This paper presents the results of a study of how software process and software process improvement (SPI) is applied in actual practice in the software industry using the indigenous Irish software product industry as a test-bed. The study used the grounded theory methodology to produce a theory, grounded in the field data, that explains how software processes are formed and evolve and when and why SPI is undertaken. Our research found that SPI programmes are implemented reactively and many software managers are reluctant to implement SPI best practice models because of the associated costs.