Information Technology Ecosystem Health and Performance

Innovation and Economic Growth

Article Snapshot


Marco Iansiti and Gregory L. Richards


Harvard Business School Working Paper, 2006


This paper looks at growth and competition in the information technology sectors like hardware, software and services.

Policy Relevance

Around 2000, the information technology sector (IT) entered a recession, and the United Stated Department of Justice entered into a consent decree with Microsoft. Today, competition and growth in the IT sector are very healthy.

Main Points

  • The recession is over, with IT showing strong gains in labor productivity, return on capital, and stock market value. Over 58% of all venture capital flows into IT, of that, software attaches 46%.


  • Software is a small part of the IT, a $23 billion market compared to $2 trillion overall.


  • Software platforms like operating systems (including Microsoft Windows or Linux) support many other players.  A platform offers tools or components that provide building blocks for others, especially software developers. 


  • The percentage of firms using more than one operating system grew from 41% in 1999 to over 50%. 


  • Software labor productivity grew about 13% since 2002.


  • Competition has taken off, serving servers (Apache), web browers (Firefox), music (iPod/iTunes), as well media players. Mobile devices proliferate. eBay, SalesForce, and Google have refocused the industry to web-based applications.

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