Microsoft

Even in times of economic uncertainty, software remains a significant component of the global economy. The drive for greater efficiency and the increasing globalization of business markets spurs much of the spending, as companies continue to invest in the hardware and software infrastructure that enables them to operate in increasingly competitive markets. The software industry has experienced significant consolidation of late. Enterprise application giant Oracle was responsible for two of the larger acquisitions, purchasing PeopleSoft ($10.3) and Siebel Systems ($5.9 billion) in recent years. Particularly vulnerable are smaller best-of-breed software providers that specialize within certain niches; unlike their larger brethren that provide broad suites that address a variety of functions throughout enterprises, best-of-breed providers have little to fall back on if growth stalls in their particular industry. IBM's enormous software holdings have largely been built with acquisitions. Mirroring past trends in maturing markets such as apparel and electronics manufacturing, an increasing number of software and IT services providers are outsourcing a significant portion of their operations to foreign countries. Software companies can hire developers in countries such as China, India, and Russia for a fraction of the domestic cost. Another significant trend in the software industry was prompted by the aftermath of the terrorist attacks of September 11. As the US government tightened security by revamping its computer and telephone systems, struggling software providers shifted gears to cater to various federal agencies and departments. The corporate scandals that shook financial markets around the turn of the century are also revitalizing the software industry. The Sarbanes-Oxley Act requires companies to provide real-time disclosure of events that might affect their financial performance and keep records of e-mails and instant messages exchanged between employees. The US Patriot Act determines that financial services companies must be able to effectively detect money laundering activities, and the Health Insurance Portability and Accountability Act requires health care companies to store e-mails in the same way they store medical records. Software providers are also embracing and developing new technologies, including a new class of applications loosely referred to as Web services. Designed from standardized building block components, Web services can theoretically be assembled in a variety of ways, allowing companies to develop business applications that function across a variety of software and hardware platforms. The current real-world applications for Web services have been limited primarily to simple integration tasks, such as managing online travel reservations and tracking shipping, but a wider-spread shift could be a dramatic, with packaged software largely disappearing and companies instead purchasing, assembling, and modifying components as needed to create specific business applications. Another growing trend in the software industry was pushed by the open source movement. Perhaps best known as the driving force behind the Linux operating system, open source has become a counter-intuitive business model for companies that distribute their products for free, generating revenues from associated training and services.

Dell

These are the companies to turn to if you are looking to purchase some computing power. The computer and software retail industry includes businesses that sell PCs, software, and computer peripherals to both the consumer and business markets. Some of these companies sell products mostly through brick-and-mortar stores while others rely primarily on catalog and Internet sales. The consumer PC and software market is dominated by well-known consumer electronics retail chains, such as Best Buy, CompUSA, and Circuit City. Other brick-and-mortar retailers serving consumers include such specialty chains as GameStop (video games), Fry's Electronics (PC hobbyists and gamers), and the retail store operations of computer manufacturer Apple. Consumers can also find products online through Newegg.com, PC Mall, and Systemax's TigerDirect unit. Serving primarily the business computing market are such giant distributors as CDW, Insight Enterprises, and PC Connection. Office products retailers such as Staples, Office Depot, and OfficeMax also sell a high volume of technology products to businesses. Once a specialty niche in the retail business, computer and software stores now face increasing competition from some of the largest department stores and discount chains. As consumers become more familiar with PCs and related technology, such chains as Wal-Mart, Target, and Costco are quickly becoming major channels through which computers are sold. Manufacturers are also putting pressure on the specialty stores through direct sales operations. Dell, a pioneer in the direct PC sales business, only sells its products through catalogs and the Internet, while Gateway sells its PCs through both retail chains and its direct sales operation.