The worldwide enterprise software revenue is forecast to total $222,6-billion in 2009, reflecting a "flat" 0,3% growth rate from 2008 revenue of $221,9-billion.
Gartner analysts says 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," says 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, Gartner analysts said that software vendors that have a balanced mix of channel, new licence 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," says 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 optimisation. This will benefit alternative software acquisition models as organisations will look for ways to shift spending from capital expenditures to operating expenditures," says Biscotti. "As a consequence, vendors offering software as a service (SaaS), IT asset management, virtualisation 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.
Eid says 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 advises vendors to consider further diversifying their go-to-market strategy across geographies and vertical industries to mitigate the effects of the economic downturn.
In EMEA, the enterprise software revenue is forecast to total $76,7-billion in 2009, a 5,6% decline from 2008 revenue of $81,2-billion.
"The economic downturn represents a dramatic shift from the usual patterns of spending seen in the past decade. In fact the UK, Ireland, Spain and Scandinavian countries, usually on the forefront of software spending growth in Europe, have all entered an economic recession with dare consequences on IT spending," says Biscotti.
"In addition, Eastern European countries, for years one of the hot spots of growth for software, are now facing the toughest economic downturn since the fall of the Berlin Wall. Nothing can counterbalance these downwards forces with Germany, France and Italy also facing difficult economic conditions.
"Middle East and Africa, while not immune from the downturn, are somehow weathering better the crisis but the capacity of spending of this region is too small to offset the overall picture for EMEA."