The market for packaged software in China grew 19.5% last year and reach $1.98bn (£1.27bn) and will continue to grow over the next few years, according to figures released by IDC.
The steady growth of the economy, rapid improvement in IT infrastructure and increased demand from private enterprises will see the market grow at a annual rate of 25.8% up to 2007, when it is estimated to be worth $6.24bn (£4bn).
Application software is the largest segment of the market, accounting for 48.4% of all packaged software sold in China last year. It is also the fastest-growing segment, expected to grow at a rate of 28.4% over the next five years. Back-office applications make up the majority of this market segment, IDC said.
Infrastructure software such as system infrastructure, network management and security software accounted for 31.4% of the market, but sales only grew by 8.5% last year, mainly because a cut in spending in the telecoms industry. Within this sector, storage software is expected to grow at a rate of 36.2%.
Application development software accounted for the remaining 20.1% of the market, key areas being information and data management software, middleware and application development platforms.
The security software market performed poorly, with most users in China preferring hardware-based security solutions. But several factors will drive this market in future, said IDC, including greater awareness of security needs, upcoming e-government projects, passing of network security laws, increasing demand from the mid-range business market and Beijing's hosting of the 2008 Olympic Games.