The market for packaged software in China grew 19.5 per cent in 2002 to reach US$1.98 billion and will grow even faster over the next few years, according to figures released Thursday by IDC.

The steady growth of the economy, rapid improvement in IT infrastructure and increasing demand from private enterprises will see the market grow at a compound annual growth rate (CAGR) of 25.8 per cent up to 2007, when it will be worth $6.24 billion, according to IDC.

Application software is the largest segment of the market, accounting for 48.4 per cent of all packaged software sold in China in 2002. It is also the fastest-growing segment, expected to grow at a CAGR of 28.4 per cent over the next five years. Back-office applications make up the majority of this market segment, IDC said.

Infrastructure software such as system infrastructure, network management and security software accounted for 31.4 per cent of the market, but sales only grew 8.5 per cent last year, mainly due to a cut in spending in the telecommunications industry, according to IDC. Within this sector, storage software is expected to grow at a CAGR of 36.2 per cent, IDC said.

Application development software accounted for the remaining 20.1 per cent of the market, key areas being information and data management software, middleware and application development platforms.

The security software market performed poorly, with most users in China preferring hardware-based security solutions. But several factors will drive this market in future, including greater awareness of security needs, upcoming e-government projects, passing of network security laws, increasing demand from the mid-range business market and Beijing’s hosting of the 2008 Olympic Games, IDC said.

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