Software revenue to rise 8% in 2008, Gartner predicts

However, it may drop after that, firm says

Gartner says the worldwide enterprise-software industry is poised for an 8.2% 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 US$190.7 billion (NZ$240.5 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, as there are several challenges facing software vendors. Growth is most likely for vendors that have diverse revenue streams through channels, new licences and maintenance, and flexibility in contractual terms through models such as software-as-a-service, open source and outsourcing, Gartner says. "Shrinking discretionary budgets will heighten competition for new maintenance and licence revenue streams, and place a renewed emphasis on vendor performance and viability," Gartner managing vice president Joanne Correia says. "Market consolidations and restructurings may accelerate as mergers and acquisitions among smaller and larger vendors increase," she says. Fears of a potential recession caused Forrester Research to predict modest growth of 2.8% in US purchases of IT goods and services in 2008. Forrester previously predicted 4.6% growth but revised its forecast downward this month after seeing newly available economic data. Gartner says problems in the US won't significantly impact worldwide software spending, but the firm isn't optimistic about the period after 2008. In fact, Gartner says, revenue decreases 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 says. "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," he says.

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