Capital expenditure on computer software

IBISWorld forecasts private capital expenditure on computer software to increase 6.2% during 2021-22, to reach $20.7 billion. The COVID-19 pandemic has accelerated the adoption of cloud computing and encouraged increasing expenditure on data storage and web hosting software. Furthermore, increased working from home has supported business demand for remote software. However, capital expenditure on software is expected to slow from the initial surge in 2019-20 spending. As such, businesses that made significant investments at the start of the COVID-19 pandemic are likely to focus on upgrading and maintaining existing software. In addition, companies are expected to have a greater focus on software made specifically for mobile devices to enhance the accessibility of their services in the current year.

Over the past five years, rising wage expenses have provided greater incentive to employers to increase investment in software (and associated hardware) to boost the productivity of their workers or, in some cases, reduce their dependence on labour by automating low-skill tasks. The surge in popularity of online shopping over the past five years has driven a significant increase in retailers' investment in internet-based sales and customer service channels. Commercial banks have invested strongly in software aimed at improving the mobility and accessibility of their services and financial products over the past five years, fuelled by the rapid adoption of mobile banking and mobile payment mechanisms. A rise in the prevalence of malware, data breaches and distributed denial of service (DDoS) attacks have prompted many organisations to increase spending on IT security software to safeguard their data from unauthorised access. The COVID-19 pandemic has also driven businesses to invest in software for remote working purposes, such as video-conferencing software and virtual private network (VPN) software.

The increasing digitisation of the Australian economy has spurred greater spending in computer software by sectors that are typically not recognised for their investment in digital technology. Over the past five years, the agricultural sector has devoted more resources to software and equipment to improve yields and output by better managing harvests, crop planting and flock numbers. The Commonwealth Scientific and Industrial Research Organisation (CSIRO) has also been placing a greater focus on researching and promoting the benefits of new technologies in farming and other agricultural applications. In particular, precision agriculture requires farmers to use advanced equipment such as global positioning and geographical information systems. These practices have increased as farmers have sought to take better advantage of their finite inputs, driving investment in software and equipment by the sector. Overall, due to stronger spending on digital technology from organisations outside of technology-rich sectors, IBISWorld forecasts private capital expenditure on computer software to grow at a compound annual rate of 7.7% over the five years through 2021-22.