Gartner is out with a press release September 20, 2010 predicting $232 billion in enterprise software revenue for 2010. Having been in the software-market forecasting business a long time, I admit nothing beats doing predictions two-thirds of the way through the year. But in fairness to Gartner, the predicted $232 billion was included in a January 2010 press release as well. Gartner has lowered its growth rate prediction from almost 5% to 4.5% for 2010 but apparently only because somewhere along the line it raised its measurement of 2009.
Still there's a couple of interesting tidbits in the press release for investors. There is also the rarely mentioned elephant in the room, 90%-plus of this revenue has been locked in for a long time because it's subscription maintenance revenue for enterprise software bought years ago. Or it's upgrade/add-on revenue for that same long-installed application and infrastructure functionality.
The tidbits include:
"Gartner analysts said enterprise software growth in North America is significantly front-loaded to the first half of the year..."
I agree but probably for different reasons than Gartner cites (e.g., pent-up demand). I think it has more to do with leading vendor marketing and fiscal policies. Three of the leaders, Intuit (INTU), Microsoft (MSFT) and Oracle (ORCL), close their fiscals in the first half so tend to spiff their sales guys to close fiscal years strongly. Intuit of course has the business tax season in the U.S. driving big first-half numbers as well (ditto for its consumer software of course). The other market leaders, IBM and SAP, still do much better in the second half; I think IBM financial guys invented the hockey stick term to describe that trend even before there was such a thing as enterprise software.
The analyst firm also says:
"Asia/Pacific (excluding Japan) is expected to have the fastest growth in software revenue of all the regions in 2010. The market for enterprise software in Asia/Pacific is estimated to reach $22 billion in 2010, up 13 percent from 2009 revenue of $19.5 billion."
I'm assuming the $22 billion also excludes Japan which indicates that well north of 90% of enterprise software spending comes from North America, Japan and EMEA, just where it has always come from. And of course if the total is growing 4.5% and the AP excluding Japan portion is growing 13%, well... you do the math.
The aircraft carrier that is the enterprise software market turns slowly.
-- Dennis Byron
(no financial interest in companies mentioned)