This represents a rise of 6.2 percent from last year's figure of US$178 billion, the market researcher said. The compound annual growth rate between 2003 and 2008 is likely to be 6.9 percent, despite challenges like security and software quality, IDC said.
"Even though the software industry is recovering from its first-ever decline, the double-digit growth rates experienced in the last decade will not return in the foreseeable future," Anthony Picardi, senior vice president of global software at IDC, said in a statement.
However, a survey of 50 North American information technology executives by Merrill Lynch has found mixed results on software spending in 2005. The financial consultancy expects spending to be up in the "mid-single-digit range" during the year. Segments like business intelligence, data warehousing and security will factor high on the spending chart.
IDC said while North America, which accounted for about half of global software in 2003, will remain the largest market, strong growth is likely in emerging markets in Asia and Central Europe. Such markets will also be the most demanding, in terms of piracy, pricing and political uncertainty. In 2003, five companies--Microsoft, IBM, Oracle, SAP and Computer Associates International--shared a third of global revenue.
Pricing models such as usage-based and software-as-a-service, as well as new approaches like niche clusters and solution coalitions, will drive growth, IDC said. The use of open-source software is also projected to grow, making it the fourth most popular platform for software by 2008, compared to the No. 7 position it currently holds.