The Evolution of the UK software market: scale of demand and the role of competencies

Suma Athreye ()

No 31, Open Discussion Papers in Economics from The Open University, Faculty of Social Sciences, Department of Economics

Abstract: This chapter studies the evolution of the computer software and services market in the UK. We show that independent vendors of software gradually replaced in-house development of software in the UK in a process of gradual vertical disintegration. We trace the demand and supply side influences on the development of the market. We argue that the heterogeneity of demand for software has meant that niche markets based on externalisation are more important than arms-length markets in the process of vertical disintegration. This in turn has contributed to the creation of specialised niche market skills over general skills such as in R&D, general management and marketing amongst firms, since niche markets do not develop the skills required for large scale marketing. This lack of generalised skills is also the main barrier to the entry of firms in the rapid growth ' product' segments of the market. Thus, we argue that the nature of demand influenced the development of the UK software market and the firm skills and competencies not developed in the process prevent a shift to a different, more radical, trajectory of growth of the UK software sector.

Date: 2000-09

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