Software Industry Report

Spending in the software market now exceeds hundreds of billions of dollars, focusing heavily on AI-related projects, including e-mail and authoring. The market is expected to remain on a remarkable growth trajectory worldwide.

Revenue in the software sector is forecast to see a steady compound annual growth rate (CAGR) of 5.01% through 2029. This growth is expected to significantly increase market volume, reaching $896.20 billion by 2029. The United States is predicted to generate the highest revenue in the space as a dominant leader in both tech startup companies and cloud computing services.

Market Segmentation

By enterprise, the software market is segmented into Large Enterprises and Small and Midsize Businesses.

By vertical, it is segmented by IT & Telecom, Banking, Financial Services and Insurance (BFSI), E-commerce, and Others.

By deployment, the segments include On-premises and Cloud.

By type, the segments include Productivity Software and Application Software.

KEY MARKET TRENDS

There are several reasons that the software sector will continue to see more opportunities to innovate, expand, and hire. Among these reasons are interest rate cuts leading to cheaper borrowing costs, increased activity from venture capital firms following years of decline, understaffed tech companies that need to add more talent to avoid losing overworked existing talent, and the need for companies to improve efficiencies while also cutting costs.

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An ongoing need for new and evolving technology in the following areas is a key driver of deal momentum in the software market:

• Artificial intelligence (AI)
• Machine learning
• Open source software
• Business-oriented software solutions
• Cybersecurity
• Intelligence data
• Data migration and data integrity
• Cloud & edge computing
• Green-tech
• Sustainability software
• Expansion of the Internet of Things (IoT)
• Quantum computing
• Edge computing
• Biometric authentication
• Virtual classrooms

M&A

The software industry offers plenty of opportunities for growth and strategic M&A consolidations.

M&A deals in the software sector include both large-scale transactions and smaller, strategic acquisitions that play a vital role, especially in the artificial intelligence space. Artificial intelligence is becoming a bigger part of more M&A software deals as more companies are seeing ways to become more innovative and find ways to incorporate AI in daily operations.

Companies of small and medium sizes that offer new, proprietary technologies are in high demand. Investors are also actively looking for companies that are leaders in vertical market niches.

Another reason for optimism for M&A in the software sector is that private equity firms are still sitting on capital that needs to be deployed during a time of pent up demand across various software sub-sectors.

Additionally, sellers who have been hesitant to make a move and are waiting for improvement in market conditions are now feeling more comfortable moving forward with pursuing M&A opportunities.

The market is expected to remain active as companies need to stay competitive in a rapidly evolving sector. Plenty of exciting opportunities can be expected for strategic acquisitions in a continually growing sector.

Our Recent Success Stories in the Sector

Some of Benchmark International’s more recent successful deals in the software space include:

• The sale of Push Technologies, SL to Cendyn Group, LLC (Backed by Accel-KKR)
• The transaction between JDI Ventures, Inc. d/b/a Peak Performance Solutions and The Brydon Group
• The acquisition of Mission Data, LLC by Growth Acceleration Partners
• The sale of Blue Wave Capital and Consulting, LLC to Pelican Energy Partners, LP
• The deal between Epic Software (CDM Group, LLC) and Aubrant, LLC
• The transaction between Asolva, Inc. and Harris Computer Systems
• The sale of NimbusPoint Consulting Limited to Capficiency Private Equity Group
• The deal between Absoft Limited and Applexus Technologies Inc.
• The purchase of ARC Technology Limited by Software Circle PLC
• The sale of MyKnowledgeMap Limited to Everfield UK LTD
• The transaction between Xanalys LTD and Harris Software-Constellation
• The deal between Blue Octopus HR & Recruitment Limited and Iris Software Group
• The purchase of Mirage Computer Systems GMBH by Unaric Holding Limited
• The transaction between Level Telematics Limited and Banyan Software, Inc.

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