopp, Hans-Werner Hector, Hasso Plattner, Klaus Tschira and Claus Wellenreuther – did just that. They created a company with the mouthful name of Systems, Applications and Products in Data Processing. The Mannheim-, Germany, based operation had a vision to provide business data processing in real-time – not in batches as was still the IBM mindset. The five had noticed that during their time at IBM, many customers wanted the same kind of business applications and that those customers were developing the software they needed for themselves in-house. They figured that SAP could become successful by offering a generic solution that could be customised to individual needs, but with a focus on real-time data processing and the data presentation at the terminal. Within a year, they had developed a financial accounting package. This component would form the foundation for the company`s first system: R/1. SAP, as the company eventually became known, continued to build on R/1, and in 1979, released R/2.

R/2 was incredibly successful in Europe because it coped well with the multiple languages and currencies of that continent and because SAP made it available as modules.Accouting was one, human resources another, manufacturing processes a third and logistics a fourth. Customers with mainframes were surprised – and pleased – to note that R/2 used the time-sharing facilities of IBM`s operating systems, which meant that they could work on their data directly, similar to the standard login prompt of today, rather than sending batches of work down to the computer department for processing. As its sales grew, so did SAP: it moved into a new building, an industrial park in Walldorf, near Heidelberg, putting all of its development operations under one roof.

Cracking the million mark

By the middle of the 1980s, SAP had founded its first sales organisation outside Germany (the majority of German industrial companies were already R/2 users). It cracked the DM100 million mark in sales soon afterwards and, in August 1988, it became SAP AG, listing on the German stock exchange that November.

Although SAP AG had won multiple awards inside Germany, it wasn`t well known outside of that country. This changed with the founding of subsidiaries in Denmark, Sweden, Italy and the United States – and with its next iteration of its real-time system, R/3. SAP R/3 used the distributed client-server concept for the first time in a business environment. Instead of terminals connecting to a mainframe, intelligent client programs on a variety of operating systems connected to a central server. SAP pushed the use of uniform appearance in graphical interfaces, consistent use of relational databases, and the ability to run on computers from different vendors. It adopted the three-tier architecture of database, application and user interface, which is still the standard.

By 1997, the time of its 25th anniversary, SAP had nearly 10 000 customers worldwide and employed over 12 000 people. Along the way, it had also spawned an entirely new market for consultants and developers who could install and customise R/3. In 1998, it listed on the New York Stock Exchange.

By the end of the decade, the internet had influenced CEO Hasso Plattner, along with everyone else. He announced the strategy, linking e-commerce solutions to existing ERP applications using web technology. SAP AG, along with the rest of the business software world, was evolving yet again. But not all business was done by users connected to a central server using a three-tier architecture. Since 1980, the personal computer was putting power back into the hands of the ordinary user. And the package that influenced that trend perhaps more than any other first appeared on the Apple II in 1979.

Personal business

VisiCalc was the first spreadsheet and it changed people`s attitudes towards the Apple II forever. Instead of being a whimsical, game-playing machine for hobbyists and tinkerers, the combination of the program and the machine put real calculating power for business in the hands of ordinary people. Businesses started buying Apple II machines and using them to get work done.


* A History of Modern Computing (second edition) by Paul Ceruzzi; MIT Press (2003)
* From Airline Reservations to Sonic the Hedgehog by Martin Campbell-Kelly; MIT Press (2003)
* Inventing the Electronic Century by Alfred Chandler; Harvard University Press (2005)


* Triumph of the Nerds by Robert X. Cringely, PBS (1996)

According to author Dan Bricklin, the idea for the spreadsheet came as he was watching his university professor at Harvard Business School create a financial model on a blackboard using a set of rows and columns. When the professor discovered a mistake, he had to correct it, but also recalculate each cell that depended on the initial result. Bricklin realised that the process could be automated in software, using formulae to keep cells updated when other values changed. VisiCalc was born.

The program would be improved upon by Bob Frankston, eventually being ported to most personal computers available at the time. You could buy VisiCalc for the Apple II, the Atari, the TRS-80, the Commodore Pet – and, crucially, the IBM PC. When IBM first announced the PC, one of the key draw cards was that VisiCalc would be available on the new platform. As described in PBS`s documentary Triumph of the Nerds, Bricklin and Frankston recorded their reaction to IBM`s announcement on home video equipment for the benefit of other employees of VisiCorp. The fact that IBM was promoting VisiCalc for business use on personal computers was something of a coup. VisiCalc was copyrighted, but not patented, so quickly, plenty of clone programs appeared. SuperCalc was released in 1980, Microsoft followed with MultiPlan in 1982, and Lotus came out with 1-2-3 the year after that. Microsoft improved MultiPlan into Excel in 1985 for the Mac, and Lotus would continue upgrading 1-2-3 to become a powerhouse vendor for the next ten years.

Bricklin has no regrets that the spreadsheet wasn`t patented and hence hasn`t made him millions in royalties. In a recent interview with PC World, he said he found it interesting that the concept of spreadsheets hasn`t changed much.

“The basic concept is the same: organising rows and columns that reference each other, absolute and relative copy operations, and a grid that isn`t dedicated for any particular purpose. You can lay things out as you see fit. Now, of course, it`s taught in grade school, so people learn spreadsheeting and spreadsheet thinking from early on. The thing that surprises me is that we haven`t come up with a better calculating metaphor. The market failure of Lotus Improv to me was what sealed that. Improv was based on tables as objects in their own right, so you had to think down to the level of the object. But people aren`t that organised in their thinking. And people like free-format tools.”

Does he still get fan mail about being the inventor of the spreadsheet?

“I still get letters. I responded today to a letter from somebody saying, ‘Thank you for putting food on my table.` That makes me feel really good.”