Enterprise software mkt to surpass $232 bn

MUMBAI, INDIA: Worldwide enterprise software revenue is on pace to surpass $232 billion in 2010, a 4.5 per cent increase from 2009 revenue of $222.4 billion, according to the latest forecast from Gartner, Inc.

The enterprise software market is projected for continued growth in 2011 with revenue forecast to reach $246.6 billion. Through 2014, the market is expected to reach $297 billion at a five-year compound annual growth rate (CAGR) of 6 percent.

"After declining 2.6 per cent in 2009, the worldwide market for enterprise software is recovering well with signs of continuing growth on the horizon," said Joanne Correia, managing vice president at Gartner.

Correia added, "Aging systems, as well as greater demand for security and aligning software with business requirements, are key decision factors for end users increasing their spending within the infrastructure software market."

Some regions will fare better than others with five-year CAGRs to 2014 varying from 2.7 per cent in Western Europe to 11.5 per cent in Asia/Pacific. Emerging regions, such as Asia/Pacific and Latin America, which were less affected by the latest economic downturn than the U.S. and Europe, are expected to invest heavily in enterprise software initiatives in the next few years as they continue to round out the IT infrastructures necessary to do business.

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. Gartner believes that both enterprise application and infrastructure software will demonstrate a strong rebound in 2010, and this positive momentum is expected to continue through 2011.

"China and India continue to be the growth engine of the software market in the region and currently represent the largest and the fourth-largest software markets in Asia/Pacific," said Yanna Dharmasthira, research director at Gartner.

"This should continue due to China's fast-growing economy, sheer market potential, and fragmented and currently relatively low software penetration. India also has much local market potential, while the country's continuing integration with key global economies is generating software revenue growth in all key industries."

Enterprise software spending in North America is forecast to reach $110.8 billion in 2010, an 8.5 per cent increase from 2009 revenue of $102.1 billion. The market would experience consistent growth through 2014, when spending in North America would urpass $143.6 billion.

The Europe, Middle East and Africa (EMEA) region will see a fall in enterprise software spending this year. Gartner estimates 2010 revenue at $64.5 billion, a 3.4 percent decline from 2009 revenue of $66.8 billion. In 2010, the majority of software market segments are predicted to see a slight decline in EMEA, although by 2014 the market is expected to reach $76.2 billion.

The slow rebound of the market in Western Europe – which in 2010 and 2011 is set to post only a mild recovery – is in striking contrast with Eastern Europe and the MEA region. Gartner analysts said Eastern Europe is proving to be a highly volatile region with a boom and bust tendency, which can bring huge gains to companies that invest during good years (e.g., 2007 and 2008) but great pain in years of recession (e.g., 2009).

Australia and South Korea are the region's most mature software markets with the majority of revenue coming from maintenance revenue streams. Currently, Australia and South Korea are the second- and third-largest software markets in Asia/Pacific.