Long before the term “Open Source” was used, software was developed by loose associations of programmers and freely exchanged. Starting in the early 1950's, organizations such as SHARE and DECUS developed much of the software that computer hardware companies bundled with their hardware offerings. At that time computer companies were in the hardware business; anything that reduced software cost and made more programs available made the hardware companies more competitive.

This model changed in the 1960's. In 1965 ADR developed the first licensed software product independent of a hardware company. ADR was competing against a free IBM package originally developed by IBM customers. ADR patented their software in 1968. To stop sharing of their program, they provided it under an equipment lease in which payment was spread over the lifetime of the product. ADR thus retained ownership and could control resale and reuse.

In 1969 the US Department of Justice charged IBM with destroying businesses by bundling free software with IBM hardware. As a result of this suit, IBM unbundled its software; that is, software became independent products separate from hardware.

In 1968 Informatics introduced the first commercial killer-app and rapidly established the concept of the software product, the software company, and very high rates of return. Informatics developed the perpetual license which is now standard throughout the computer industry, wherein ownership is never transferred to the customer.