UK software firms to suffer during downturn, study says

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UK software firms to suffer during downturn, study says

Warwick Ashford

A major shake-up of the UK's software market is 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.





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