The Power of Software
Alfonso Fuggetta
CEFRIEL
February 2008
Highlights
Software is now everywhere, and plays a fundamental and increasing role in our society.
The “power of software” is producing deep changes in the market even in non-ICT sec-
tors and has a number of impacts in the way we live. It is therefore essential to under-
stand the characteristics of software, the peculiarities of the software market, and the
roles of the different players acting on this market. Moreover, the fact that software is an
immaterial and relatively new kind of technology leads to a number of issues that need
to be addressed with particular attention, including licensing, software patents, open stan-
dards and formats.
The main goal of this white paper is to provide a quick overview of the world of soft-
ware and, most importantly, to show its critical and essential role it in the development of
our society.
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The Power of Software
1. The role of software in modern society
Even if many illusions of the “new economy era” have disappeared, the reality is that ICT (Information and Communication Technology) is
really changing our society. New products and services based on ICT have become part of our daily life. A totally new way of managing
business around the world has been made possible by the pervasive diffusion and application of ICT.
Software is the core of this revolution. It is software that provides intelligence and features to any “hard” product such as mobile phones,
music players, transportation vehicles, home appliances. It is therefore essential to understand the characteristics of the ICT market, and,
more specifically, the role of software.
The ICT market is traditionally structured in two main sectors:
Information Technology (IT). This sectors includes all the products and services related to computer hardware and software. Nowa-
days computer hardware and software are not just mainframes, minicomputers, PC, Windows, and Office. A wide variety of prod-
ucts have emerged such as Personal Digital Assistants (PDA) and the corresponding software products.
Telecommunication (TLC). This sectors includes all the products and services related to supporting the communication among peo-
ple, computers, and devices in general.
The evolution of ICT, and the increasing pervasiveness of software, have made this distinction more blurred, and typical characteristics of
the IT market can now be found also in sectors that were previously considered purely TLC.
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1.1. The evolution of ICT The E90 is more similar to a laptop than to a traditional phone,
and even for voice calls it is not “just” a cellular phone anymore.
It is a computer that can make phone calls through specific soft-
The impressive development of ICT, both in the IT and TLC
ware applications. This is made possible through three different
sectors, have caused a revolution in the market. The main rea-
channels/applications: “traditional” GSM calls, UMTS video calls,
sons of such revolution can be summarized as follows.
and VoIP calls using Internet connectivity.
Everything is digital The E90 is a perfect example of the ICT revolution we are ex-
All the information that is produced and exchanged in our soci- periencing. This revolution is based on the increasing importance
ety is represented in a digital format: text, images, voice, and of software.
video are coded and transmitted as digital data. This revolution is
dramatically changing the structure of many markets and sectors, 1.2. Software, software, software
such as entertainment and telecommunication services. Think
about the impact of products and services such as Skype and The development of ICT and, in particular, of software, have
iPod/iTunes. boosted and sped up a deep transformation of many business
sectors. Being they centered on the digital revolution, they are
Unlimited power more and more becoming similar to IT business models (see
The power of modern microprocessors and digital circuits is section 2). Let’s consider here a few examples.
really impressive. It is possible to embed in a portable device or
even in a small sensor the same computing power that, until a Cellular phones
few years ago, had to be provided by a large computer. Originally, mobile phones were devices able to perform just one
single function: making phone calls. They used some software
Unlimited capacity onboard, but it was just instrumental to support that unique
Digital memories and hard disks have reached a very high capac- feature. Over time, cellular phones have evolved into complex
ity. It is possible to have gigabytes of memory even on a PDA or devices such as the E90 illustrated in the previous section. But
cellular phone. In the near future, flash memories are expected even simpler products, such as more conventional cellular
to replace, in many situations, hard disks. phones, are now much more than simple devices used to make
phone calls. They all have, even if in different forms, the following
characteristics:
Decreasing size
Integrated circuits are becoming smaller and smaller. Telecommu- 1. Their hardware is basically a small computer with a signifi-
nication devices and antennas can be miniaturized. It is even cant amount of memory, (very often) a digital camera, a
possible to create “smart dust”, i.e., very small devices with their number of communication channels, and, in more recent
own computing capabilities, memory, and communication means. products, even an hard disk.
“Intelligence” can be located everywhere.
2. They all have an operating system that controls the device,
Full connectivity supports the user interaction, and manages the different
software applications available on the device.
