Global spending on software will rise steadily over the next four years, even as businesses look increasingly to the delivery of traditional software functionality via online services.
According to IDC, global software revenues rose 6.2% in 2004 to hit $189 billion. The analyst group expects the growth rate to creep up to 6.9% between now and 2008 when annual spend is predicted to total $249 billion.
In 2003, IBM, Microsoft, Oracle, SAP and Computer Associates were responsible for over one-third of the worldwide revenue. As the industry matures, smaller concerns will play a greater part in growth. IDC believes successful vendors will use strategies such as the adoption of usage-based pricing models, the establishment of software-as-a-service, the exploitation of niche markets and the formation of ‘solution coalitions'.
Despite the software industry's recovery from its first decline, IDC analyst Tony Picardi says that the growth levels of the nineties will not return. "Issues of complexity, security and software quality, as well as a myriad of changing macroeconomic factors all pose continuing challenges to industry growth," he observes.