Industry Analysis: Software & Services

The computer software and services industry is a maturing industry that offers a wide range of products and services such as personal computer operating systems, office productivity, network security applications, payroll processing services, information technology consulting and outsourcing services. New software is continually introduced to the market due to faster processing speeds and more efficient information technology and has become an integral part of daily operations for all facets of business.
There are two main segments of the software & services industry. One segment offers the primary product that consists of the standard software and services through a perpetual license agreement. Application software is used to accomplish an array of tasks with the computer. Database software and Office suite software which includes word processing and spreadsheets targets individual consumers while enterprise software such as Business Intelligence and Customer Relationship Management targets businesses for efficient operational use and growth. The other segment offers a customized combination of the product that will best fit the client’s needs. There is a highly competitive landscape in the industry. The 50 largest companies generate approximately 70 percent of revenue. Smaller software companies’ success is depends on developing new technology or targeting niche markets with effective marketing strategies. Many small companies align with larger well-known companies to market their products to reach a wider audience. Threat of new entrants is a real risk for existing companies but its sustenance in the industry is the determining factor on whether it will be an avid adversary. Newcomer companies must have technological and/or marketing edge in order to challenge larger rivals. If successful, they must