Report: 'Complexity Crisis' To Restrain Software Growth

"The recession knocked the wind out of software sales," said Dr. Anthony Picardi, IDC's senior vice president of software, in an interview Friday. While software sales began dropping in 2000, and were down to just one-half of one percentage point of growth in 2001, worldwide software revenue increased 5.1 percent, to $178 billion, in 2003, he said.

In the new IDC report, released Thursday, Picardi projects that software revenue will rise at an annual rate of 6.9 percent through 2008, when it will reach $189 billion in sales.

"Issues of complexity, security, and software quality, as well as a myriad of changing macroeconomic factors, all pose continuing challenges to industry growth," Picardi said, calling the complexity issue the real villain holding back software sales from returning to double-digit pre-recession growth rates. He foresees the complexity crisis continuing for five to ten years.

"The problem is--there's a lot of redundant data out there," he said. "And IT people want to automate it all." He noted that enterprise resource planning (ERP) and supply-chain applications need to be simplified, integrated, and automated. And that will take time.

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In addition, security issues will work to drag out the software-complexity predicament. "Everybody needs security," Picardi said. "But there is no one standard for security." Because virtually each software product has its own security feature, and there is a dearth of software-security standards, Picardi said security issues will continue to fuel the software-complexity crisis.

Picardi predicts that the North American software market will remain the largest single market in the world, accounting for just over one-half of all packaged-software consumption.

"Emerging markets in Asia and Central Europe will represent the fastest growing opportunity," he said. However, he cautioned that they will also be the most "demanding, in terms of piracy, price, and political uncertainty."

IDC found that more than one-third of 2003 global-software revenue was accounted for by--in order--Microsoft, IBM, Oracle, SAP, and Computer Associates. Going forward, software growth will be driven by many smaller initiatives, according to the IDC report. "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 cluster, and the formation of solution coalitions," IDC added.

And what about Linux? IDC expects the open-source operating system to continue its robust growth trajectory, climbing from its current place as the seventh most popular software platform to fourth place by 2008.