How Programmers Get Rich

By Alexander L. Taylor III.

Software designers make big profits but face stiffer competition lip

Exciting Career Opportunity: Make thousands or even millions of dollars in a fast-growing new industry by working out of your own home in your spare time." That sounds like one of those inflated advertisements for a job putting on mail-order labels or selling soap products door to door. Actually, it describes the way an eclectic group of individuals has capitalized on the popularity of the personal computer. By having the wit to develop programs that enable the machines to do a variety of tasks that users particularly want or need, stay-at-home software experts, many of them kids, are getting rich.

Les Freed, 29, a former TV technician, wrote a program called Crosstalk at his home in Woodstock, Ga., that allows different kinds of computers to communicate with one another. So far, its sales have reached $1 million. Jeff Gold of Saratoga, Calif, was only 15 when he created a program in his bedroom that solved the puzzle of Rubik's Cube. A thousand copies were sold before Gold, now 16, came up with a second winner: a program to prevent the theft of other programs. Gold is making $2,000 a week from the proceeds of both creations, and he recently bought himself a new $18,000 Datsun Turbo 280-ZX sports car. Jeff Garbers, 23, of Atlanta, who has a master's degree in computer science, has already made $25,000 from sales of his electronic appointment calendar, called Time Manager. Says he: "The potential gain in this industry is more substantial than any other I can think of. If you are successful, you can make a comfortable living. If you have something that really makes a big splash, you can make a great deal of money. Basically all you need is a warm place for your computer, and some Pepsis, and you are in business."

Of course, once the author has written his program, he usually has to find a software company willing to mass-produce and market it. The product is most often sold in the form of a floppy plastic disc the size of a 45-r.p.m. record on which the inventor's program is inscribed. All programs, however they are packaged and sold, are known as software. Programs written by independents have become the engine that drives the boom in personal computers. Unit sales of the $500-to-$12,000 desktop devices for office or home are expected to reach 1.1 million by the end of this year, according to International Data Corp., a research company. But instead of shopping around for a particular machine made by Atari or Apple, canny consumers are first looking for the programs that will perform the specific tasks they most want done, such as letter writing or financial planning. Then buyers select the brand of computer that can operate that software. This year software sales for personal computers are expected to reach $590 million, an 82% rise over the past two years. By 1986 sales could reach $2.2 billion.

Because computer manufacturers frequently have their hands full just building and selling the complex machines, they have often found it easier to leave the development of software to independent programmers. The actual task of writing and perfecting a program takes hundreds of hours and requires particular skills and insights that need not reside exclusively in big corporations. IBM, which produces all its own programs for large mainframe computers, established a company precedent when it decided to encourage outsiders to develop software for its successful Personal Computer.

IBM has received a "substantial number" of submissions from individuals since its computer was introduced in August 1981. Apple Computer Inc. gets 100 every week. For any programmer whose software hits it big, the profits can be enormous. Seymour I. Rubinstein, 48, who wrote WordStar, a program for editing text, notes that while it costs only about $25 to manufacture his software package, the programs retail for between $200 and $500.

The bench mark for success among independent programmers remains the record of Daniel Bricklin, a Harvard Business School graduate, and Robert Frankston, a computer scientist, who created VisiCalc in 1979. With nearly 400,000 copies sold for up to $495 apiece, VisiCalc, a financial-analysis system for businesses, remains the single bestselling piece of software. Like other successful programmers, Bricklin, 31, and Frankston, 33, have expanded their business well beyond the prototypical home attic where many first get their start. They reinvested the VisiCalc income (more than $11 million) in their new company, Software Arts, with headquarters in an old chocolate-factory building outside Boston; the number of employees has already grown from the original two to 80. The company's latest program, called TK!-Solver, is designed as a modern "tool kit" for solving mathematical problems like those confronted by engineers and chemists. Says S Bricklin: "You can't just start in the garage as easily any more. The price of entry is going up and up because people are expecting so much from these products."

Mitchell Kapor, a onetime Hartford, Conn., disc jockey and instructor of transcendental meditation, also started small. Kapor, 32, ran up $30,000 in debts while writing two business programs on his own time. After selling the rights to the programs for $1.2 million and piling up $500,000 more in royalties, he raised $1 million in venture capital to start Lotus Development Corp. in Cambridge, Mass. Its first major product, called 1-2-3, which runs only on IBM machines, is an elaborate business program that combines management information and graphing along with financial-analysis tools. 1-2-3 is expected to become a bestseller when it goes on the market next month at $495.

As experienced programmers like Kapor step up their output, and personal computers become more sophisticated, competition gets more intense. Apple's new Lisa computer, which will probably be introduced in January, will have many software functions built into the machine. That may limit the market for independent producers. Just as it is no longer possible to start a computer company in a garage, it is becoming harder to get rich writing software in an attic.

--By Alexander L. Taylor III. Reported by Barry Hillenbrand/Boston and Dick Thompson/San Francisco

With reporting by Barry Hillenbrand/Boston and Dick Thompson/San Francisco

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