During the first generation, the computer industry consisted of a handful of vendors. Each company produced its own line of hardware and software and provided services to its clientele.
Multiply the number of computer product vendors that existed 30 years ago by several thousand, and you have an idea of how large the computer industry is today.
The computer industry is commonly broken down into three distinct segments: hardware, software, and services. Some firms within the industry specialize in only a single segment; others compete in two or three.
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Hardware :
Today well over 100 firms manufacture computer system units. Some are particularly strong in mainframes, others in minis, and still others in microcomputers. Only a few large firms offer products in more than one of these areas.
Many companies that produce their own system units also make supporting hardware. However, not all firms that make peripheral devices also make system units.
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Because the computer market is so big, virtually every company specializes in certain areas. For example, Apple and Compaq concentrate on micro computing products. Digital Equipment Corporation (DEC) and Data General are prominent vendors of minicomputer products.
Qume is a major manufacturer of printers and display devices. Other companies specialize in certain industries. For instance, Diebold concentrates on technology products for banking, and Quotron specializes in products that relate to providing stock market quotations.
IBM is in a class by itself as a major force in mainframes, small-business systems, microcomputers, peripheral equipment, and software. The Japanese firms, on the other hand, have become especially formidable players in the peripheral hardware markets.
With so many products made by companies other than the ones that sell them today, it’s sometimes hard to tell who does what. In fact, some products bear the logo of one company even though they are manufactured by another.
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Companies that buy equipment made by other firms and “manufacture” their own systems out of it are sometimes referred to as original-equipment manufacturers (OEMs), turnkey vendors, or value-added resellers (VARs).
Software :
In recent years, there has been a virtual stampede into the software business. Entrepreneurs have been attracted to the field because the amount of capital required for starting a software firm is relatively low. All one really needs is time, access to a computer system, and some good ideas.
Most software is produced by independent software firms rather than by companies that also produce hardware. Among the most prominent software-only firms are Microsoft Corporation, Lotus Development Corporation, Computer Associates International, and Borland International.
Naturally, there are few hard-and-fast rules in the software industry; companies often expand into new areas based on the talent they have available and the opportunities that lie ahead.
Like firms in the hardware sector of the computer industry, software firms usually specialize in a particular “niche” area, such as database systems, word processing packages, or accounting packages.
In addition to applications software, organizations must buy systems software. In the case of larger computers, such software traditionally has been produced by the computer manufacturers.
But after IBM unbundled its hardware and software pricing in the late 1960s and computer usage burgeoned, independent software houses popped up to satisfy unmet needs. In the case of microcomputers, virtually all systems software is produced by independent software firms.
Services :
Although advances in micro circuitry have made it easier than ever for a firm to buy its own computer, this is not always the best course of action. In some cases, it’s still better to do work manually, “share time” on someone else’s computer system, or even use outside expertise.
A small company may have no equipment or computer knowledge on hand, or a large company may run out of capacity on its own computer system and need to use a piece of someone else’s system temporarily.
Firms that are in business to sell expertise or computer-related services are called computer services companies.
These companies work in a variety of ways. For instance, a computer services company might provide printing and graphics services to other firms. Such a company might be able to create high-quality brochures and slides for firms that can’t afford to produce such outputs in-house.
Other computer services companies sell only educational services, such as training a firm’s accounting staff in the use of auditing software or its programmers in the use of a new programming language.
Still others may offer an online service, such as providing information over the phone lines about securities prices, news items, and so forth. The variations are almost endless.