Global software sales are expected to grow at a modest rate in 2003, according to International Data Corp.
The market research firm is forecasting worldwide software revenue will increase 6.3 per cent this year to $183.1-billion (U.S.).
"It's a little bit of a recovery," said Anthony Picardi, a software analyst at the Framington, Mass.-based company. "There isn't going to be one killer app [application] that's going to lead software."
IDC recently reduced its 2002 global forecast to $172.3-billion, a marginal increase of 0.8 per cent, compared with 2001. This is because worldwide spending on information technology over all was expected to shrink 2.3 per cent to $875-billion, according to IDC.
In Canada, software revenue fell 9.1 per cent in 2001, and for 2002 it was expected to increase 3.2 per cent to $6.14-billion (Canadian), according to IDC Canada Ltd. However, the research firm expects the 2002 growth rate might actually end up at about 1.5 per cent. It is predicting the sector will perform better this year with software sales growing 6 to 6.5 per cent.
It's a far cry from the 20-per-cent growth rates enjoyed during the Internet boom years, but at least "the worst is behind us," said Alister Sutherland, a software analyst at IDC Canada in Toronto.
Analysts had predicted a recovery in the second half of 2002, but that has not materialized and they have had to reduce their targets.
"It's been an environment where things haven't picked up to the extent that might have been hoped for earlier on," said Warren Shiau, a software analyst at IDC Canada. "A lot of that is due to where economic strength in America is coming from or some factors specific to Canada.
"We really don't have a broad-based products and services recovery in the [Canadian] economy and that . . . affects spending on software," Mr. Shiau said.
Software executives aren't expecting a broad improvement either.
"I don't think spending on IT is growing at any discernible rate," said Philip Deck, chief executive officer at Waterloo, Ont.-based MKS Inc., a maker of tools that allow software developers to manage and change their source codes.
In today's spending environment, software firms will grow two ways: by winning more business from existing customers who are expanding, or by offering applications that make their employees more productive, he said.
After a period of intense software consumption during the technology bubble, companies are now trying to figure out how to make it all work together with their existing systems, Mr. Picardi said. IDC is betting the five hot areas that will lead the growth include applications for:
retrieving, distributing and managing content, which lower costs and increase productivity;
security, identification and authentification;
automation and integration of business processes; and
hardware and network utilization and management.