Wireless and wireline technologies have dramatically increased
their ability to cover the entire planet with a web of connections. 3. Any feature offered by the device is implemented through a
Any device, fixed or mobile, can exploit a number of different software application, including plain GSM voice calls.
communication technologies.
4. To use one of these devices, the user needs to subscribe to
Software, software, software one or more communication services. Increasingly, they are
multi-channel, i.e., the user can seamlessly use GSM, GPRS,
The core of the ICT revolution is software. The availability of
EDGE, UMTS, or WiFi, depending on the location and the
cheap computing power, memory and ubiquitous connectivity,
application he/she wants to use.
even for small devices, makes it possible to embed intelligence
everywhere. Software provides the added-value. Any feature These four characteristics are the same that characterize the PC,
offered by a computing device is implemented through software. and in general, IT market. Indeed, the cellular phone market is
acquiring the same characteristics of the PC market. Hardware is
being standardized because the operating system and the appli-
A perfect example of these trends is represented by modern
cations are becoming more and more important. Users want to
“phones” such as the Nokia E90 Communicator. This device has
have sophisticated services and a consistent user interface. This is
a powerful processor, a high-quality camera, an integrated GPS
causing a shift towards design (we want a nice phone) and soft-
receiver, and can accommodate even gigabytes of memory (with
ware (we want features). While the production of hardware is
an additional card). From a connectivity viewpoint, it sports a full
increasingly concentrated in a handful of companies, the key
range of communication channels: GSM, EDGE, GPRS, UMTS,
players are the producers of software platforms and applications,
WiFi, Bluetooth. Depending on the location, availability of serv-
and the new service providers. Consider for example the recent
ices, performance, and costs, the user can select any of these
announcements made by Nokia about their new Ovi Internet
channels to connect his/her device to the rest of the network
services offer, or by Google about their Android platform for
and exploit the advantages and services made available by the
mobile devices.
universal diffusion of the IP protocol.
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Entertainment trating into sectors that until few years ago would have never
The entertainment world has been dramatically shacked by the been associated with high-tech. For instance, small sensors are
digital revolution. Music and media in general can be distributed inserted into corks to control the quality of wines, or in hams to
as any other digital contents. This is changing the business model check if they are “ready” to be distributed on the market.
of music companies and television broadcasters. IPTV, in particu-
In general, ICT provides added value and innovative features to
lar, is a strong challenger to conventional TV broadcasters, in
any modern product and gives the possibility to deliver innova-
particular when compared to satellite and terrestrial TV that are
tive services. This justifies the assertion that software and ICT are
not bidirectional. Moreover, IPTV enables two completely new
the core of innovation in modern processes and products.
paradigms:
1. On demand TV: customers can decide what to see and 2. Software products and services
when to see it. It is the death of the “TV schedule” we are
used to deal with. As in many other industrial sectors, the software market can be
broadly structured in two main areas: products and services.
2. Anybody can become a TV broadcaster: this is not a busi-
ness of those who own the broadcasting infrastructure A software product is the set of artifacts that delivers a specific
anymore. set of software features to a customer. It is important to re-
member that a software product is more than just executable
Intelligent devices and stupid network code (”the program”): a product is composed of the design
In general, software is the key element of telecommunication documentation, the source code, the code used to test the ap-
products and services. Besides cellular phones, all network de- plication, the user documentation, and, in general, any other in-
vices (switches, routers, firewalls, ...) are built as software applica- formation needed to understand, use, manage, and evolve the
tion and/or firmware running on some computing infrastructure. “actual” program.
All the services traditionally offered by telecom operators are
There are two main types of software products:
now made available as software applications running on the user
terminal. Skype is probably the perfect example of the revolution Packages: a package is a program that has been developed
started in the past ten years, i.e., what David Isenberg called the to address the need of a large number of customers. It is
rise of the stupid (neutral) network. released through a license agreement. The license defines
the obligations for the customer and the developer of the
The conventional telecommunication market was based on
package. There are two main families of licenses: proprietary
the notion of intelligent network: all the services were pro-
and open source. They will be discussed in section 5. Usu-
vided through specific features that were part of the net-
ally, the customer pays a cost to acquire the right to use the
work infrastructure, while terminals (such as POTS - Plain
software according to the obligations listed in the license
Old Telephone Service) were “stupid” (i.e., they were just
agreement.
able to accomplish very simple and fixed operations).
