Michael Carr on Future Of Software Industry

Nicholas G. Carr - author of "Does IT Matter? Information Technology and the Corrosion of Competitive Advantage" in his editorial on New York Times writes about the future of the software industry. He is reacting on the Microsoft's decision to return $32 billion to its shareholders , according to to him it may be a wise business move, but it is also an admission of defeat.

With its announcement this week that it will pay a special one-time dividend of $3 a share, the company is confessing that despite years of trying, it has not found an attractive way to invest its cash reserves. After decades of spectacular growth, the world's most famous software company seems resigned to a more sedate middle age.

Microsoft may be the biggest name in software, but its problem is not unique. In recent weeks, many of the largest suppliers of business software, like Computer Associates, Seibel Systems and Veritas, have announced that their growth will fall short of investors' expectations.

The software industry's sluggishness is not just a reflection of the vagaries of the economic cycle. It is a manifestation of a fundamental, if often overlooked, characteristic of the industry's product: software never decays. Machinery breaks down, parts wear out, supplies get depleted. But software code remains unchanged by time or use. In stark contrast to other industrial products, software has no natural repurchase cycle.