This chapter studies the evolution of the software industry in the UK. It describes the role of demand factors in the process of vertical disintegration and distinguishes between the product and service segments of the software market. The chapter reviews the changing need for software in the growth of the global software industry. It highlights the role of a narrow demand base in the emergence of a market for traded software in the UK. The chapter examines the supply side of the software market. It also examines the impact of the demand- and supply-side factors on the nature of competition, competitive advantage and barriers to growth for firms in the UK software sector. The absence of a large commodity software market has meant a less radical impact of the software industry upon industrial growth in the UK economy.