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Trinh Abrell The Global Enterprise Software Market

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 By Trinh Abrell

The Facts, Figures and Forecasts for the Enterprise Software Market

Before diving into a series of articles about enterprise software, CRM software and software as a service (SaaS) in each of the major global regions we thought we'd set the stage by starting with the big picture — and understanding the market sizes in both absolute and relative terms. We start this understanding by looking at the global enterprise software landscape.

IT budgets rebounded in 2010, and the U.S. technology industry grew twice as fast as the overall U.S. economy, according to Andrew Bartels of Forrester. "In 2009, companies hoarded cash. In 2010, profits were surprisingly strong. So in many cases, companies were sitting on excess capital. One of the ways they deployed that capital was to acquire equipment and software." While Forrester projects IT spending to rise 7.4% in 2011, IDC is slightly more conservative, predicting worldwide IT spending will grow 5.7% to reach $1.6 trillion. Both firms agree that the increase in IT spending will be driven by software and services, leaving hardware behind.

The need to replace aging business systems and to respond to information security demands has pushed the enterprise software market to exceed the US$232 billion mark in 2010, a 4.5% increase from the prior year's figures, according to research firm Gartner.

"After declining 2.6% in 2009, the worldwide market for enterprise software is recovering well with signs of continuing growth on the horizon," explained Joanne Correia, managing VP at Gartner. "Aging systems, as well as greater demand for security and aligning software with business requirements, are key decision factors for end users increasing their spending within the infrastructure software market."

Some global regions will fare better than others with five-year CAGRs (compound annual growth rates) to 2014 varying from 2.7% in Western Europe to 11.5% in Asia-Pacific. Emerging regions, such as Asia-Pacific and Latin America, which were less affected by the recent economic downturn than the U.S. and Europe, are expected to invest more heavily in enterprise software projects over the next few years as they continue to round out the IT infrastructures necessary to do business.

Enterprise software spending in North America is forecast to reach $110.8 billion in 2010, an 8.5% increase from 2009 revenue of $102.1 billion. The market will experience consistent growth through 2014, when spending in North America will surpass $143.6 billion. Research director Colleen Graham commented that key markets such as virtualization, operating systems and security are expected to finish the 2010 year with double-digit growth.

The Europe, Middle East and Africa (EMEA) region will see a decline in enterprise software spending in 2010. Gartner estimates 2010 revenue at $64.5 billion, a 3.4% decline from 2009 revenue of $66.8 billion. In 2010, the majority of software market segments are predicted to see a slight decline in EMEA, although by 2014 the market is expected to reach $76.2 billion.

The slow rebound of the market in Western Europe — which in 2010 and 2011 is set to post only a mild recovery — is in striking contrast with Eastern Europe and the MEA region. Gartner analysts said Eastern Europe is proving to be a highly volatile region with a boom and bust tendency, which can bring huge gains to companies that invest during good years (i.e., 2007 and 2008) but great pain in years of recession (e.g., 2009).

"The story in Western Europe at the moment is the duality of the situation with Germany leading the rebound, France following behind, and the U.K. and the Nordic countries showing promising prospects, while Ireland, Spain, Portugal and Greece are still struggling with weak performances," commented Fabrizio Biscotti, research director at Gartner Europe. "This is leading to a 'polarization' of performances in the software market, with the countries that are leading the recovery being more proactive on the software purchase front while those that are still languishing in recession are missing out on the more innovative software investments. By 2011 this could lead to an even larger gap between the size and growth rates of the software markets in these of countries."

Asia-Pacific (excluding Japan) is expected to have the fastest growth in software revenue of all the regions in 2010. The market for enterprise software in the Asia-Pacific region is forecast to reach $22 billion in 2010, up 13% from 2009 revenue of $19.5 billion. Gartner believes that both enterprise application and infrastructure software will demonstrate a strong rebound in 2010, and this positive momentum will continue through 2011.

"China and India continue to be the growth engine of the software market in the region and currently represent the largest and the fourth-largest software markets in Asia/Pacific," said Yanna Dharmasthira, research director at Gartner. "This should continue due to China's fast-growing economy, sheer market potential, and fragmented and currently relatively low software penetration. India also has much local market potential, while the country's continuing integration with key global economies is generating software revenue growth in all key industries."

Australia and South Korea are the Asian region's most mature software markets with the majority of revenue coming from maintenance revenue streams. Currently, Australia and South Korea are the second- and third-largest software markets in Asia/Pacific.End

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Comments (2) — Comments for this page are closed —

Guest Lenny Chapman
  I know your SaaS market report is coming, but can you provide a peak at where the SaaS market stands?
  Denise Denise Holland
    Here's an early preview.
These numbers are from Gartner, Market Trends: Software as a Service, Worldwide, 2008-2013.
The total SaaS Revenues for Enterprise Applications forecast is $9.6B. The major SaaS enterprise software component forecasts are as follows:

Productivity Applications:
Messaging and Collaboration:
CRM Applications:
ERP Applications:
Supply Chain Management:

In a 2010 IDC report titled "Worldwide Software Business Solutions 2010 Top 10 Predictions: The 'New Normal' for Enterprise Software", the analyst firm predicts that the software industry shift towards subscription models will result in a nearly US$7 billion decline in worldwide licensing revenues in 2010.



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Asia-Pacific (excluding Japan) is expected to have the fastest growth in enterprise software revenue of all the regions in 2010. The market for enterprise software in the Asia-Pacific region is forecast to reach $22 billion in 2010, up 13% from 2009 revenue of $19.5 billion.

~ Gartner


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