Custom software: this is software that is developed to fulfill
The advent of the Internet (and of software) has radically
the needs of a specific customer. For this reason it is often
changed the situation. The network is “stupid”, as it has just
called also bespoke software. Custom software is developed
to deliver packets efficiently from a source to a destination.
through a software development service contract, i.e., the
The network is not aware of the nature of the information
customer pays the cost of developing software to a soft-
being sent. All the “intelligence” is in the devices, i.e., in the
ware developer.
software applications on users’ terminals: they know the
meaning of the bits that are transmitted and received. Very often, a solution is composed of different pieces of soft-
ware, some of which are packages while other are custom soft-
Basically, we have moved from an “intelligent network with stupid
ware. For instance, a solution may be based on a software pack-
terminals” to a “stupid network with intelligent terminals”: this is
age that is extended with custom software developed to address
due to what can be called the informatization of telecommunica-
a specific problem of the customer.
tion technology and services, i.e., the advent of software.
A complementary form of delivering a software product is cus-
Actually, the neutrality (or “stupidity”) of the network is nowa-
tomization. This is the typical approach used in ERP systems such
days intensively discussed at the economic and political levels.
as SAP. SAP is a software package that provides a rich set of
Network neutrality has a deep impact on the structure of the
features to manage the operations and activities of a company:
telecommunication market, as the debate between telco opera-
billing, human resources, project management, etc. SAP features
tors and service providers (Skype, Vonage, and also Google and
can be “customized” to better suit the needs and characteristics
Microsoft) is demonstrating.
of the customer. This is accomplished by properly tuning the
basic SAP package through a number of configurable options
Other (non-ICT) sectors and features. For instance, it is possible to specify how to deal
The impact of software and ICT is visible also in many other with expired invoices. In general, a SAP-based solution is ob-
sectors. Cars and transportation systems are centered on ICT tained by purchasing the license for the basic software package,
components: an Audi A8, for instance, has dozens of microproc- and by acquiring services: customization of the basic package and
essors controlling everything from the engine to infomobility development of specific add-ons that may be required by the
services and on-board entertainment. Tractors used in agricul- customer.
ture use GPS to automatically plow. White appliances are con-
trolled by microprocessor and embedded software. ICT is pene-
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Software-related services can be broadly classified in the follow- process, it is possible to transfer to the external company hard-
ing categories (quoted definitions are taken from Wikipedia): ware, software, and even people. The advantages for the com-
pany outsourcing its ICT infrastructure is to reduce cost and
Consulting. “A consultant provides expertise to clients who improve quality of service, as the external company may exploit
require a particular type of knowledge or service for a economy of scale to manage a number of different clients with
specific period of time, thus providing an economy to the the same organization and resources. Usually outsourcing is cen-
client. In other situations, companies implementing a major tered on facility management services. However, it may involve
project may need additional experienced staff to assist with also software development services and software maintenance.
increased work during that period.”
Offshoring is an outsourcing process that is carried out exploiting
Software development and software maintenance. These serv- companies located in low-wages countries, typically in Asia (In-
ices are related to running software development and dia) and Eastern Europe. Offshoring is one of the most impor-
maintenance projects for a customer. tant phenomena of the last years. Many consider it as crucial
competitive move to reduce costs in a global economy. How-
Facility management. “Facility management is the manage-
ever, offshoring may present problems as well:
ment of buildings and services. These services are some-
times considered to be divided into hard services and 'soft 1. Countries such as India are experiencing an increase in
services'; hard services include such things as ensuring that wages, people volatility (the attitude of a person to change
a building's air conditioning is operating efficiently, reliably, workplace frequently), and skill shortage.
safely and legally; soft services include such things as ensur-
ing that the building is cleaned properly and regularly or 2. To really appreciate the potential benefit of offshoring it is
monitoring the performance of contractors (e.g. builders, essential to consider not just the labour cost (i.e., wages),
electricians).” IT Facility management is related to the man- but also overheads and any other form of indirect costs. For
agement of hardware and software applications so that instance, coordination and travel costs may increase signifi-
they are reliably and constantly available to the customer. cantly.
ASP (Application Service Provider). “An application service 3. Cultural barrier are another important factor. A call/support
provider (ASP) is a business that provides computer-based center in India may have problems in interacting with an
services to customers over a network. The most limited Italian or Spanish customer base. Similarly, it is not so easy
sense of this business is that of providing access to a par- to pass complex requirements concerning Italian public
ticular application program (such as medical billing) using a administrations and accounting procedures to software
standard protocol such as HTTP.” developers that live in a totally different environment and
culture.
