This encouraging context is nevertheless accompanied by major challenges for French software publishers, both in the technical field and from an HR or commercial point of view.
This is particularly true for start-ups and SMEs in the sector, whose reality differs significantly from that of the large historical players.
1. Leveraging current growth against industry leaders
Software publishing has experienced significant and confirmed growth in recent years, of the order of 10% per year and up to 16.5% in 2017, under the combined effect of trends that are driving the market: cloud computing, mobility, customer experience management, Big Data and IS security in particular.2
This good news for all the players in the sector should not, however, mask another reality, which is the extreme concentration of this market: 7% of publishers alone account for 70% of the total turnover generated.
Therefore, making the most of these new market shares is a major challenge for start-ups and SMEs in the sector.
2. Developing internationally
Another key trend in the sector: the French are going on the attack and going international! However, there is a considerable difference depending on the size of the company: while major publishers such as Dassault Systèmes and Ubisoft are resolutely turned towards the international market - with 91% and 92% of their turnover abroad respectively - the same cannot be said for start-ups and SMEs in the sector, 75 to 83% of whose turnover is still generated in France.
However, more than a third of French publishers are already established in the United States and the growing share of the sector's overall turnover generated outside France can also be explained by theemergence of start-ups that have been internationally oriented since their creation.
The considerable development prospects offered by internationalisation are therefore encouraging SMEs in the sector to consider deployment beyond our borders.
3. Recruit and retain the best developers
The growth of the sector is accompanied by the creation of many jobs, particularly in R&D. The mastery of know-how and the strategic dimension of innovation are essential for software publishers, and companies are currently facing a real "shortage" of talent for these key positions, which they are choosing to keep in France.
It is therefore not only a question of identifying and attracting the best developers, but also of retaining them, by offering them motivating prospects in the short, medium and long term, particularly through remuneration, profit-sharing and equity investment.
Hence the even greater need to develop a business plan that offers attractive and secure development prospects!
4. Financing R&D investments
Although it is part of the DNA of software publishers, innovation remains an economic challenge for the youngest companies and/or those with annual sales of less than €10 million: it requires massive investment in R&D, not only during the pre-marketing phase, but also throughout the commercial exploitation of solutions.
However, the financing of innovation is still mainly internalised (self-financing or debt), which directly impacts the profitability of software publishers. Market enthusiasm for the sector remains timid in France, despite the existence of dedicated tools (FCPI, PEA PME, etc.), and European research programmes seem complex and inaccessible to SMEs. Tax credits (CIR and CII) and simplified access to public contracts therefore remain the public measures most favoured by publishers.
This is a financial issue that the sector's managers must integrate into their strategic vision by favouring contracts that provide a significant cash flow.
5. Refine their economic and business model
The sector has also been affected for several years by a fundamental trend: the gradual disappearance of the On-Premise software model in favour of SaaS solutions.
87% of software publishers now offer all or part of their products in SaaS mode.
Since 2010, the share of software publishers' overall turnover derived from SaaS activity has continued to increase, reaching 32% in 2016. Today, French software publishers are choosing to focus on this activity, regardless of their size, but this is particularly true for start-ups.3
A major technological transformation (adaptation and development of services for the web, secure hosting of solutions and data, etc.) which also raises commercial questions: the transition from a perpetual licence model to a fixed-term subscription model is profoundly changing sales methods.
This evolution leads to commercial processes in which marketing takes on a new and decisive role.
In this context, it is essential for you, as an SME manager in the sector, to :
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- Setting up a successful sales organisation
- Manage your sales teams effectively, both in France and internationally
- Identify and prospect effectively for your key accounts
- Fullyintegrate the marketing dimension into your sales processes
These challenges are added to your many strategic concerns (technological developments, financing of innovation, recruitment, vision and development of the company, etc.) and sometimes seem to be far removed from your main skills and your "comfort zone".
All the more reason not to neglect them and to seek support in these matters, which are crucial to the current and future success of your business!
We are here to help you: this is the vocation of KESTIO Live and the objective of the series of articles to be published each week on this blog!
To find out more about the use of specialised and appropriate tools to adopt, discover this webinar on optimising the return on your commercial assets:
