Software Industry To Remain Resilient Through The Crisis

In the first quarter of 2020, experts anticipated growth of six to nine percent in the global software market before the news of COVID-19 broke out. However, since a number of major corporations are facing hardship and the demand for products across sectors have declined, revised forecasts are now eyeing flat to negative 7 percent growth together with increased demand uncertainty.

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Although the figures present a deterioration, many are still confident that the software industry will thrive regardless of a possible economic recession.

The fast-paced acclimation of the world to online collaboration tools, video-conferencing apps, and IT services during the lockdown have led to expansion in some segments of the software market. Medium and large-sized companies have been spending the most on software compared to small businesses. They are investing in certain apps and software that they deem a necessity.

On the financial side, since the outbreak started after the fourth quarter of last year, most agreements were already wrapped up with upfront payments secured. Software companies benefitted from the timing of their customers’ annual budget cycle vis a vis the start of the crisis. Furthermore, given software licensing frequently involves recurring payments, most contracts were already set up to weather a temporary macro storm.

Notably, however, some vendors who rely on one-off payments for software and application licensing are in a tough spot. They can face liquidity challenges and with the uncertainty of landing future revenue, they will not be able to invest in operations or pursue growth initiatives.

Looking at operational structures, software companies were some of the first organizations to adapt to the “new normal” given they are not as reliant on physical attendance and the large majority of their employees were already working remotely to some degree.