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Computer Software Market Report
Key Note Publications Ltd, Jan 2001
In 2000, the UK computer software market was worth £7bn. Between 1999 and 2000, sales grew by 8.4%, with growth in 2001 expected to accelerate to 11.9%.
Two main classes of software are studied in this report: system software, (including infrastructure systems software [ISS] and applications tools) software, and application software. Application software and applications tools have been the best performing sectors of the market, reflecting the decline in sales of operating systems which has held back growth in the infrastructure systems software sector.
The performance of the computer software market has been strongly influenced by spending to offset the anticipated effects of the `Millennium bug'. Software sales grew strongly in 1998 and 1999 in response to heavy spending on new software to deal with `year 2000'-related problems. However, in 2000, the rate of growth declined as `Millennium bug' spending tailed off. The market has also been adversely impacted by software piracy with almost £580m lost to the industry in 2000.
The growth of the Internet and e-business, and the constant pressure on companies to become more competitive, has led to strong growth in particular sectors of the software market. Products such as analytical software, enterprise system management software and serverware have all grown strongly in response to the rise of the Internet and commercial pressures. The growth of the Web has also brought into existence the Application Service Provider (ASP) model of operation, which is fundamentally affecting how software companies distribute their software and the business models of the publishers.
In the future, applications software and applications tools will see the fastest growth overall, while ISS software spending will continue to decline as proprietary, mainframe software gives way to more open software. Another likely trend is that the software industry will consolidate, as size gives the market leaders a clear commercial advantage over their smaller rivals. At the same time, ASP will become firmly established, shifting the software market from a product market to a services market.
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