Enterprise software spending set to slow

12 Dec 2008

Gartner has lowered its estimate for enterprise software spending in 2009 to 6.6pc growth.

The fourth quarter of 2008 will mark the first of several challenging quarters for the enterprise software markets, according to Gartner.

A combination of economic, technical and regional forces has caused Gartner to revise its enterprise software spending forecast for 2008 through 2012 downward.

Worldwide enterprise software is on pace to total US$229.2bn in 2008, a 13.9pc increase from 2007. These projections are slightly down from the September forecast of US$231.2bn in 2008, a 14.9pc increase.

The market is forecast to reach US$244.3bn in 2009, a 6.6pc increase from 2008 revenue. This is down from Gartner’s September projection of 2009 revenue totalling US$253.1bn, up 9.5pc from 2008.

“The business case for many application and infrastructure initiatives are now aligning to cost reduction and risk management, as opposed to fostering revenue growth,” said Fabrizio Biscotti, research director at Gartner.

“This important shift, coupled with the recent financial and credit markets crisis has led us to reduce our software spending forecasts through 2012.”

Biscotti said that this revised forecast takes into account a number of factors that have emerged in recent months, including: confirmed recessions in several key countries; new revised GDP predictions released in November; early warnings from vendors in October and November on their sales expectations for the fourth quarter of 2008 and 2009; and fluctuations in currency exchange rates, which are causing British sterling and the euro to lose value against the dollar.

According to Gartner, all geographies will feel the impact of the slowdown in software spending by some degree in the fourth quarter of 2008 through 2009. Many mature countries will feel the greatest impact, while emerging regions will experience slower growth rates. All markets and vendors are expected to be impacted across the board.

“For the near term, software vendors will continue to face tough product life-cycle decisions and short-term pressure on price and margins, which will put the ability to be innovative at risk,” said Joanne Correia, managing vice-president at Gartner.

“The fundamental changes that are occurring in how software technology is deployed and used mean that no software market or vendor will remain untouched.”

Gartner analysts cited eight major technology forces that are being shaped by current market conditions, including networked, pervasive computing; business process transformation; SOA and web services; technology convergence; rationalisation of product portfolios; Linux and open-source software (OSS); virtualisation; and collaboration, unified communications and voice over IP.

By John Kennedy

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years