Tough year ahead for application software vendors as Covid-19 impacts licensing

Application software companies will have a tough 2020 as the Covid-19 pandemic slows the licensing of software products.

Our latest report – Covid-19 Impact on Application Software – reveals that the continued fallout from the pandemic will undermine companies’ and industries’ propensity to buy, delay product launches, and transform the way software applications are developed and written.

Application software companies face a sterile year, with latest product releases struggling to escape Covid-19’s cloying grasp. The spring software product launch season will be less dynamic than usual because of user and market uncertainty. Only the collaboration tools market epitomised by Slack and Zoom will generate any fizz.

Even Microsoft, which recently reported strong third-quarter results and ranks second on the thematic screen of GlobalData’s application software sector scorecard, has warned of a transactional licensing slowdown from small to medium-sized businesses.

It is still early days and the true economic impact of Covid-19 has yet to hit software companies but, when it does, they will protect their profitability by slowing hiring and reducing discretionary spending.

The areas likely to generate revenues for software companies are applications that can support, monitor and manage the widespread shift to home-working. Specific applications include collaboration tools, human resources (HR) management, document management, IT workflow management, and risk management.

Low-code and no-code products, which are being used by organisations to respond to the public health challenges the pandemic has created, will also be in demand.

A large part of the buzz in software is generated by product launches, which are typically timed to coincide with physical conferences.

Although vendors have made noises about turning physical events into virtual ones, the rhythm of these launches has been disrupted. Offers and free trials are only a short-term fix. Software companies’ raison d’etre is to develop, launch and sell new applications.

David Bicknell is principal analyst in the Thematic Research Team at GlobalData