Enterprise Software Revenue Forecast for 2009 is $222.6 Billion
Worldwide enterprise software revenue is forecast to total $222.6 billion in 2009, reflecting a "flat" 0.3 percent growth rate from 2008 revenue of $221.9 billion, according to Gartner, Inc.
Analysts said that despite an unsettled outlook, the enterprise software market has the potential to weather the current economic downturn better than in 2001 and 2002 because market conditions are dramatically different in terms of maturity, penetration, confidence in IT, and the geographical and vertical mix.
“The fourth quarter of 2008 was the turning point in creating an uneasy selling environment that may usher in several difficult quarters for the enterprise software markets,” said Tom Eid, research vice president at Gartner. “Current expectations are for a slow economic recovery, mirrored by software spending upturn starting no earlier than the first half of 2010.”
Despite the economic gloom and uncertain future, Garner analysts said that software vendors that have a balanced mix of channel, new license and maintenance revenue streams, and flexibility on contractual terms (such as software as a service [SaaS], open source and outsourcing) have the strongest options for continued growth. Larger vendors may be less vulnerable as they have both a good geographic balance and a sizeable maintenance stream and can bundle and price aggressively to gain a greater share of software budgets.
“All geographies felt the impact to some degree of a slowdown in software spending in the fourth quarter of 2008 and will again through 2009,” said Fabrizio Biscotti, research director at Gartner. “Most mature countries will feel the greatest impact, while emerging regions will also have slower growth rates than previously forecast, in particular Eastern Europe whose prospects have been deteriorating remarkably.”
This year, the bulk of enterprise software segments are still anticipated to have mildly positive growth rates. However, some of the largest segments such as operating systems, office suites, middleware, storage and digital content creation are forecast to have negative growth rates. Appliances, an emerging way of combining hardware with essential software functionality, are set to be on the forefront of growth alongside software markets including hierarchical storage management and archive software, Web conferencing, and security information and event management.
“In general, we anticipate a wave of interest around technologies that can help cost optimization. This will benefit alternative software acquisition models as organizations will look for ways to shift spending from capital expenditures to operating expenditures,” Mr. Biscotti said. “As a consequence, vendors offering software as a service (SaaS), IT asset management, virtualization capabilities and an ability to leverage open-source software will benefit.”
Partnerships will also become extremely important as the need to be more geographically dispersed and more vertically integrated increases. Aligning with partners that can provide local knowledge or industry insight will be a considerable differentiator.
Mr. Eid said that vendors need to be mindful of the fact that although all regions will experience the economic slowdown, some will still bear more opportunities than others. He advised vendors to consider further diversifying their go-to-market strategy across geographies and vertical industries to mitigate the effects of the economic downturn.
This new forecast has been revised down from Gartner’s 4Q08 forecast for 2009 of 6.6 percent growth as projections for the global economies continue to worsen. The full-year 2009 forecast could decrease an additional 1 to 2 percentage points leading to negative growth in 2009 if deteriorating economic conditions continue.
More detailed analysis is available in the Gartner report “Forecast: Enterprise Software Markets Poised for Recovery in 2010." The report is available on Gartner’s Web site at http://www.gartner.com/DisplayDocument?ref=g_search&id=920613&subref=simplesearch.
The Gartner report “Forecast: Enterprise Software Markets, Worldwide, 2008-2013, 1Q09 Update” includes detailed country forecasts for infrastructure and application software for all the world’s major regions by 18 software segments and 90 subsegments. The report is available on Gartner’s Web site at http://www.gartner.com/DisplayDocument?ref=g_search&id=913424&subref=simplesearch.
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