The accounting software market - Italy

1.2 The global market

The accounting software market was estimated to be worth $**.** billion in **** and is expected to grow at a CAGR of *.*% through **** to reach a size of $**.** billion [***] 

Evolution of the global accounting software market size World, ****-****, in billions of dollars Source Mordor Intelligence  

Companies acquire accounting software both to replace an obsolete system and to increase their functionality. In addition, the software allows for accurate calculations and requires less manpower, which reduces the risk of human error.

The growing trend of online business usage among small and medium-sized enterprises is expected to fuel the accounting software market during the period through, for instance, the automation of bank flows or the automation of invoice management. In addition, accounting software has emerged as one of the best solutions for managing a company's accounts, as it simplifies many accounting and business aspects. Functions that save time, increase profitability and increase productivity will then stimulate demand.

A significant portion of vendors, accountants by profession, have taken a cost advantage of the cloud and targeted the SMB niche. In addition, new entrants to the market, for differentiation purposes, are integrating advanced features such as Artificial Intelligence.

Finally, accounting software is moving towards increased automation, aided ...

1.3 The domestic market

A study conducted by the Digital Innovation Observatory in collaboration with the Politecnico di Milano published in July **** provides us with an overview of the Italian market. In order to quantify the value generated by the market studied, the information on company turnover extracted from the AIDA database in **** has been taken into consideration. The figures therefore refer to the year ****.

This study initially targeted **,*** companies specialized in software creation and IT consulting, which represented a turnover of **.* billion euros in ****. If we select the companies with more than * employees and a million euros of turnover, the number of companies is reduced by **% to reach *,***. However, the turnover would be much less impacted, with a decrease of **.*%, which leaves us with **.* billion euros.

A few suppliers now hold the majority of the turnover in the oligopolistic Italian accounting software market.

Finally, the market size for business software in Italy was estimated at **.* billion in ****, with *,*** specialized firms. The micro category of specialized accounting software (***) accounted for less than a quarter of the total products, however, more than one third of the software put on the market is equipped with more than one functionality.

Software market turnover Italy, ****, in billion euros Source: ...

1.4 Impact of the Covid-19 pandemic

While the accounting software market was already growing in recent years, the Covid-** pandemic has only accelerated this trend. The impact of the Covid-** crisis accelerated the digitalization of many industries by prompting companies to adopt telecommuting measures (***) to protect employees from a possible contamination. Teleworking software and applications were then massively used [***].

On the demand side, the restrictive measures have had a considerable impact on data traffic, with a peak between March-April **** and April **** of up to **% for fixed networks and **% for mobile networks [***].

From now on, companies will have to face the post-crisis period and continue their digitalization process in order to perpetuate their activity. For **% of them, the software acquired during the crisis is now fundamental to guarantee the continuity of the company.

Impact of the health crisis on software purchases Italy, ****, in % Source: ****

The health crisis prompted more than half of the SMEs surveyed to acquire software during the crisis, whereas they had not thought about it before.

In addition, the crisis has prompted the government to accelerate broadband coverage in white areas as well, which will encourage the growth of cloud-based accounting software.

2.1 Demand driven by large companies

According to an ISTAT study published in **** on digitalization and technology in Italian companies, **.*% of the firms surveyed stated that they use accounting management software.

Companies with at least ** employees that have adopted management softwares Italy, ****-****, in % and in numbers Source: ****

In addition, companies that acquire their first management software tend to use industrial accounting modules and documentation management, which are among the most pressing perceived needs.

Evolution of innovations by type of process Italy, ****-****, in %

Between **** and ****, the amount that companies invested in innovations in accounting and administrative systems was **.*%, higher than the amount invested in marketing (***). If we consider only companies with at least *** employees, **.*% of them invested in new accounting and administrative activities. On average, large companies invest more than those with fewer than *** employees in new and innovative processes [***].

2.2 Digitization of SMEs to fuel market growth

The digitization of SMEs, accentuated by the health crisis, is still in its first stages. A Capterra study, published in ****, therefore focused on the digitalization of SMEs.

First, **% of companies surveyed stated that they use some type of software on a regular basis. The most used software in SMEs according to the study are the Office suite, Adobe Photoshop and Google Drive. In fourth place comes SAP, a business management software that integrates various solutions, including an accounting section.

Moreover, **% of them use between * and * software programs, and **% use more than *. In addition, **% of SMEs would like to make a greater use of the possibilities offered by technology to improve business processes. Finally, only **% of SMEs responding to the survey develop their own in-house software; they are therefore dependent on third-party products.

Ranking of the most used software categories in SMEs:

Marketing and sales software Project management software Human Resources Software Financial and accounting software Software for supply chain management CRM

Source: ****

Accounting software is one of the most used software by SMEs, but as seen previously, a much smaller number of companies are innovating in these tools. The new accounting software will have to accentuate research and development in order ...

