The editor of Socitm's recent report "The index of application software" said the reduction in the number of suppliers was helping improve product quality.
The Socitm survey found that 10 suppliers now provide 80% of application software used by local government, compared to 12 in 2002.
"The impetus is coming from the suppliers," said independent consultant Brian Westcott, who edited the report. "Suppliers cannot afford to have three or four customers, so the larger suppliers are buying up the smaller ones.
"It is a good thing from the customers' perspective. We are not getting to the stage of monopoly. You need choice but you do not need 20 suppliers in one market - four or five is quite enough. This is making more money available to spend on research and development, which will improve systems and allow them to adapt."
The ongoing e-government programme has caused a rise in the use of customer relationship management software, the report found. Of the 339 local authorities, police and fire services surveyed, 114 were using CRM systems - more than double the number last year.
"CRM is one of the things councils are getting to develop e-government," Westcott said.
"Council staff have information about the public via the CRM system. There is not much difference between these systems and the private sector products, but there may be some adaptation."
Software procurement was also maturing, he said, improving the quality of products. "The process of tendering has been honed and is now used for purchasing most software, whereas before it was a bit hit and miss."