Software Revenues in 2022 Should Record Steady Increase

Software Revenues in 2022 Should Record Steady Increase

The IDC Worldwide Semiannual Software Tracker finds strong revenue results for the global software industry despite fears of inflation and the ongoing Russia-Ukraine war. Current geopolitical and macroeconomic turmoil is not expected to have a decisive impact on software growth as businesses push for more automation and digitalization to save costs and improve supply chains across the globe.

On a regional level, Europe, the Middle East, and Africa (EMEA) saw year-over-year revenue growth of 7.1% in current currency (USD) and 16.4% in constant currency in the first half of 2022. This represented a slower growth than the other global regions where the Americas reached 16.4% year-over-year growth in both current and constant USD and Asia/Pacific (including Japan) (APJ) saw a year-over-year increase of 10.6% in current currency and 18% in constant USD.

The main reason for a slower performance in EMEA lies in inflationary impacts, especially with the weakening of the euro to the dollar. This is evidenced in the much closer performance of EMEA in constant currency, which eliminates the effect of fluctuating exchange rates. Apart from the macroeconomic headwinds for EMEA, there was also a substantial year-over-year decline in Russian revenues - down 22.5% in current USD and down 18.5% in constant currency - which is expected to continue into the second half of the year as more companies pull out of Russia.

"Despite the many challenges facing the EMEA region, and Europe in particular, software demand remains strong," said Thomas Vavra, associate vice president of European Software Data & Analytics. "As was the case with Covid, adversity can be a driver of software spending as companies seek to remain competitive and agile.

According to the Software Tracker forecast, the EMEA region is expected to grow 8.9% year over year in 2023. This is about two percentage points lower than the Americas and three percentage points lower than APJ. The compound annual growth rate for the four-year period 2022-2026 is expected to reach 10.9%, which is just a half percentage point below the Americas. In terms of primary markets, Application Development & Deployment is expected to outperform Applications and System Infrastructure Software by a substantial margin and achieve a 17.1% CAGR across the observed period.

"In recent years, there has been a lot of spending on applications. Now, companies and organizations are seeking ways to maximize their performance and utility. As a result, we see a renewed focus on development and deployment tools and platforms such as Analytics and Business Intelligence, AI platforms, and data management," said Vavra.