The European software market grew by 15% year-on-year in 2022 despite economic turbulence and global instability. This represented the highest growth in the last 20 years, demonstrating the resiliency of demand for software in the face of major macroeconomic factors. This is according to the latest IDC's Worldwide Semiannual Software Tracker.
“The growth was primarily driven by increased price of software licenses (reflecting high inflation), customers locked in with existing partners, and contracts signed for longer time periods than in previous years. In 2023, however, the European software market is predicted to grow at “just” 11.7%, owing to general caution across all sectors,” says the Tracker.
Although the five-year compound annual growth rate (CAGR) for 2022–2027 is expected to be 12% for the European software market overall, three main areas are predicted to grow substantially faster.
Artificial intelligence platforms have an expected CAGR of 41% (reflecting a 16x increase from 2018 to 2027), followed by integration and orchestration middleware with a CAGR of 24% and software quality and life cycle tools with a CAGR of 20%.
In addition to those top 3 segments, the overall application development and deployment market (platform as a service) is forecast to post an 18% CAGR, making it a key spending driver. Before the COVID era, applications were European companies' leading software investment area.
Security software was central to companies' investment strategies during the pandemic and in 2022 when the number of DDOS attacks reached a record high. Healthy growth in security spending is expected throughout the forecast period, alongside an increasing demand for tools used by developers and integration specialists.
“Applications integration, business transactions, and automated decision-making - including predictive and prescriptive analytics - are growth areas now, and we expect demand to be stable or increasing for the next five years, underpinned by massive AI enablement,” says Tomas Doktor, research manager with IDC European Software.
“New capabilities and services based on generative AI will open opportunities for competitive differentiation and revenue growth for vendors that can offer those solutions with the appropriate security and governance.”
“IDC's Worldwide Semiannual Software Tracker provides an in-depth look into the competitive landscape and the market dynamics shaping the current and future direction of the global software industry. It tracks and details individual software vendors' historical business performance, and it forecasts the development of the industry 5 years into the future, across 54 geographies and 81 discrete software market segments. In addition, the tracker provides an understanding of the transition from traditional on-premises deployments to public cloud services by segmenting software revenue by deployment type, vendor, geography, and market segment,” adds Doktor.
“International Data Corporation (IDC) is a provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. With more than 1,300 analysts worldwide, IDC offers global, regional, and local expertise on technology, IT benchmarking and sourcing, and industry opportunities and trends in over 110 countries.”