Worldwide Enterprise Software Market to Experience Flat Growth in 2009

“We are not expecting much growth this year. Zero growth will be acceptable to us rather than a negative performance.” This is what I hear most of the time from entrepreneurs due to the ongoing economic slowdown.

But to some, they say that the month of March, showed some recovery. The growth was attributed to consumer confidence since the anticipated economic slump was not as bad as expected for the month of January and February of 2009.

Talk about zero growth, research firm Gartner is saying that 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.

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.

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.

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.

Advertisements

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: