Though the collapse of the bubble has led to a difficult period for the bits-and-bytes industry, it has now returned to stable and sustainable growth coupled with vibrant innovation in many departments. The coming years promise to be exciting as the software industry, once again, reinvents itself to reach a whole new level.

According to Software Magazine's Software 500 Survey, the revenues of the top 500 software companies totalled $394 billion in 2006, a growth of 3.5% from 2005. Today's biggest contenders include IBM, Microsoft, HP, Oracle, SAP and Apple.

The convergence of multiple point technologies – wireless, pervasive broadband, and online collaboration – generates a whole new level of interactive of interactive applications. The heralded Web 2.0 revolution – with its innovation in content (e.g., blogs, wikis, user editing and tagging), tools like search, and services like content hosting – brings about a much larger opportunity to transfer the new developments in the consumer side to the corporate environment.

According to McKinsey & Company / Sand Hill Group, two major business models
are competing for a growing share of software spend: Software as a Service and Open Source.

Software as a Service has become increasingly relevant to both large corporations and SMEs and is likely to impact the entire IT landscape. Software as a Service has already gained momentum in number of application areas – including payroll, human capital management, CRM, conferencing, procurement, logistics, information services, and e-commerce) – and is expected make gains across a much wider cross-section of applications over the next 3 years.

On the other hand, Open Source continues to upset packaged software business models. Major open source projects have expanded across nearly all layers of the stack, including web browsers (Mozilla Firefox), application servers (JBoss, JOnAS, Geronimo), web servers (Apache, Tomcat), mail servers (Sendmail, QMail), databases (MySQL, MaxDB), operating systems (Linux, BSD, RTOS), and programming languages (Perl, PHP, Smalltalk, Java).

A recent McKinsey survey of CIOs shows that experimentation with open source software is now relatively mainstream, with 43 per cent mentioning the use of open source applications of some sort and 41 per cent the adoption of an open source infrastructure like Linux.