Global software market still in decline
Julian Hewett, Chief Analyst
Ovum has just released its annual survey of the global software market. As we predicted, the market declined by a massive 5% in 2002, when it was worth $152 billion. We predict that it will decline by a further 2.5% in 2003. Beyond this, we forecast a small decline in 2004, and perhaps small growth in 2005.
However, the 2003 decline is really 1% to 2% worse if you ignore the effect of currency shifts. They flatter 2003 spending if you measure in US dollars, because the dollar has fallen 15% against the euro since December 2002..
Also, remember that these figures include inflation. In real terms, the figures are even worse. In fact, in real terms, it’s unlikely that the market will grow again until 2007! We can only come back once again to our 2003 themes of ‘maturity and consolidation’.
On the other hand, there seems to be a rash of new surveys and predictions from others forecasting a return to industry growth in 2004. Yes, folks, lots of observers STILL believe that growth is ‘two quarters away’.
Despite a flat market overall, there will still be lots of change – both technology and industry structure. Web services looks like being the most disruptive technology around. The visionaries in Ovum argue that this might cause the disaggregation of enterprise software products into a services-based architecture. Another safer assumption is that we will continue with the current trend of consolidation.
Business intelligence remains a growth area. Perhaps the most positive recent results have come from BI software company Cognos. It reported revenues and net income both up by 25% in its quarter ending 31 May 2003. Other growth areas include security, portals and content management. Records management has suddenly become important, to help respond to Basel II and Sarbanes-Oxley. Open source, championed by IBM and Oracle in particular, continues to make ground. Supporting mobile workers and devices with wireless technologies is beginning to attract serious interest.
The mantra of Harvard Business School guru Michael Porter is more potent than ever. Winners in a mature market will be either cost leaders, or those with a defensible niche. Those who are ‘stuck in the middle’ will find it increasingly uncomfortable.
The databases and tools sectors are largely consolidated already. Now it’s the turn of business applications with the Oracle-PeopleSoft-JD Edwards ‘love triangle’. Software infrastructure will be next. EMC’s acquisition of Legato this week has started the ball rolling.
The top twenty global software vendors
Rank
|
Vendor
|
Total revenues in 2002 ($b)
|
Software revenues in 2002 ($b) *
|
1
|
Microsoft
|
30.8
|
25.9
|
2
|
IBM
|
81.2
|
13.1
|
3
|
Oracle
|
9.4
|
6.9
|
4
|
SAP
|
7.0
|
6.8
|
5
|
HP
|
70.5
|
2.6
|
6
|
Computer Associates
|
3.1
|
2.5
|
7
|
Hitachi
|
81.5
|
1.5
|
8
|
Veritas
|
1.5
|
1.4
|
9
|
Symantec
|
1.3
|
1.3
|
10
|
Intuit
|
1.5
|
1.3
|
11
|
EMC
|
5.4
|
1.2
|
12
|
PeopleSoft
|
1.9
|
1.2
|
13
|
BMC
|
1.3
|
1.2
|
14
|
Adobe
|
1.2
|
1.2
|
15
|
Cadence
|
1.3
|
1.1
|
16
|
Siebel
|
1.6
|
1.1
|
17
|
SAS
|
1.2
|
1.1
|
18
|
Sun
|
12.2
|
1.0
|
19
|
Network Associates
|
0.9
|
0.8
|
20
|
BEA
|
0.9
|
0.8
|
|
|
|
|
|
|
* Ovum estimates in some cases. Note that these figures represent end user spending on software product licenses and maintenance. They exclude recreational software.
For more on these figures, see Ovum forecasts: Global software markets, 2003-2007 or contact Phil Carnelley, Research Director on PXC@Ovum.com 
|