2.3 SMEs' perception of their digitalization

The perception of SMEs on their digitization process is an important factor that helps indicate the propensity of these companies to acquire an accounting software. According to the Digital Observatory in the PMI, only *% of SMEs think that digital innovations are not necessary to develop their business.

Distribution of the perception of the digitalization of SMEs Italy, ****, in % Source: ****

This graph shows that **% of the SMEs surveyed consider themselves to be fully digitalized. They would therefore not tend to use new software, unless it would offer a significant advantage for the company.

The vast majority, however, consider themselves rather digitalized. Already having an experience with computer software, they would potentially be more inclined to use software that brings added value to the company.

Of the **% SMEs that do not consider themselves fully digitized, the *% that are not digitized and the *% that do not know what digitalization means make up a quarter of SMEs. Different barriers such as the cost, difficulty of use and lack of skills or support from institutions have a negative impact on demand [***].

According to Capterra, **% of SMEs would like to see their company take greater advantage of technology, while only **% of them use software efficiently.

Impact of ...

3.1 A dynamic low-medium concentration market

Accounting software is a sub-category of business software, which is used to automate business processes within companies.

The Politecnico di Milano associated with Osservatori analyzed the turnover of *,*** business software companies in Italy. They found a market of low-medium concentration, in which **% of companies belonging to a group contribute to **% of the total market revenue. Mergers and acquisitions in the business software sector enable groups to increase their portfolio of offers while creating synergies of skills as well as a common vision. In addition, research and acquisition of technology, know-how and human capital are the main factors for market consolidation.

Concentration ratio of the largest business software companies Italy, ****-****, in % Source: ****

The concentration ratio is calculated in the graph above. When it is equal to *%, the market is in perfect competition condition. On the other hand, when it is equal to ***%, the market is considered as monopolistic.

The largest groups represent a significant market share, especially the international players, but independent companies and smaller groups also manage to capture significant market shares. Moreover, the presence of large international players is also synonymous to a dynamic market where there are considerable opportunities for competition and value creation.

3.2 Sales channels and partnerships

According to interviews conducted by the Politecnico di Milano and AssoSoftware, the software companies manage the implementation of their own solutions and manage the project on a turnkey basis, i.e. they are committed to the client (***) to provide all the services necessary for the work to be completed and ready to be used and/or operated.

Although only **% of them declare that they offer systems integration services, they do carry out a series of systems integration services at the customer's premises on a recurring and sometimes minimal basis, even if this is not openly declared on their own channels.

Regarding sales channels, **% of the software companies did not investigate whether, in addition to direct sales, there is also an indirect resale channel through a partner network. As these companies are mostly small and medium-sized, the customer base is often local or regional and managed directly by the company's sales force. 

Software companies with a partnership Italy, ****-****, in % Source: ****

On the other hand, technological partnerships (***). These partnerships generate a competitive advantage because the large international players provide the basic technological components on which software publishers and sales channels build their value, meeting specific local needs.

The market is then very ...

3.3 A rather disparate market

The Italian software companies present in the business software market are mainly small. According to the Politecnico di Milano and AssoSoftware, **% of them have between ** and ** employees, and a turnover of less than ** million euros.

Distribution of management software companies by revenue and number of employees

Source: ****

*Highlighted figures represent **% of companies

We can see a correlation between the number of employees and the turnover of companies. In addition, management software companies have a good productivity index of ***,*** euros per employee. Furthermore, the skills of the staff represent the main added value of the companies, which unlike other sectors (***) have very few production costs.

On the other hand, Italy is facing a talent shortage. Ranked **th out of ** countries in terms of human capital in the digital field, according to the Digital Economy and Society Index, only **% of Italians aged ** to ** have at least basic digital skills compared to **% for the European average and only **% have digital skills above the basic level compared to **% for the European average. Furthermore, only *.*% of Italian graduates are studying Information and Communication Technologies (***), which is well below the European average.

The geographical distribution of the companies is very uneven. While **% of companies are located ...

4.1 Characteristics of accounting software

There are many accounting software programs that are organized around six typical features:

Management of accounting entries Management of VAT registers and VAT settlements Balance sheet printouts and reclassification Materials Management/Deadlines Creation of invoices, credit notes and DDT Management of electronic invoices

The use of a management software allows the company to have an up-to-date accounting under control at any time. They thus make it possible to avoid time losses and billing errors. In addition, accounting software allows faster access to documents, guarantees a greater security by facilitating tax audit procedures, supplier management and the retrieval of data (***) on customers, the number of sales and orders placed [***].

The main benefits for businesses using accounting software are: [***]

Saves time and increases productivity thanks to the automation of certain tasks, which can also be carried out simultaneously and instantaneously, reducing the time required to carry out operations. A better control of information and an increased security by keeping all data in one easily accessible place, which improves the decision-making process. In addition, back-ups are regularly performed and access can be restricted to certain people. A cost reduction: since accounting software automates tasks that were previously performed by accountants, companies can therefore save ...

