The Accenture 2008 Global Software Study: Key Industry Trends and Evolving Requirements for Achieving High Performance

Once upon a time, you knew where to find software. It came on a floppy disk and lived inside a computer. Software was never simple, but the landscape was more or less definable.

Given the industry’s history, can anyone claim to know its future? However, with a great deal of investigation—surveys, interviews, scrutiny of publically available information—a lot can be gleaned about where the industry is now and where it and its players are headed. This was the goal of an intensive research initiative by Accenture.

The broad mission was to identify the trends and events associated with high performance in the software segment of the electronics and high-tech industry and address the following questions: what capabilities, policies and priorities are most often associated with software companies that consistently outperform their peers; who are those “high-performance businesses”; and what are the characteristics of high performance that will propel them to continued success in the future?

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In the course of the survey, Accenture identified several big-picture events that affect the policies and fortunes of today’s software companies. Think of these in two contexts: global business changes and tectonic shifts in software demand.

Global Business Changes

From a macro perspective, the multi-polar world is business’ new reality—a global landscape characterized by more hubs of economic power and activity than ever before. In the multi-polar world, Western companies may compromise their effectiveness by viewing international business solely through an occidental prism.

Economic interdependence—across companies, countries and continents—is the watchword. As Western markets slow and their workforces age, software manufacturing—and hence capital—are migrating toward Asia and Eastern Europe. The primary driver of this shift is not so much labor as it is growing markets and the need to reduce risk by building and buying in multiple locations.

Consistent with the rise of the multi-polar world, the need for a globalized IT workforce is changing how companies develop and maintain software. Software development is moving offshore and the availability of software developers is declining in developed nations. Combined with the reality of aging North American and European work forces, finding needed bodies to handle development and support local operations is becoming a problem.

Lastly, shifting growth strategies are changing the industry. New markets (for example, small and medium-size enterprises and companies in emerging countries) are now critical for future profitable growth. Software manufacturers need new ideas, new products and new business models to compete effectively in these markets, and they’re unlikely to get there solely through mergers and acquisitions.

The New Nature of Software Demand

Demand for on-demand software is growing rapidly. Software as a service (SaaS) and cloud computing are two related paradigms that are defining the on-demand market:

• Software as a service (SaaS)—refers to applications provided by vendors in hosted or "leased" environments. The traditional software licensing model—master site license with ongoing upgrade revenues—is slowly losing ground. Although the economic downturn has increased the rate of on-demand adoption, SaaS as a standard practice is some distance away and is unlikely to overtake mainstream computing applications in the near future.
  
  
• Cloud computing—refers to information permanently stored in servers on the Internet and cached temporarily on client units such as computers, entertainment centers, monitors and so forth.

A key mission of the Accenture 2008 Global Software Study was to identify characteristics of high performance that are most relevant to software manufacturers. High performance refers to business behaviors that allow an organization to outperform its peers across economic and industry cycles and through generations of leadership.

Accenture was able to identify six characteristics which, in our view, best epitomize high performance in the software industry:

1. Adopt a portfolio management approach that aligns with market and business needs.
2. Understand and leverage partner ecosystems and the “power of the crowd.”
3. Have a clear go-to-market strategy.
4. Make the right acquisitions.
5. Install stellar leaders at the top.
6. Understand the requirements for competing in a multi-polar world.

Perhaps the clearest conclusion drawn by Accenture’s research is that high performance—the behaviors exhibited by companies that consistently and profitably outpace competitors—has unique implications for the software industry. Like most sectors, software developers seek to maintain equilibrium between profitable growth and rigorous efficiencies, and between global standardization and local flexibility.

However, software companies must also consider defining high performance in terms of how products are bundled, sold and distributed; and how future innovations mesh with the plans of almost every other industry—from appliances and automotive to telecommunications and transportation. For software manufacturers, high performance is clearly a question of balance.

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