Software Industry Overview of Global Marketing Channels

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  • Topic: Marketing, Distribution, Software publisher
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  • Published : April 4, 2011
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I Software industry overview of global marketing channels

1. Overview of the software industry

The software industry is the most important and one of the most rapidly growing segment of the information and communication technology (ICT) industries. According to DataMonitor, the size of the worldwide software industry in 2008 was US$ 303.8 billion, an increase of 6.5% compared to 2007. The United States is estimated to have approximately 50% of the global software market's value. U.S. software companies lead the world in development and production of softwares for business, homes, and schools. DataMonitor forecasts that in 2013, the global software market will have a value of US$ 457 billion, an increase of almost 50% since 2008. Most software products fall into three categories:

- Packaged (shrinkwrapped or off-the-shelf) products
- Module products such as educational and general business management software - Core products such as industrial process-controlled software. Packaged software could be purchased “off-the-shelf” and is typically mass produced, sold or licensed in standardized form in any format (electronic download, physical media such as disk or CD, or a webbased service). Packaged software is intended for general use common to the everyday operations of businesses and governments. Because it is a standardized product, packaged software has more in common with a product than a service. In the development of the software industry, a shift from customized computer programming (or software products) to standardized programming is apparent. Some software was developed for a single client but evolved over time into standardized packages. According to Software & Information Industry Association (2005), the packaged software market in the United States is estimated at nearly $70 billion with business software, home use products and education software accounting for $64 billion, $5.5 billion, and $600 million, respectively.

2. Distribution channels for software
The distribution channel of product software consists of either direct or indirect distribution. Even if a software is considered more as a product than a service, its distribution system differs a lot from other dairy products. Indirect distribution

Indirect Distribution comes in several forms:
- specialized software resellers
- shrink-wrapped product located in a store or Value Added Resellers (VARs) who combine software with another service. The end user customer may have the license or the intermediary may be the licensee in this structure. Typically, producers offer intermediaries a substantial discount for volume purchases, which makes the transaction more cost effective for an individual consumer. Direct distribution

Direct Distribution refers to a customer having a direct relationship with the producer of the software, with no intermediaries. Direct product is most often delivered in an intangible digital form that can be downloaded off the internet such as Adobe Acrobat 7.0 from adobe.com. Electronic software distribution (ESD)

Software is the top category for on-line shopping and computer products (both hardware and software) are projected to be the fastest growing category. On-line transactions of software are mainly business-to-business. There are two ways to deliver software from a Web store. One is on-line ordering: customers order the product over the Web, but it is shipped through the traditional mail system. The other is electronic software distribution (ESD). It refers to the transfer of software, data and other digital content, in the form of bits, from a manufacturer or provider to an end user. In this system, the publisher provides a software master to its partners. Before the user downloads the software, a secure electronic version of the software must be packaged in a “digital wrapper” (envelope) either by the publisher, by the channel partner, or by a clearinghouse which audits sales. The package cannot be...
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