Staffing services. “[It means to] place technologists in busi-
nesses on a temporary basis. These firms are pejoratively In general, outsourcing and offshoring are opportunities to ex-
known as "body shops". While they are geographically lim- ploit. But it is essential to assess them carefully in order to re-
ited by their customers, they can exploit global cost differ- duce the risks of introducing high indirect costs and reduced
ences by bringing guest workers to their host country.” The overall effectiveness. A company should outsource/offshore only
difference between staffing and consulting or other kinds of processes and services that are not strategic, and that can be
services discussed above is that with staffing the responsibil- effectively managed even if operated in a separate company and/
ity of the work being performed is almost totally left to the or remotely. 1
customer. This can be roughly illustrated by saying that a
staffing company “sells the bodies”, while a software devel- 4. Structure of the market
opment company (or a facility management company) sells
projects (or functions). The companies operating in the software market can be classi-
In general, the services offered to a customer are a combination fied according to different dimensions: industrial sector, company
of the different forms discussed above. It must also be noted that positioning, and business model. These dimensions are not or-
the above categories are not totally disjointed: a consultant often thogonal, i.e., not all possible combinations are implemented by
offers also development services; a facility management company existing companies. Also, the classification has to be related to
is often also in charge of software maintenance; consulting com- the different types of products and services discussed in section
panies often offer also staffing services. This issue will be further 2.
discussed in section 4, which discusses the structure of the mar-
ket from the offer viewpoint (who are the main actors?). 4.1. Industrial sectors
3. Outsourcing and offshoring A first fundamental distinction useful to characterize the different
actors operating in the market is based on the main industrial
sector where a company operates.
Two important keywords characterizing the software market are
outsourcing and offshoring.
Outsourcing means to externalize the ICT infrastructure and its
management to an external company. As part of the outsourcing
1 There are several studies on the effects, pros, and cons of outsourcing and offshoring. The reader is invited to consult magazines and sites such as Harvard
Business Review or McKinsey Quartely for a detailed analysis of trends and challenges.
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Primary software companies software, as their revenues often depend entirely on serv-
Primary software companies develop software as their core ices. However, also proprietary software vendors such as
business. Typical examples are giants such as Microsoft, IBM, and Microsoft are increasing their revenues related to services.
Oracle, or, at the other extreme, small software houses develop- Some of them, such as SAP, are also offering ASP services.
ing custom software. This category includes also companies pro-
System integrators. They are companies that basically sell
viding the different kinds of IT services discussed in section 2.
projects, i.e., software development services. Some of them
offer also facility management and, in general, outsourcing
Secondary software companies and ASP services. Typical examples are EDS and IBM3.
Secondary software companies develop non-software products Sometimes, they also offer staffing services.
that embed as significant elements one or more software com-
ponents. These companies develop software that is used to pro- Web agencies. They are companies specialized in building
vide features and added value to their products. As ICT (and web sites and portals. Their expertise includes not only ICT,
software) is becoming more and more pervasive, the number of but also the skills needed to create effective communication
companies that can be classified as “secondary software compa- tools.
nies” is rapidly increasing. Car manufacturers, home appliance
Staffing companies. These companies offer almost exclusively
producers, consumer electronic industries are just some of the
staffing services.
companies that are increasingly involved in software develop-
ment activities.
4.3. Business model
The distinction between primary and secondary software com-
panies is important as secondary companies often do not have As briefly mentioned in the previous section, the business model
an ICT (and IT in particular) background. For them it is difficult of software vendors may differ significantly. The main options to-
to assess and master the role of IT in their business. Often, IT day available are the following ones:
and software is seen just as a cost, rather than an important
means to increase competitiveness, create new products, and Proprietary. They sell licenses and offer support and related
improve processes. Also, primary software companies must learn services.
to interact with secondary companies, and understand their
Open source. They rely on selling services. Software is dis-
domain knowledge, their language and cultural background, their
tributed with the source code.
needs and challenges.
