Software revenue to rise 8 per cent in 2008, Gartner predicts

Gartner says the worldwide enterprise-software industry is poised for an 8.2 per cent revenue increase in 2008 despite fears of a possible recession and gloomy predictions about IT spending from some industry watchers.

Global software revenue will total $US190.7 billion this year, up from US$176.3 billion last year, Gartner predicts. It's not clear whether that growth will continue beyond 2008, Gartner adds, enumerating several challenges facing software vendors.

Growth is most likely for vendors that have diverse revenue streams through channels, new licenses and maintenance, and flexibility in contractual terms through models such as software-as-a-service, open source and outsourcing.

"Shrinking discretionary-spending budgets will heighten competition for new maintenance and license revenue streams, and place a renewed emphasis on vendor performance and viability," Gartner managing vice president Joanne Correia said in a press release. "Market consolidations and restructurings may accelerate as mergers and acquisitions among smaller and larger vendors increase."

Fears of a potential recession caused Forrester Research to predict modest growth of 2.8 per cent in US purchases of IT goods and services in 2008. Forrester previously predicted 4.6 per cent growth but revised its forecast downward this week after seeing newly available economic data.

Gartner said problems in the United States won't significantly impact worldwide software spending, but the analyst firm does not sound optimistic about the period after 2008.

In fact, Gartner said revenue declines in a few portions of the software market could begin as early as the second quarter of this year.

"The enterprise software market is undergoing major technology and business-model transitions that will last through 2012," Gartner research vice president Tom Eid said in a press release. "For the near term, software vendors will continue to face tough product life-cycle decisions and short-term pressure on price and margins, which will put the ability to be innovative at risk. The fundamental changes that are occurring in how software technology is deployed and used means no software market or vendor will remain untouched."