The accounting software market is now so mature that new entrants will be unable to catch up, according to Sage chief executive Paul Walker.
Speaking at the Regent Associates conference, Walker explained that the current harsh economic climate is making it hard for new firms to break into the accounting software market.
"It makes it much more difficult for new companies to enter the market if they are relying on new licence revenue. They will have to sell out at an early point in the cycle to bigger players and that will go on for the next two or three years," he said.
"In the small to medium sized enterprise [SME] space local markets and local support plays an important role. Trying to build a business on new licence revenue alone is hard," he added.
Walker explained that the market is maturing to become more like the aerospace industry where services are more important for revenues than products. "The software we provide is becoming a smaller part of our revenue," he said.
He insisted that the key is to hook companies on Sage software when they are small, because then they are likely to spend more later. "If you don't have them in the first place trying to find them when they step up [in size] is hard," he maintained.
Even Microsoft, which last year acquired Great Plains Software, will find it hard to attack the conservative SME market, said Walker.
"Microsoft has acknowledged that it will take a long time to put a service in place for SMEs because they have already bought software and they won't change it just for technology's sake," he concluded.
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