Freeware. Freeware must not to be confused with free
4.2. Company positioning software. Freeware is distributed “for free”, usually without
the source code (so it is not free software). Basically, this
A second dimension to classify software companies is based on kind of software is developed by individuals who are inter-
the company positioning on the market. In his book “The business ested in personal rewards or by companies that offer light
of software”, Michael Cusumano2 identifies three main catego- version of professional products “for free” in order to at-
ries of companies: company selling packages, companies selling tract new customers to their professional offer.
services (including custom software development services), and
hybrid solution companies, offering a combination of products Adware. This is software that is distributed “for free”: the
(packages) and related services. This classification can be further developer makes money by including advertisements in
enriched by profiling the different kinds of companies that oper- banners or specific portions of the application user inter-
ate on the market: face.
Market analysts. They analyze the ICT and software market Shareware. This is similar to freeware. Wikipedia defines it as
in order to identify market trends and strategic alternatives. follows: “Shareware software is typically obtained free of
Typical examples are IDC and Gartner Group. charge, either by downloading from the Internet or on
magazine cover-disks. A user tries out the program, and thus
Strategic consultants. They offer high-end consulting services, shareware has also been known as 'try before you buy',
mainly related to designing the company strategy and the demoware, trialware and by many other names. A share-
role of ICT in such strategy. A typical example is McKinsey. ware program is accompanied by a request for payment,
and the software's distribution license often requires such a
Consultants. They offer consulting services related to busi- payment. Payment is often required once a set period of
ness process reengineering and product and process inno- time has elapsed after installation.”
vation. Often, they provide also system engineering and
software development services. A typical example is Accen-
ture.
5. Software licenses
Software vendors. They sell software packages. Most of them A software license is a set of obligations ruling how a software
are increasingly offering also services related to their prod- product can be used by a customer. There are many forms of
ucts. This is true for companies producing open source
2 M. Cusumano. The business of software. Free Press, 2004.
3 Of course, IBM is a large company and each of its divisions can be considered a company in its own. There are divisions of IBM selling services, others
selling products, others offering consulting services. Certainly, system integration and outsourcing are two large market areas.
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licenses. Two important elements characterizing a license are can be redistributed only with the same kind of license. Second,
duration and scope. any other piece of software that is integrated with source code
covered by GPL can be distributed only under GPL (i.e., as free
Duration. A license may be temporally limited or unlimited (i.e., software). This two requirements make the GPL a “viral” license:
the customer can use the software package forever). For in- its properties and characteristics are maintained and propagated
stance, it is more and more common to pay a yearly fee to use a as the software evolves or is expanded. The term used to iden-
software package. Such fee includes also the ability to receive tify this approach is copyleft, i.e., the application of copyright to
software updates and bug fixes. support the free distribution of open source software.
Scope. A license may apply to different kinds of entities. In general, there are many other open source licenses with dif-
ferent characteristics and constraints. Similarly, also proprietary
A license can be related to a specific machine. This is the
licensing schemes are constantly expanded and blended with
case for the basic Windows license that is associated to a
other approaches to solve specific problems or to address issues
specific PC.
and limitations of existing approaches. For instance, Microsoft has
A license can be related to a specific customer: in this case, recently introduced new licensing schemes that, under specific
the customer can move the software package on different conditions, make the code of its application available to the licen-
machines as long as he/she is the only user. see.
A license may be associated to a dynamic number of users. Custom software deserves different kinds of considerations.
This is the typical case of expensive software packages used Usually, custom software is developed through a software devel-
by a number of users at the same time. In this situation, the opment service that is totally paid by the customer. This means
license defines the maximum number of users that can that the customer has the power to ask the (possibly non-
access the program concurrently. exclusive) ownership of the developed source code.
A license may be associated to a site or to an entire com- In general, from a license viewpoint a software solution is often a
pany: basically, the license allows a company to install as combination of software packages covered by some license and
many copies of the software as needed. This is typically the custom code “sold” to the customer.
case of the Microsoft Campus agreement that make it pos-
sible to install Microsoft products on any machine of the 6. Software patents, open standards, and
licensee.
open formats
Of course, there is a third element that defines the characteris-
tics of a software license: its nature. Basically, the above com- Important topics related to the role of software in our society
ments apply almost entirely to proprietary software, i.e., software are patents, open standards, and open formats. They have an
that remains under the full control of the original producer. The increasing impact on society and economy.
advent of Linux and open source/free software has introduced a
new generation of licenses.
