Gartner: Enterprise-software sales to drop in Europe

The analyst firm predicts that Europe will see a drop in sales as the economic downturn bites into budgets and spending slows

Sales of enterprise software in Europe will fall by 5.6 percent this year, dropping from $81.2bn to $76.7bn, analyst firm Gartner has predicted.

That is in contrast to the worldwide market for enterprise software, which will experience flat growth, Gartner said on Monday. Global revenue for the coming year will be $222.6bn (£157bn), the company expects, compared with $221.9bn in 2008 — a rise of just 0.3 percent.

In the unsettled market, the software makers likely to do better than others will be those with a balanced mix of revenue from channel sales, new software licences and maintenance, the company noted. The big sellers will also have an advantage in riding out the downturn due to their ability to give price breaks on bundles, as well as their geographic spread.

While most types of enterprise software will still see modest gains, Gartner identified some areas where it expects to see sales shrink: operating systems, office suites, middleware, storage and digital content creation.

On the positive side, Gartner forecast that there will be growth in appliances, where hardware comes with essential software preloaded. It also said products that help companies optimise their existing technology should do well.

"In general, we anticipate a wave of interest around technologies that can help cost optimisation. This will benefit alternative software acquisition models, as organisations will look for ways to shift spending from capital expenditures to operating expenditures," Fabrizio Biscotti, research director at Gartner, said in a statement. "As a consequence, vendors offering software-as-a-service (SaaS), IT asset management, virtualisation capabilities and an ability to leverage open-source software will benefit."

The main reason Gartner is predicting a fall in enterprise software sales in Europe is the fact the UK, Ireland, Spain and the Scandinavian countries have all entered an economic recession, with "dire consequences to IT spending", Biscotti said.

On top of this, the countries of Eastern Europe are facing "the toughest economic downturn since the fall of the Berlin Wall", Biscotti said, with Germany, France and Italy also facing difficult economic conditions.

However, the Middle East and Africa are weathering the crisis better than Europe, Biscotti said.

Worldwide, the enterprise software market has the potential to weather the current economic downturn better than in 2001 and 2002, Gartner said, because the market has the "maturity, penetration, confidence in IT, and the geographical and vertical mix" that were lacking in previous years.

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