A new study on European software and services commissioned by the European Commission has predicted strong growth in the cloud computing, open source and service oriented architecture spaces, but warned that major barriers still need to be overcome.

Frederic Giron, director of consultancy firm PAC, said during a conference call today to announce the findings of the research so far that the web-based software market will experience compound annual growth of 20.5 per cent in the next 12 years.

He added that cloud computing is the "most dynamic segment" of the software and IT services industry, and that open source will also see strong growth.

"Open source is increasingly playing an important role in the software industry, and can be seen as a viable alternative to traditional software products," said Giron.

"Open source is also playing an important role in the customisation of information systems, enabling service providers to better serve customer needs. "

Giron added that service oriented architecture, along with cloud computing and open source, is one of the key elements of the "industrial revolution in software", and will develop strongly in the future.

However, Giron warned that continued R&D support and incentives from public institutions are key to the success of the European software and services industry, and that the fragmented market across Europe is its major flaw.

"Everything comes down to the fragmentation of markets. It's a key weakness of the European market as opposed to the US, for instance," he said.

"It's one of the key challenges which the European Commission will have to address in the next few years: how we can try to remove this barrier to growth. "

Mukesh Sharma, director, VMware Alliances & Private Cloud at EMC, agreed that the fragmented European landscape represents a significant hurdle to overcome.

"In the UK and Nordics local authorities are seeing cloud platforms and the underpinning software technology as a perfect opportunity to pull together disparate systems," he added. "We see public sector and medium-sized businesses as really leading the cloud adoption charge, with enterprise not too far behind.”