6.1. Software patents
Open source/free software4
is covered by a license that grants
the user a number of rights or freedoms (definition adapted Software patents have been fiercely discussed during the past
from the one by the Free Software Foundation): years. Open source advocates consider them a direct attack to
their community. Software patents promoters consider them an
1. The freedom to run the program, for any purpose. absolutely necessary means to support the development of the
market. Indeed, there are an increasing number of people that
2. The freedom to study how the program works, and modify consider patents in general as counterproductive. Moreover,
it (access to the source code is a precondition for this). when applied to software, there is a lot of confusion on what
3. The freedom to redistribute copies. should and could be patented.
4. The freedom to improve the program, and release the The notion of patents is defined in Wikipedia as follows:
improvements to the public (access to the source code is a A patent is a set of exclusive rights granted by a state to a
precondition for this).
person for a fixed period of time in exchange for the regulated,
Notice that free software is not necessarily distributed “for free”: public disclosure of certain details of a device, method, process
it may be the case that to obtain a copy of the software it is or substance (known as an invention) which is new, inventive
necessary to pay some fee. However, once the customer be- and useful.
comes a licensee, he/she is granted the above freedoms.
Let’s consider a simple example: Ducati invented a distribution
There are many forms of licenses based on the open source
system (called desmodromic) that makes their motorbike engines
paradigm. The most famous one is the General Public License
unique. Ducati patented this invention. The patent contains the
(GPL). Indeed, many consider GPL as the canonical means to
design of the desmodromic distribution: it does not cover a spe-
define if a software is open source or not. GPL has two main
cific implementation of the distribution, rather its design. In gen-
characteristics. First, it imposes that a software covered by GPL
4 This paper does not discuss the difference between open source and free software. This distinction may be considered not relevant here. The reader is
invited to read more specific papers on the topic such as A. Fuggetta, “Open source: an evaluation”, Journal of Systems and Software, April 2003.
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eral, patents are specifications. They indicate why the patented
invention is new and how to implement it. Is it novel? Yes Yes
When applied to software, the notion of patent is used in a very Is it a “scientific principle or
No No
confusing way. law”?
Someone wants to patent the source code. Source code is Is it an invention? Yes Yes
an implementation. As such, it does not make any sense to
patent it. It would be equivalent to patent a specific imple- Did it take time to conceive? Yes Yes
mentation of the desmodromic transmission. Source code
can be protected using the notion of copyright (which is Can I reproduce it, once I
Yes Yes
used also by the open source community to implement have read the patent?
their licenses).
Is it an established or
No No
Others want to patent generic principles such as “code obvious concept?
generation”, “one click” or boolean operators (someone
Table 1: Comparing Ducati’s patent and UML.
wants to patent “is-not”).
Others want to implement scientific principles. They can be 6.2. Open standards and open formats
considered equivalent to scientific discoveries and, as such,
they cannot be patented. Open standards define standard interfaces of ICT systems and
However, assuming that patents in general have still a role to play, services. They are common agreements that enable communica-
there might be a limited number of situations where software tion between different ICT systems, making it possible to have a
patents may make sense. Let’s consider as an example the speci- variety of interchangeable and interoperable products developed
fication of a language such as UML (Unified Modeling Language). by different companies. Open standards are instrumental to
Let’s assume that it is novel and reasonably different from any increase competition and, in the end, customer satisfaction. Typi-
prior art. Of course, this is a mandatory check that should be cal examples of open standards are ANSI C and TCP/IP, two
accomplished before any other kind of evaluation is started. cornerstones of modern ICT technology.
Patenting UML may have different kinds of interpretations: Open formats define open ways to store and transmit docu-
ments, information, and in general knowledge: they can be con-
1. Create a patent on the notion of object-oriented design. This sidered a particular subset of open standards. Examples of open
would basically mean to patent a general principle that is formats are HTML and XML. In general, a standard format is just
part of the society knowledge and, therefore, it should not a particular form of standard. Document formats are often de-
be accepted. fined by the producers of the software packages that generate
them: for instance, a major source of discussion is the approach
2. Create a patent on the source code of a UML support tool used by Microsoft to define and evolve the formats of Office
(i.e., a tool to create and manipulate UML diagrams). This documents. In general, if a document has been produced using a
would mean to patent some source code and, again, it specific package (and is therefore stored using a specific format),
should not be accepted. users who want to access that document are forced to acquire
and use the package that has generated it.
