Gartner Forecasts Gloomy Enterprise Software Market

Analysts at Gartner have little hope that the market conditions for enterprise application software will improve anytime soon.

As a result, the company reduced its growth forecast for the segment from an already paltry 5 percent expectation in Q1 of this year to only 4.5 percent in the most current update that will be presented on June 28.

"The global marketplace is still experiencing a series of conflicting and contrasting economic news reports, and the full impact of the economic uncertainty on the enterprise software markets may not be readily assessable until the end of the first half of 2012," said Tom Eid, research vice president at Gartner. "Spending in 2012 is anticipated to focus on industry-specific applications; upgrades to established, mission-critical software; integrating and securing established systems and infrastructure; and software as a service (SaaS) deployments representing extensions to, or replacement of, existing applications and new solutions."

Gartner predicts a volume of $120.4 million for 2012, up from $115.2 million in 2011. In the enterprise app software market, which includes business intelligence, content, communications and collaboration, customer relationship management, digital content creation, enterprise resource planning, office suites and personal productivity, project and portfolio management, and supply chain management, it is still enterprise resource planning that captures the lion's share of the segment. The potential is $24.9 billion, followed by office suites at $16.5 billion, business intelligence at $13.0 billion, and customer relationship management at about $13.0 billion as well.

Software acquisition models that include SaaS, IT asset management and virtualization are predicted to be among the winners in a rather challenging time for enterprise software vendors. Gartner said these models cater to a trend in which a demand for "megasuites" of software shifts to the "automation of processes".

Gartner analysts said that cost optimization and shifts in spending from "megasuites" to the automation of processes as well as corporate efforts to move upfront capital expenses to operational expenses , will continue to benefit alternative software acquisition models such as SaaS, IT asset management and virtualization. "After more than a decade of SaaS and cloud service use, adoption continues to grow and evolve within the enterprise application markets. This is occurring as tighter capital budgets demand leaner alternatives, popularity and familiarity with the model increase, and interest in SaaS and cloud computing grows," Eid said.

Gartner is offering the full report for purchase for $9,995.

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