Enterprise software spending to grow 6.4% to $297 billion in 2013: Gartner

Infotech Lead Asia: Enterprise software spending is likely to touch $297 billion in 2013, up 6.4 percent from $279 billion in 2012.

Gartner says the global enterprise software spending will increase 6.7 percent to $316 billion in 2014.

Though the growth for enterprise segment remains unchanged from Gartner’s previous forecast, this belies significant changes at a market level, as stronger growth expectations for database management systems (DBMS), data integration tools and supply chain management compensate for lower growth expectations for IT operations management and operating systems software.

See the full chart on Gartner’s IT predictions for 2013 and 2014

McKinsey says many small and midsize enterprise software companies spend too much on sales and on research and development to survive the coming shakeout. Many rely on cash reserves, while others milk maintenance contracts and upgrades on software they have already sold.

These smaller vendors might have reached their sell-by date, for the enterprise software industry will consolidate as customers buy products from fewer vendors. One company recently raised its preferred supplier’s share of its software budget to 70 percent, from 10.

This sort of decision—by no means unusual among software customers these days—is good news for larger vendors, which find synergies in selling bundled applications, such as enterprise-resource-planning or supply-chain-management software. But it is bad news for small companies.

According to McKinsey, the big will get bigger in enterprise software, though not primarily through acquisitions, because the difficulty of integrating the products of two merging companies can make the price too high.

Meanwhile, PwC released the second of a series of reports evaluating how shifts in the enterprise software sales model — from license to services — will impact pricing.

PwC four point pricing management framework centers on key factors affecting pricing maturity and financial results: pricing strategy, price formulation, transaction management and performance management. These factors, working together in a functioning business, affect and are affected by process, organization and technology, and data analytics.

The fourth part of PwC’s pricing management framework is performance management, which measures, enforces and refines pricing policies, based largely on post-sales analysis.

Mark McCaffrey, PwC’s global software leader, said: “By combining analytics with formalized processes and standards, companies can get on a path towards a more coherent, organization-wide pricing model that delivers proven results.”

Meanwhile, global IT spending is projected to total $3.8 trillion in 2013, a 4.1 percent increase from 2012 spending of $3.6 trillion.

John Lovelock, research vice president at Gartner, said: “The Nexus of Forces — social, mobile, cloud and information — are reshaping spending patterns across all of the IT sectors. However, the ratio of this mix is changing dramatically and there are clear winners and losers over the next three to five years.”

Ambika K
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