Data collected by the Society of IT Management (Socitm) for its latest Index of Application Software Index highlights significantly increased concentration in the market for application software over the last year.
In some key application areas a small number of companies now dominate the market through aggressive marketing and acquisitions. These include Anite, Northgate Information Systems, ESRI, Capita, Civica and Mapinfo. Civica’s acquisition of Flare over the last year has led to an immediate rise in its market share of Environmental Health and Trading Standards software from 6% to 43%. Similarly, Mapinfo’s acquisition of South Bank Systems has extended its reach into technical services areas such as waste disposal and street cleansing.
Concentration in the market is being encouraged by the trend for in-house software to be phased out by local authorities as more applications become available on the market. For example, fewer than 5% of the sample now has in-house developed software for their general ledger (16% in 2000, 7% in 2005) and just 8% have in house developed HR systems (19% in 1999, 9% in 2005). However, in-house developed software is still important for less well-established applications like committee administration (40%) and waste management (33%).
The main suppliers now dominate, particularly for applications specific to local government. After excluding in house systems, two companies supply 86% of local authorities with Client Systems for Social Services, four account for 91% of Council Tax systems and four account for 90% of Electoral Registration systems. With regard to non-specific applications there is more choice – for example seven companies supply 75% of General Ledger software and a total of 23 suppliers have at least two local authority sites.
The information about the software market is culled from Socitm’s eighth annual survey of Application Software used by local authorities, published on 24 July. Details of software used by 353 local authorities - 80% of the total in England, Wales, Scotland and Northern Ireland are provided, alongside information for 35 fire authorities, 23 police forces and 33 housing associations.
The survey covers the software used in 77 function areas including financial, people and property systems as well as specialist systems for front-line services such as environmental health, libraries, social services and housing management. Also included are systems to support internal management processes such as document management, CRM, content management, and virus detection, as well as specialist applications used by Fire and Police.
The Index provides a comprehensive picture of the software used by each council including supplier, operating system, installation and planned replacement dates (see sample of General Ledger table below). It also includes tables showing the relative market share (in terms of number of installations) of each supplier and the levels of user satisfaction with suppliers and their products (see sample for Council Tax below).
The Index includes contact and product details for over one hundred of the main software suppliers to local government. The many changes in suppliers’ names over the past twelve months is a reflection of the scale of mergers, takeovers and new entrants to the market over the last year.
Analysis of the data between the first Software Index in 1999 and the current 2006 edition reveals some other interesting trends:
In newer areas it is apparent that market concentration is still at an early stage. For example the four companies with the largest number of customers account for just 37% of the local authority market for Content Management Software. This is an increase from 31% in 2005 so it appears that a trend, similar to that of the more established application areas, is taking place.
The data clearly shows the move away from mainframe configurations towards Windows operating systems. For example, General Ledger systems in 2000 were run on mainframes in 43% of authorities, Unix in 50% and Windows in 7%. Today the equivalent figures are 6%, 51% and 43% respectively. For applications more recently automated, the trend to Windows is even more noticeable – 88% of Licensing systems run under Windows with the remainder under Unix operating systems.
According to Index editor Brian Westcott, the information it presents is extremely valuable for local authorities, particularly when they are considering replacing software or developing ICT applications in new areas. ‘They are able to see who are the main suppliers, their relative market shares and the satisfaction levels of existing users.’ he says. ‘They can also pick out authorities as reference sites or to contact for more information. Suppliers use it to check the market shares of their competitors and identify potential sales from the age of software and planned replacement dates.’
The Socitm Index of Application Software costs £250 +VAT for commercial organisations (Socitm subscriber members £150) or £100 + VAT for not-for-profit and public sector organisations. It can be ordered from the Socitm website.