4.2 Product Typology

According to the Politecnico di Milano and the Digital Innovation Observatory, *,*** business software products were available on the Italian market in ****, which corresponded to an average of * products per software company. Moreover, only *% of companies had a catalog of more than ** products. Among the management software, the modules specialized in administration and data archiving, which includes the sub-segment of accounting management, are the most common. In fact, they represent a quarter of the total management software on the Italian market.

Distribution of categories among management software Italy, ****-****, in % * software developed especially for a specific sector Source: ****

The first four categories dominate the management software market. Nearly a third of the software products also have a transversal logic, i.e. products with more than one integrated management module within them.

Distribution of subcategories of software for administration Italy, ****-****, in units and in % Source: ****

With **** documentation management software, this subcategory is the most present on the Italian market of management software. The management of bureaucratic procedures are then very much in demand by companies, but it also seems very complicated to develop a standard product that meets the requirements and needs of different industries and companies, whose activities can be very ...

4.3 A highly specialized offer

As seen in the previous section, it is quite difficult to standardize a product given the many sectors and companies on the Italian market. The editors have therefore a rather large margin of positioning, and often decide to specialize themselves.

Nearly half of the publishers surveyed stated that they produce at least one software ad hoc, which means that it is specifically designed for a given purpose and for a specific sector.

Distribution of management software publishers by type of sector Italy, ****-****, in % Source: ****

There are more management software publishers specialized in the services industry than in other industries. This significant difference can be explained by the large number of companies present in the sector, but also by their very distinct activities (***).

Although the hotel, food and fashion industries represent the core of the Italian economy, few software companies specialize in these sectors. Digitization of the players in this sector, especially SMEs, would provide a considerable competitive advantage also across borders.

If we now look at products rather than companies, we can see some differences. Indeed, **% of the products are intended for a specific sector. The banking sector comes in first place, with **% of the total management software intended for ...

4.4 The high added value of innovations

New technologies, such as cloud, artificial intelligence, big data or blockchain will guide future software innovations. 

Software with at least one innovative trend, by company size Italy, ****-****, in % Source: ****

In contrast, only *% of the management software present an innovative dynamic. This trend is explained by a rather fragmented market, where the large number of SMEs limit their investments in research and development, determined by the financial assets available in the company. The larger groups, beyond their substantial R&D funding capacity, also have merger and acquisition strategies to acquire niche technologies [***]. 

Distribution of types of innovation among innovative products Italy, ****-****, in % Source: ****

Among these *% of innovative products, AI is the main technology included, followed by Big Data. Blockchain technology and augmented reality only concern a limited number of software products. Artificial intelligence is mainly associated with service-oriented sectors, characterized by repetitive and easily automatable functions, such as Chatbots.

Big Data, through the analysis of a massive amount of data to support decision-making, could also propose solutions to certain problems and automate actions to be taken.

The Blockchain allows the decentralization of data, which would have the advantage to include better transparency and traceability of information but also the elimination ...

5.1 Regulations

From a legal point of view, it is necessary to find a balance between two opposing interests. The public interest must be promoted through technical progress, but, at the same time, the private property of companies or individuals must be protected. In Italy, software are therefore protected by a copyright with the legislative decree n. ***/**** which completes art. * of the Law ***/**** (***). However, it is sometimes also possible to complete the copyright with a patent, which then becomes complementary [***]:

According to the decree of the President of the Republic of ** June ****, No. ***, in the case of computer programs, patentability per se is excluded, but patent protection is available if the software is an integral part of an industrial invention.

The Directive EEC No *** of ** May **** concerning the legal protection of computer programs that grants copyright protection to software, provided that it meets the requirement of originality.

That directive was transposed into Italian law by Decree No. *** of ** December **** which addresses the need to provide uniform protection for software developers and users, balancing the disadvantages between competitors in different European countries.

The law of ** August ***, n°*** on the new rules of copyright protection reinforces the penal sanctions, sets the modalities of reproduction and ...

5.2 The recovery and resilience plan for a more digital future

The EU Member States set out in their recovery and resilience plans the reforms and investments they wish to implement by ****. Once submitted, the Commission assesses them within two months and translates their content into legal acts. On the basis of a Commission proposal, the Council has in principle four weeks to adopt the Commission's proposal. [***]

Within the digital transition budget, a total of about EUR * billion is allocated to the area of human capital. The measures target the population, with particular attention to people with disabilities or at risk of digital exclusion, but also public administration, the education system and new market's needs.

The plan aims to develop Italians' digital skills, by strengthening the "digital civil service", a programme that deploys a network of young volunteers throughout Italy to train people in digital skills as well as digital training centres.

About advanced digital skills, the plan should finance doctoral courses in the field of new technologies to the tune of *** million euros, while expanding the university offer in this area. It then includes a number of reforms and investments aimed at modernizing the education system, facilitating the transition to the labour market and stimulating the acquisition and recovery of skills, ...

6.1 Segmentation

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• Oracle Netsuite (Groupe Oracle)
• Zoho
• Intuit Italia
• Freshbooks
• Xero
• Smeup
• Zucchetti