3. Create a patent on the UML specification. This reflects the
general notion of patent and therefore could be accepted. Unfortunately, the definitions of open standard and open for-
Certainly, it is not a true “software patent” (i.e., a patent on mats are not so “standard”. There are different interpretations of
a “piece of software”), Rather, it may considered a concrete the terms and, more important, there are alternative visions
and realistic example of the term that has been coined in about the strategy that should be followed to define and up-
international bodies: computer-implemented invention. dates these standards.
The position expressed above can be analyzed in more detail by The existing forms of “standards” can be roughly organized as
comparing Ducati’s distribution with UML (Table 1). In general, follows:
the notion of software patent may be acceptable in a very lim-
ited number of situations, where it is applied in a way that is Proprietary standards (often covered by patents and/or
consistent with the original definition and purpose. Certainly, it copyrights): they are “de facto” standards because of their
cannot be accepted as a generic way of controlling anything wide availability and adoption. They can be further organ-
related to software. ized in two subcategories:
Proprietary undisclosed standards: they are standard
Characteristics of the entity Ducati’s dis-
UML whose structure is kept undisclosed. They can be
to be patented tribution
used/exploited by other companies through licens-
Is it a precise specification? Yes Yes ing ruled by specific NDAs (Non Disclosure
Agreements). Typical examples are document for-
Is it code mats whose details are not made public (e.g.,
No No
(or an implementation)? Skype).
© CEFRIEL, 2008
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The Power of Software
February 2008
Proprietary disclosed standards: they are created by a technology leads to a number of peculiar issues that need to be
company and then made public. They can be re- addressed with great attention: these include software licensing,
stricted (nobody can use them) or licensable: in this software patents, open standards and open formats.
case, they can be either royalty-free or royalty-
based. A typical example of a proprietary disclosed This white paper aimed at providing a quick overview about the
standard that has restricted access is Visual Basic: it “world” of software, in order to show the critical and essential
is well-known, but nobody other than Microsoft can role it is playing in the development of our society. This is essen-
create compilers. A typical example of licensable tial in order to understand the trends we can see, and to face
proprietary disclosed standard is Autodesk DWF the challenges that this revolution poses.
document format. This was also the case with PDF,
which was later submitted to ISO for official stan- Acknowledgments
dardization.
The author wishes to acknowledge the contribution and support
Concerted disclosed standards: these “de facto” standards are of Davide Cerri.
defined by closed or controlled groups of organizations that
exploit a consultation mechanisms to collect feedback and
suggestions about the evolution of the standard. Java is a
typical example.
Open standards (concerted): they are defined by open con-
sortia or group of companies, universities, and research
institutions. Typical examples are standards defined by IETF
and W3C.
Open standards (de jure). these standards are defined by
national and international standardization bodies such as
ANSI and ISO.
Based on these definitions, many considerations about “open-
ness” should be revised as they appear to be strongly influenced
by cultural and even emotional factors. For instance, Java is not
an open standard while C# is an ISO standard. Therefore, it is
necessary to study these issues in a more structured and “open” This paper is covered by a Creative
way, in order to effectively characterize and address them.5 Commons License.
Open standards and software patents are not completely dis- Some rights reserved:
joint issues. Indeed, a publicly available specification and an open
process are not enough to declare a standard as “open”, if the Attribution.You must attribute the work in
standard cannot be implemented without asking someone for a the manner specified by the author or licensor.
license and paying the relevant fees.
Noncommercial.You may not use this work
for commercial purposes.
7. Conclusions
No Derivative Works. You may not alter,
The ICT revolution has had a deep impact on the market and, transform, or build upon this work.
more generally, on our society. The pervasive presence of ICT
and software, made possible by the decreasing cost and size and
the increasing power of computing equipment, is dramatically
reshaping other technologies, i.e. non-ICT products and services.
Software is the core of this revolution, and it is the element that
provides the added value. This change introduces typical ele-
ments of the IT market also in other sectors: in the TLC market,
for example, there is an ongoing paradigm shift from the “intelli-
gent network with stupid devices” to an approach where there
is a “stupid network with intelligent devices”.
For this reasons, it is essential to understand the characteristics
of software and of the software market. Some important issues
discussed in this white paper are the products vs. services dis-
tinction, the different kinds of companies operating in the soft-
ware market, the outsourcing and offshoring trends. Moreover,
the fact that software is an immaterial and relatively new kind of
5A broader discussion on this topic can be found in D. Cerri, A. Fuggetta, “Open standards, open formats, and open source”, Journal of Systems and Software,
November 2007.
© CEFRIEL, 2008
9