Over the next five years, revenue for the human resources and payroll software industry is expected to increase to $4.0 billion, according to a new study.

The revenue increase will be due in large part to benefits from increasing private investment in computers and software, and the further adoption of the Software as a Service business model, according to independent market researcher IBISWorld.

The firm’s research indicates that some companies will return to outsourced HR and payroll providers as corporate profit increases. Nevertheless, a rise in the volume of administrative work, necessitated by improvements in the labor market, will increase industry demand over the next five years.

IBISWorld also estimates that while more businesses are expected to use HR and payroll outsourcing in 2011 as corporate profits rise, the small business market will help ensure continued growth during the year.

In addition, despite overall growth, the industry has consolidated, with average profit margins of 20%. Large software companies that dominate the market will rely on acquisitions to fine-tune their product portfolios, according to IBISWorld. Specifically, the research firm estimates that the number of industry establishments has fallen by 2.9% annually to 106.

Fineberg writes for Accounting Today, a Source Media publication.

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