Software sales to outpace PC growth

While PC shipments are expected to begin a faltering recovery next year, packaged software sales will initiate a period of slow to moderate growth, according to IDC.

The analyst said yesterday that sales of packaged software would enter a five-year period of growth in 2003, generating compound annual growth rates (CAGR) of 10% to 12% by 2006.

That compares to an IDC report last month predicting just 1.1% annual growth in PC sales this year, to 135 million units, and 4.8% growth next year. IDC revised these estimates down, from 4.7% and 11% respectively.

IDC said it did not expect to see a significant recovery in PC sales until both consumer and business demand picks up. The analyst said this might not happen until the middle of 2003.

However, IDC senior vice president of global software Tony Picardi said the analyst is more optimistic about the short-term future of boxed software sales. "A slow recovery will begin in late 2002, and we are optimistic about growth opportunities moving forward," he said.

Applications will remain the strongest and largest market in terms of revenue, growing to $131bn by 2006. Application development and deployment will be the fastest growing markets with CAGR of 11.5%, exceeding system infrastructure and applications.

Sales growth in North America, Western Europe, Asia Pacific and the rest of the world will remain steady, IDC said, with no-one region growing more rapidly than the other.

Striking a note of caution, though, was Credit Suisse First Boston (CSFB). In a separate research note, the financial analyst predicted mid-single-digit growth in software spending through 2005. CSFB noted demand for enterprise software has deteriorated beyond the usual summer softness, driven by weakening demand in Europe.

IDC reported the four top-ranked vendors in the worldwide software market in terms of revenue for 2001 and 2002 are Redmond, Washington-based Microsoft Corp, IBM and Redwood Shores, California-based Oracle Corp with Waldorf, Germany-based SAP AG knocking Islandia, New York-based Computer Associates International Inc out of fourth position.

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