Software budgets expected to grow faster

BANGALORE, INDIA: Although organisations in Asia Pacific expect to continue to be conservative with their total IT budgets in 2010, software budgets are expected to increase, according to a survey by Gartner, Inc.

The survey showed that organisations in Asia Pacific plan to increase their software budgets by 4.4 percent on average in 2010, while overall IT budgets were expected to decline by 3.1 percent on average. More organisations in Asia Pacific (38 percent) expect to increase their software budgets in 2010 than their overall IT budget (31 percent).

The average expected increase in software budget of 4.4 percent is higher than all other regions surveyed including Europe, Middle East & Africa (EMEA), North America and Latin America.

Gartner surveyed 323 IT managers in Australia, Singapore, Malaysia, China, India and Hong Kong, as part of a worldwide survey of 982 respondents, to help business and IT managers compare their enterprise IT spending with peer organisations. Respondents were asked whether they expected their 2010 IT budget to be below, the same or exceed their IT budget for 2009.

India-based respondents are consistently the most optimistic, with the highest number of respondents intending to increase their IT budget in 2010 (42 percent), followed by China (32 percent). On the other hand, Malaysia-based respondents remain pessimistic, with the largest number of respondents intending to decrease their spending (52 percent), followed by Singapore (48 percent of respondents).

“For most organisations, the budgeting process happens once a year, but adjusting the IT budget is a continuous exercise that is driven by economic conditions and changes in the business,” said Gartner research director Yanna Dharmasthira.

“In the midst of economic volatility, hardware budget allocation remains the top priority in most countries, but software budgets are a real bright spot and continue to demonstrate a positive outlook, although more cautious when compared with last year's survey,” Dharmasthira added.

Software is expected to represent the second-largest portion of the IT budget in most countries, with the exception of India (where software and hardware spend are roughly equal) and Australia (where spending is notably higher on IT staff). India is the most aggressive with the highest software budget allocation (26.9 percent), followed by Singapore (25.8 percent), Malaysia (24.1 percent) and China (23.1 percent).

When looking at country level software spending, India is the most optimistic, with the average expected change in software budget of +10 percent.  Australia and Singapore, although considered mature markets, are not conservative, expecting positive average change in software budget for 2010.

Gartner recommends that software vendors in Asia Pacific continue to build, fund and invest in sales and marketing, despite economic volatility.  Dharmasthira said that vendors should revisit their potential customer list, as they may have shifted in terms of geography, as well as market segments.

“Software vendors should not only focus sales efforts on traditional hot spots such as India and China, but look at opportunities in mature markets too.  The intentions to increase software budget have become more varied among different countries and organisations, presenting good opportunities in a mix of developed and emerging countries,” said Dharmasthira.

When looking at horizontal enterprise applications, the software segment with the highest percentage of respondents indicating an increase in spending is customer relationship management (CRM).  This is followed by respondents in office applications, collaboration and enterprise resource planning (ERP) software respectively.

Software as a service (SaaS) spending continues to be fragmented within Asia Pacific, with variation by country, vertical and software segments. Plans to use SaaS in the future are the highest in Hong Kong, followed by India and China, a good mix of both mature and developed countries.