Overview: Software Taxonomy and Revenue Model

IDC's software research programs maintain a centralized database that includes worldwide total packaged software revenue for more than 1,000 software vendors. We do not contend that this is an exhaustive list of software providers; in fact, we believe there are more than 10,000 such suppliers. However, our database is designed to support very precise forecasting, and the suppliers in the database represent a majority of the software market's revenue overall and a majority of the revenue in each of the various segmentations it supports. The revenue is allocated to functional market segments, geographic areas, revenue types, industries, channels, and operating environments. The functional software markets defined by the taxonomy represent a collectively exhaustive and mutually exclusive view of the worldwide software marketplace.

IDC's software market taxonomy is the basis for the relational multidimensional schema of the IDC Software Market Forecaster research database. The information from this continually updated database is used by all IDC software continuous intelligence services (i.e., our subscription research services) to generate consistent packaged software market sizing and forecasts.

Total packaged software revenue is defined as license revenue plus maintenance revenue plus subscription and other software revenue. It is primarily the total packaged software revenue that is further allocated to markets, geographic areas, and operating environments. In addition to total packaged software revenue, IDC collects software license revenue, software maintenance revenue, subscription and other software–related revenue, and total company revenue (see Figure 1):

› License revenue consists of license fees charged for the right to use software products under perpetual or multiple-year term arrangements in which the fair value of the license fee is separately determinable from maintenance and support.

› Maintenance revenue consists of fees charged for continuous improvement of the software by repairing known faults and errors and/or enhancing and updating the product, as well as for technical support.

› Subscription/other software revenue consists of fees to use software products and to receive maintenance and support for those software products for a limited period of time. Subscriptions consist of bundled software and services where the fair value of the license fee is not separately determinable from maintenance/support. This category also includes software lease or rental revenue (often, but not exclusively, applied to mainframe software).

Packaged Software Revenue Data Model