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Software Industry Survey

•  Run in Finland since 1997

•  2014 marks the 17th survey

•  The longest running software

industry survey in the world

•  Provides annual overview of the

industry

(3)

Survey in the 2014

•  Data collection in early summer

•  Covers the whole software industry

–  Product and services firms

–  In 2014, 293 full and 99 partial

responses this far

•  Cooperating universities

–  University of Jyväskylä and Aalto University

(4)

Summary of results 2014

26.6.2014, Eteläranta 10

Eetu Luoma, University of Jyväskylä Mikko Rönkkö, Aalto University

(5)

Contents

•  Overview of the Finnish Software and IT Services Sector

•  General Results of the Software Industry Survey 2014

–  Growth curves for SMEs and large firms

–  International revenues

–  Platforms used in software development

•  Changing research theme: Marketing and sales

(6)

Overview of the Finnish Software and

IT Services Sector

Eetu Luoma, Hanna Kinnunen, Marko Tanskanen University of Jyväskylä

(7)

World software markets

•  The worldwide software market grew 5.5% in 2013 (IDC)

–  Higher than 4.3% in 2012. Positive scenario continues.

•  Key trends: Cloud computing and Software- as-a-Service (SaaS),

Data management and analytics, Collaboration and Content applications

•  Consolidation of the industry continues, platforms and

(8)

The Finnish Software and IT services grew

11.4% in 2013

•  Statistics Finland estimates

that the Finnish software and IT services sector grew 11.4% in 2013. •  Trend continues: Q1 this year +15.4% •  Estimate for GDP in 2013: -1.4% compared to 2012 7.9%   -­‐9.4%   4.4%   5.2%   8.4%   11.4%   Growth  of  Finnish  so7ware  and  IT  services  industry  

Re ve nu e,  B  E ur o  

(9)

IT services companies in Helsinki Stock

Exchange had varied results

Company   Revenue  2013   Revenue  

change   Op.  income  change      Changes  in  business  

QPR   8,688,000   -­‐6.8%   -­‐2.7%      Increase  in  SaaS  

Affecto   132,896,000   -­‐0.4%   -­‐1.6%      From  projects  to  conGnuous  services   Solteq   38,100,000   -­‐2.3%   -­‐1.4%      From  projects  to  conGnuous  services   SSH  CommunicaGons  Security   13,300,000   11.8%   -­‐7.7%  

Elektrobit   199,281,000   14.6%   3.5%      New  profitable  business:  AutomoGve   Basware   123,349,000   8.5%   -­‐4.6%      Increase  in  SaaS  

Comptel   82,668,000   0.3%   25.2%      Growth  from  applicaGons  

F-­‐secure   155,100,000   -­‐1.3%   4.6%      Several  new  product  releases:  Cloud  and  SaaS.  

Digia   99,740,000   -­‐0.7%   -­‐3.7%      From  projects  to  products.  Growth  from  Qt  ecosystem   Tieto   1,676,300,000   -­‐8.2%   1.8%      Sold  BUs,  Increase  in  Cloud  and  SaaS  

Innofactor   32,685,000   73.7%   3.6%      Growth  from  Microso7  ecosystem   Tecnotree   73,900,000   0.7%   19.1%      From  projects  to  products  

Ixonos   33,397,000   -­‐41.3%   1.2%      Reorganizes  to  serve  selected  segments  

•  Overall, the revenues decreased -4.6% from 2012

(10)

Games industry growing rapidly

Highlights •  CAGR 2004-2013: 39.5% •  Estimated 2200 employees in Finland

•  Most of the revenue is

exports Source:  Neogames  

(11)

Conclusions and interpretations

•  Overall, the Finnish software and IT services industry grew

11.4% in 2013, driven by SMEs

•  The public listed companies had varied results

–  Reports on changes of customer demand, due to economic cycles

–  Reports on reacting on changes in demand and trends

•  Games industry growing rapidly

–  Driven by a few star performers, Rapidly changing business

(12)

General Results of the Software

Industry Survey 2014

Eetu Luoma, University of Jyväskylä Mikko Rönkkö, Aalto University

(13)

Recap from last year:

Outlooks for 2013 are conservative

-5 0 5 10 15 20 G ro w th o f re ve n u e , % 2008 2009 2010 2011 2012 2013 Year Realized growth Revenue < 1Meur Revenue 1-10Meur Revenue >10Meur Expected growth Revenue < 1Meur Revenue 1-10Meur Revenue >10Meur

(14)

Firm level growth in decline. For SMEs,

growth rate matches the worldwide market

0 5 10 15 20 G ro w th o f re ve n u e , % 2010 2011 2012 2013 2014 Year Realized growth Revenue < 1Meur Revenue 1-10Meur Revenue >10Meur Expected growth Revenue < 1Meur Revenue 1-10Meur Revenue >10Meur

(15)

No changes in sources of revenue

3% 3% 3% 15% 15% 15% 2% 2% 2% 8% 8% 8% 33% 33% 33% 3% 3% 3% 11% 11% 11% 8% 8% 8% 6% 6% 6% 11% 11% 11%

3rd party software licenses

3rd party software licenses 3rd party software licenses

ASP and SaaS

ASP and SaaS ASP and SaaS

Content and ads

Content and ads Content and ads

Deployment project Deployment project Deployment project Development project Development project Development project Hardware Hardware Hardware Maintenance Maintenance Maintenance

Not software related

Not software related Not software related

Other software related

Other software related Other software related

Own software licenses

Own software licenses Own software licenses

Sources of revenue Sources of revenue Sources of revenue N=321 N=321 N=321 Survey  2013:   Survey  2014:  

(16)

