software

Intangible component of a computer system that imparts intelligence to otherwise useless pieces of metal and silicon called hardware. It consists of carefully-organized instructions and code, that programmers write in a language the hardware can understand and act upon. Software is divided commonly into two main categories: (1) System software: controls the basic (and invisible to the user) functions of a computer and comes usually preinstalled with the machine. See also BIOS and Operating System. (2) Application software: handles multitudes of common and specialized tasks a user wants to perform, such as accounting, communicating, data processing, word processing. It is often bought separately by the user, and is usually the reason people buy computers.

Young companies have to get the word out, but they also can go broke doing it. A decade ago, America Online spent so much money flooding the planet with free trial software that it tried to mask the bleeding by capitalizing those expenses on its balance sheet. (Regulators later nixed that accounting treatment, wiping out millions in accounting profits.) What percentage of sales should go toward marketing? As with sales, there is no one rule of thumb.

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