By: Bashyam Anant
For this Application Usage Management Benchmarking Report, we examined download activity based on completed software downloads between 2007 and 2010 in North America, Europe, Australia and New Zealand. Completed software downloads count the number of times the end customers downloaded software from ISVs and device manufacturers. It includes new purchases of software in addition to patches and upgrades of software as part of maintenance agreements. As such, these download statistics can be closely correlated with the ISV or manufacturer's software revenues from new and existing customers.
Chart 1: Total Download Share by Region
In Chart 1, we note that the share of total downloads between North America, Europe and Australia have stayed largely stable between 2007 and 2010. So, a first point to note is that at a regional level, the global recession did not work to any specific region's advantage or disadvantage – all shared relatively equally in its impact.
Chart 2: Growth in Completed Downloads by Region
In Chart 2, we show the trend with year over year growth in completed downloads in North America, Europe and Australia. Compared to North America, the variability in download activity year over year in Europe is lower. Specifically, in 2008 Europe grew only by 6% versus 20% for North America and 26% in Australia and New Zealand, while in 2010, Europe dropped only by 12% versus 17% for North America; Australia was back in positive territory with 3% growth. Thus, while Australia and North America tend to show relatively strong growth in times of economic growth, the corollary that they demonstrate relatively significant declines during recessionary times is also true. Thus, Europe appears to be a more stable region for software ISV's, despite upticks and downticks in the economy.
Drilling down into the software download activities in Europe, however, reveals a more complicated picture. In Chart 3 below, we show the trend with respect to share of downloads by sub-region in Europe. Between 2007 and 2010, Eastern Europe and Southern Europe grew their share of European downloads from 16% in 2007 to 26% in 2010. This came primarily at the expense of Northern Europe which lost share during the same period, from 36% in 2007 down to 23% in 2010. Thus not surprisingly, while Europe as a whole appears more buffeted from upturns and downturns in the economy, certain subregions in Europe are faring better than others. Countries in Eastern Europe have export restrictions from the US Department of Commerce- as a result, US-based ISVs and device manufacturers have to pay closer attention to software downloads arising in this region and ensure that appropriate compliance checks are in place. See Q1 2011 Application Usage Management Benchmarking Report for more on the export compliance topic.
Chart 3: Share of Downloads by Sub-Region
Moreover, not surprisingly, even within European subregions, certain countries dominate in terms of software download activity. For example, in each sub-region, three countries constitute from 71-89% of all software downloads in that particular sub-region. The Table 1, below, shows the Top 3 countries in each European region. Southern Europe is dominated by Italy, Spain and Portugal, which collectively account for 89% of all download activity. United Kingdom, Sweden and Norway dominate 80% of all download activity in Northern Europe. Western Europe's Top 3 countries are Germany, France and the Netherlands, which collectively represent 82% of all download activity in that region. Eastern Europe appears to be more fragmented than other regions with its Top 3 countries, Russia, Poland and the Czech Republic, accounting only for 71% of total downloads in the region.
Table 1: Top 3 Countries by Sub-Region
So, which countries are the true European powerhouses, dominating the software industry? A drill down by country for download share is shown in the Table 2, below. It is interesting to note that Germany, United Kingdom and France dominate Europe with 49% of the total downloads in 2010. The market is very fragmented outside of the Top 3. The 11 countries shown in the table below accounted for 88% of all European downloads in 2007 versus 84% in 2010. This group of countries lost share to other countries in Europe that are outside the Top 11. In other words, based on this data, the software business became more fragmented in 2010 versus 2007. ISVs and device manufacturers that are looking for growth opportunities in Europe need to keep the increased fragmentation in mind as they develop go-to-market strategies for Europe.
Table 2: Download Share by Country
Table 2 is color coded to show countries that grew their share of European downloads in 2010 (in green) versus 2007 in contrast to those whose share shrunk (in red). Among the Top 3 countries, Germany alone grew share while United Kingdom and France lost share. These countries lost share to countries further down the table.
How does download activity correspond to a country's GDP? In Table 3 below, we ranked European countries based on their completed downloads and by GDP. In general, the GDP rankings and download activity rankings are closely correlated. Russia is the one exception- by GDP, it ranks 5th in Europe, where as by download activity, it ranks 11th. It is possible that Russia's economic output being dominated by commodities helps its GDP ranking- however, the commodities sector is not a heavy consumer of software compared to financial services, manufacturing or other sectors that dominate the remaining Top 10 European countries.
Table 3: Download Activity versus GDP for Top 11 European Countries
Finally, in Chart 4, below, we looked at year over year growth in completed downloads between 2007 to 2010 by sub-region in Europe. Within Europe, the performance of different regions varied widely:
- Southern Europe was strongest coming into the recession (34% growth in 2008) and strongest coming out (13% in 2010). Strong growth in Italy in 2010 more than offset declines in Spain. Italy and Spain have a dominant share of downloads in Southern Europe. Australia's growth pattern was very similar to Southern Europe- strong growth in 2008, decline in 2009 and returning to positive growth in 2010.
- Northern Europe was weakest going into the recession (-17% in 2008) and significantly weaker as the recovery started in 2010 (-35%)
- Western Europe shares a growth pattern with North America- strong growth in 2008 followed by declines in 2009 and 2010.
Chart 4: Year-Over-Year Growth in Completed Downloads
Between 2007 and 2010, Eastern Europe and Southern Europe grew their share of European downloads at the expense of Northern Europe which lost share during the same period. ISVs should continue to look for growth in these regions. The European market is getting more and more fragmented which should be taken into account as ISVs and device manufacturers develop go-to-market strategies for Europe.