A major shake-up of the UK'ssoftware marketis likely because of
overcrowding in a tougher economic climate, predicts analyst
Plimsoll.
A study has shown that UK's top 200 software companies control
69% of the market, up from 65% two years ago. This shows that the
bigger companies are in a headlong battle for market share, said
Plimsoll.
The study found 32% of those companies are showing no sales
increases, 22% are selling less than they were two years ago, 31%
had increased debts to maintain their position in the market, and
67.5% failed to increase sales at the same rate as their
investment.
This follows an earlier Plimsoll study of 2,000 companies that
showed the UK software maket was moving towards recession, with
one in five companies expected to close.
David Pattison, an analyst at Plimsoll said business leaders
borrowed heavily to fund investments in profitable years, but that
strategy has left some companies in severe financial danger due to
the turbulent economic climate of 2008.
"Some 44 companies (22%) have been awarded a danger rating in
this latest study as a result of their failing business strategy,"
he said.
The analyst said UK software companies should have a serious
rethink about their business models, but said it was likely that
jobs would be lost and projects cancelled in an attempt to control
spending.
It was also likely that management at some companies could be
changed to accelerate the cutback process, while other companies
would be sold to enable
market consolidation through acquisition, Plimsoll said.
However, Pattison said these conditions were ideal for the more
visionary leaders to steal some ground on their competitors by
buying up weakened companies.
"It is a great time to go on the offensive if you have the cash
reserves to do it without placing your own business in jeopardy,"
he said.