Software industry analysis is the comprehensive financial analysis and evaluation of the global software market. It involves analyzing quantitative statistical data such as the size of a particular market and the market share for specific software companies. The analysis can be conducted by a variety of corporate entities, including business corporations and not-for-profit organizations. Business in general is heavily dependent on computer software to perform a variety of daily functions and as such, the software industry is vast. Therefore, software industry analysis is a very important process for corporations that are involved in the global software market.
There are several areas that must be covered in software industry analysis, including analysis of software industry trends, market size, and sales statistics. It is also typically important to identify consumer demographics and the geographical scope of the analysis. Computer software applications, such as accounting and spreadsheet programs, are heavily used in this area of works. For example, a financial analyst might gather statistical data and implement the data in an existing spreadsheet, from which graphical representations of the data can be derived.
Industry trend analysis is an important component of software industry analysis because it enables an analyst to identify patterns of consumer behavior, from which future predictions can be made. Typically, this process involves reviewing quantitative historical data and using it to ascertain whether a business, product, or service is likely to be profitable in the future. For example, a software industry analyst might review historical trends within the music software sector prior to a product launch. Trend analysts typically use graphs and charts to aid them in the process.
Market size analysis involves reviewing quantitative data about a market size. In software industry analysis, market size analysis typically involves identifying the size of submarkets in the software industry. For example, word processing software and music software are two separate submarkets and, therefore, warrant separate market analysis. If a music software company is launching a new product, it would not make sense to analyze the market size for the word processing software sector. A governmental organization might conduct market size analysis for the entire software industry, typically in the aid of national statistics.
Sales statistical analysis is another fundamental component of software industry analysis. The data included within a sales analysis typically include monthly, quarterly or annual sales statistics. This type of analysis is important because it enables the analyst to establish whether a product or service has been commercially successful in its specific niche. If it is established that sales are declining for a specific product or service, this could be a factor in determining whether to develop and launch a potential product.