Cambridge, MA April 8, 2002 The $62 billion market for enterprise software applications is maturing, with license revenue projected to grow at a moderate 9 percent for 2002 through 2005, according to a study released today by technology consultancy Giga Information Group.
The projected growth represents a partial recovery from 2001, when license revenues fell to 4 percent compared to a 39 percent growth rate in 2000, Giga said.
"The hockey-stick growth patterns for enterprise applications are clearly over," said Giga Vice President Andrew Bartels. "Looking to the future, we expect the enterprise application market to grow slowly in 2002 as companies digest their existing investments."
Giga defines enterprise applications as the software that companies use to automate business processes, and Bartels distinguishes these applications from such other software products as infrastructure software (operating systems, databases, etc.), integration and application development software or desktop software.
The disruptive e-commerce applications like commerce servers and e-market platforms, which saw skyrocketing demand in 2000 have cooled down, according to Bartels. Customer relationship management (CRM) and supply chain management had down years as well in 2001 after strong growth the prior year.
On the other hand, efficiency-enhancing applications including human resource management, e-procurement/e-sourcing, financial management, business intelligence and collaborative product development have done well during the past year, as have vertical applications such as healthcare systems and retail management.
"Applications that help companies cut costs will continue to do well in the first part of 2002 as they did in 2001, but applications that help grow revenues such as CRM and commerce servers will come back into favor as the economic recovery strengthens later in 2002," Bartels said. "While integrated suites continue to find great appeal, demand for these suites will be greatest among mid-tier companies and for comprehensive solutions tailored to vertical industries."
Bartels also said non-license revenue will outpace license revenue due to the compounding effects of maintenance revenues on larger existing license bases, a continuing emphasis by suppliers on providing consulting services and a shift toward rental or usage-based revenues. "License revenues are a better measure of forward momentum than total revenues since they reflect new deals as opposed to the legacy of past deals captured in maintenance fees and services revenues," said Bartels. "The picture is definitely grimmer in terms of license revenues."