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Article at a glance:

The outlook for enterprise software

Growth in the software industry has slowed so much that many small and midsize companies will need to reconsider their long-term prospects. As customers curb their appetite for software and large developers grow larger, smaller ones will need to reassess the threats and opportunities they face.

The take-away
Simply to gain access to customers, many smaller software developers will have to embrace the platforms of larger ones. Milking maintenance contracts may save some of these smaller companies, but not all of them.

This article is part of a McKinsey Quarterly package on restructuring in high-tech industries. To read another article from the package, please select from the following.

High-tech mergers take shape
Economic pressures to restructure high-tech industries will eventually become irresistible. Executives should prepare themselves for more—and more hostile—acquisitions.

Not by M&A alone
Sometimes alliances make more sense than mergers or acquisitions.

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