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Software market to be hit hard by recession

Cliff Saran

The UK software market will be one of the worst hit sectors affected by the worldwide recession according to analyst Ovum.

Ovum reported that growth in the UK business software market dropped sharply in 2008 to 4.9% from 9.4% in 2007. Ovum estimated growth in the software market would shrink further in 2009 to 4% then bounce back slightly in 2010 before strengthening in 2011 and 2012 (but at a much slower pace than in 2006-07).

Ovum analyst Laurent Lachal said the dip was steeper than expected by most at the beginning of the year, because the UK has been one of the Western economies worst hit by the current world recession. He said, "The UK was one of the top three countries with the most planned IT budget decreases and the [least number of IT budget increases."

Lachal predicted that software providers would try to make their revenues less dependent on up-front licensing fees by relying more on maintenance revenues and by expanding into software as a service next year.

He predicted growth will be strongest in the information management sector (6.9% Compound Annual Growth Rate (CAGR) between 2008 and 2012, against 5.4% for the total UK software market) followed by systems infrastructure (5.5% CAGR) and business applications (4.7% CAGR). Lachal believed front-office applications will be less affected by the downturn than back-office ones. He said suppliers of specialised and vertical applications (eg, healthcare management systems and telecoms billing) will also feel the pinch less than others (except in areas that are vulnerable to recession, such as finance).


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