Over half of the firms have international

revenues; Growth has stabilized

20% 20% 20% 40% 40% 40% 60% 60% 60% 80% 80% 80% 100% 100% 100% 2008 2008 2008 2009 2009 2009 2010 2010 2010 2011 2011 2011 Year Year Year

Significant international revenue

Significant international revenue Significant international revenue

Minor international operations

Minor international operations Minor international operations

Plans to internationalize

Plans to internationalize Plans to internationalize

Not currently relevant

Not currently relevant Not currently relevant

Have previously had

Have previously had Have previously had

N=2216 N=2216 N=2216 20% 40% 60% 80% 100% 2010 2011 2012 2013 Year

Significant international revenue Minor international operations Plans to internationalize Not currently relevant Have previously had

N=1502

(17)

Nordic Countries and Western Europe

remains important areas for exports

89 89 89 86 86 86 48 48 48 47 47 47 12 12 12 26 26 26 10 10 10 13 13 13 11 11 11 8 8 8 0 0 0 20 20 20 40 40 40 60 60 60 80 80 80 100 100 100 Number of firms N umb er of f irms Number of firms Nordic Countries Nordic Countries Nordic Countries West Europe West Europe West Europe

East Europe and Russia

East Europe and Russia East Europe and Russia

North America

North America North America

Mid and South America

Mid and South America Mid and South America

East Asia East Asia East Asia South Asia South Asia South Asia South Pasific South Pasific South Pasific Middle East Middle East Middle East Africa Africa Africa N=169 N=169 N=169 85 73 40 40 10 20 7 13 11 7 0 20 40 60 80 N u mb e r o f firms Nordic Countries West Europe

East Europe and Russia North America

Mid and South America East Asia South Asia South Pasific Middle East Africa N=135 Survey  2013:   Survey  2014:  

(18)

Conclusions and interpretations

•  Survey results in line with official statistics; confirm that SMEs

drive the growth of the industry

–  Growth rates are generally down

–  Outlooks for 2014 conservative, but stable.

•  Large number of companies capable of attaining international

revenue, but the growth has stabilized

–  Internationalization is a slow process for “traditional” software businesses

(19)

Cloud practically as important for software

development as traditional server platforms*

•  Finnish software firms adopt

cloud computing platforms for software development with an accelerated pace**

•  Use of social media platforms

(like Facebook) for software development decreased from 13.5% in 2012.

•  (Use of mobile platforms

incomparable to previous years).

* We emphasize, that this does not include use of a platform for other purposes. For example, a software firm may have a cloud-based email service, but it does not necessarily develop software for cloud platforms.

(20)

Cloud is used both for cost efficiency and new

business opportunities

•  SaaS firms exploit new

business opportunities.

•  Development service firms

use cloud, most likely, to decrease operational costs.

•  Comprehensive and complex

cloud offering demand for new capabilities and roles,

such as “cloud brokers”.

2% 19% 2% 9% 31% 1% 11% 8% 5%

14% 3rd party software licenses

ASP and SaaS Content and ads Deployment project Development project Hardware

Maintenance Not software related Other software related Own software licenses

N=152

Sources  of  revenue  by  companies     developing  so7ware  with  cloud  pla`orms:    

(21)

Mobile is a close race of three major

platforms, Windows Phone slowly closing iOS

•  Android, iOS and Windows

Phone all grew, no change in order*

•  Former Nokia platforms

Symbian and Meego

discontinued; Qt platform now developed by Digia still live and well.**

* Figures for 2012 are 20.0% (Android), 18.5% (iOS) and 14.8% (Windows Phone) ** Digia reports increase in revenues from Qt business to be up by 25% globally in 2013.

(22)

Conclusions and interpretations

•  Mobile is a game of three (Android, iOS, Windows Phone). This

reduces the multi-homing costs for Finnish app developers.

–  Application store sales keep increasing, which attracts more developers

•  Finnish software firms have adopted cloud computing platforms

quickly. Cloud is used for cost efficiency and new business opportunities.

•  Also, more than one third (38%) of respondents offer platform or

(23)

Focus on software firms’ flexibility

(24)

Why flexibility?

•  Research has demonstrated positive impact of flexibility to

company performance under economic cycles.

•  Wildly successful firms like Apple and Amazon have been able to

enter adjacent market or create new markets. Applying existing resources to new purposes and organizing to new activities

(25)

Finnish software companies assess themselves

as flexible in resources and adaptability

Our products/services are easily modifiable

We are very fast in creating new

Modifying our products/services to new

We are unable to utilize the resources of our

We are able to organize into new activities

We can organize into new activities with our markets creates significant costs.

to new markets.

quickly.

company fast enough to respond to products/services to new segments.

partners quickly. 2% 10% 13% 45% 29% 4% 24% 19% 36% 16% 13% 44% 21% 17% 5% 13% 49% 26% 10% 2% 2% 9% 17% 53% 20% 1% 9% 15% 53% 23%

(26)

Flexibility is associated with platforms and

experimenting approach

We experiment with different business models

We collect information about the customer needs often We use cloud computing for software development

We offer platform or interface to other companies for software development We offer standardized products

We are a new / young as a company

✖ ✔

✖ Not  associated  with  flexibility   ✔ To  some  extent  associated   Highly  associated  

(27)

Conclusions and interpretations

•  The software companies which provide platforms or interfaces to

other firms for software development report more flexibility than companies on average.

•  The software companies which embrace experimenting approach

to developing business report more flexibility than companies on average.

(28)

Contact information

•  http://www.softwareindustrysurvey.fi

Eetu Luoma, University of Jyväskylä

eetu.luoma@jyu.fi; +358 40 805 4291

Mikko Rönkkö, Aalto University

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