Java, 'Net Revenues Don't Yet Match Hype, IDC Says

Java and Internet-related software products have drawn lots of ink but relatively few dollars to software vendors over the past year, according to a preliminary report by International Data Corp.

Java and Internet-related software products have drawn lots of ink but relatively few dollars to software vendors over the past year, according to a preliminary report by International Data Corp.

The overall packaged software market worldwide grew 11.9% this year to US$105 billion. While hype ballooned around Internet-related applications and Java-based application development tools, they accounted for little of that spending, according to the report. For example, Java accounted for less than $100 million of the $27.7bn in revenues from the development tools market.

"We are sort of in the infancy of ... the evolution of tools for the Internet," says Stephen Hendrick, director of application development tools research at IDC.

Given the "minute" amount of revenue derived from Java today, there is bound to be tremendous growth in the near future, Hendrick says. "The big issue is the rate at which Java and Java-related tools become a common part of a developer's stable. That could potentially mean tremendous growth for Java or just modest growth for Java."

Overall, according to the report, packaged software growth this year was slowed somewhat compared to last year, due in part to the continued shift to less expensive desktop software and pricing pressures on mainframe software vendors. Despite a slight drop in revenues, IBM remains the No. 1 vendor overall, with $12.5bn in sales and 11.9% of the market. Its market share shrunk 1 percent compared to last year, however, and Microsoft is gaining on it from the No. 2 spot, with $9.4bn in sales and 9% of the market.

In the $49bn applications market, Microsoft, IBM, and SAP hold the top three spots, the only three vendors posting more than $1bn in revenue. Computer Associates International fell behind fast-growing Cadence Design Systems. and Parametric Technology into the sixth slot. Data warehousing, re-engineering of business processes, vertical markets, and the consumer markets will spur growth in this area. Over the next five years, that may be offset by declines in other areas, such as declines in non-client server enterprise application revenues, leading to a combined annual growth rate of 13 to 14%.

IBM tops Microsoft in the $28.2bn systems software market and the $27.7bn tools market, although its market share is slipping in both while Microsoft's is gaining. Microsoft has pulled ahead of Oracle Corp. in the tools market, due to the strength of Microsoft Access and Excel, as well as strong growth in Visual Basic and SQL Server. Informix Software., buoyed by its acquisition of Illustra Information Technologies. and its dynamic server architecture, showed the highest growth of all leading tool vendors, pulling ahead of Sybase into fourth place. Over the next five years, the market's combined annual growth rate is expected to be 12 to 13%, with Java, end-user oriented tools, and component software expected to factor into that growth.

The systems software market is expected to have a combined annual growth rate of 13% through the year 2001. The growth in distributed systems will spur demand for operating systems, system management software, and middleware, according to the report.

IDC can be reached on the World Wide Web at http://www.idcresearch.com/.

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