Software revenue to grow at CAGR of 7%

FRAMINGHAM: According to industry research leader, IDC, worldwide software revenue increased 5.1 percent to $178 billion in 2003 and is projected to rise to $189 billion in 2004. Over one-third of 2003 worldwide revenue was attributable to the five leading vendors: Microsoft, IBM, Oracle, SAP, and CA.

"Even though the software industry is recovering from its first-ever decline, the double-digit growth rates experienced in the last decade will not return in the foreseeable future," said Anthony Picardi, Senior Vice President of Global Software at IDC. "Issues of complexity, security, and software quality, as well as a myriad of changing macroeconomic factors all pose continuing challenges to industry growth."

Despite the challenges, IDC envisions steady growth to continue throughout the forecast period, with 2003-2008 compound annual growth rate (CAGR) of 6.9 percent. North America will remain the largest single market, accounting for slightly over one-half of worldwide packaged software consumption in 2003. Emerging markets in Asia and Central Europe will represent the fastest-growing opportunity, as well as the most demanding in terms of piracy, price, and political uncertainty.

As the software industry matures, growth will be driven by a host of smaller initiatives. IDC believes successful vendors will follow one or more strategies that include the implementation of usage-based software business modes, the enablement of software-as-service processes, the exploitation of niche clusters, and the formation of solution coalitions.

IDC expects Linux operating environments will continue to grow rapidly, propelling open source from its current seventh place to the fourth most-popular platform for software by the end of the forecast period.

"The widespread adoption of standards-based CyberSmart Computing will trigger a new round of applications in the industry. They will combine software, hardware, communications, and services in new ways. The limiting factor to opportunity realization is creativity," added Picardi.