OS demand is drooping - so why can't businesses stop spending on software?

OS demand is drooping - so why can't businesses stop spending on software?

Summary: Enterprise software may enjoy the biggest growth in any area of IT spending, but serious changes are going on under the surface.

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While spending on enterprise software is expected to maintain healthy growth in the next couple of years, the traditional operating system is taking a tumble.

Gartner research released today shows that enterprise software will be the sector of IT spending with the highest growth between 2013 and  2014 at 6.7 percent. The figure represents a slight increase on 2013's figure of 6.4 percent — when software's growth is only topped by that of devices.

However, that growth won't be mirrored in operating systems, where the inexorable rise of smartphones and tablets is causing a fall in demand for traditional desktop OSes.

In 2010, half of spending on devices went on PCs and laptops, and a quarter on smartphones. However, according to Gartner, that pattern will be roughly reversed by 2017: smartphones and tablets will account for half of device spending while the traditional desktop PC and notebook share will fall to 20 percent.

Growth in spending for operating systems has declined from six percent between 2010 and 2011 to a negative figure of -0.03 percent in 2011-12 and is expected to stand at 3.5 percent for 2013-14.

Change in user tastes and the BYOD trend

Gartner managing vice president Richard Gordon said the sharp slowdown in corporate demand for traditional PCs is bound up with a change in user preferences and the BYOD trend.

"What you're seeing in enterprises is some of that dynamic. It's not the case that everybody walks into their company and gets a PC anymore," Gordon said.

"You're seeing a slowdown in refresh rates for the more traditional device types. And when you look at enterprise software, the slowdown in operating system growth is probably a result of that trend."

Worldwide enterprise software spending is forecast to hit $297bn this year, the analyst said.

The fall in demand for operating systems and operations management software is being offset by stronger growth in databases, data integration and supply-chain software.

"There's a real need for companies to invest in software for things like business analytics, business intelligence and database software to deal with the influx of a huge amount of complex data. That's where the spending is shifting to," Gordon said.

Telecoms services leads in spending

In terms of overall spending levels, telecoms services leads the field by some margin, with revenues expected to reach $1,728bn by 2014. IT services comes next with $963bn, devices on $758bn, enterprise software on $316bn and datacentre systems on $152bn.

Global IT spending is due to reach $3.8tr by the end of this year, according to Gartner.

"If you look at the overall IT spend growth figures they are fairly modest — three or four percent," Gordon said.

"But with the uncertainty over the economic situation and the politicians' ability to make sensible decisions, that fact we've got IT spending holding up at that level is quite encouraging," he said.

Gordon argued that there is no further degradation in IT spending growth. "You might have expected potentially to have lower growth figures — zero percent or even negative — but we're not seeing that," he said.

"I think what it says is that we're still seeing — obviously the keep-the-lights-on-spending is continuing — the strategic investments going even though the economic situation is unstable and uncertain. We're seeing some positive growth, which is encouraging and we can take some optimism from that."

Gartner first quarter 2013 IT spending projections
Gartner's 2013 projections show telecoms and IT services still account for the lion's share of IT spending.

Topics: Enterprise Software, Big Data, CXO, IT Priorities

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6 comments
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  • OS Spending

    Well, I'm not plugged-in to the people who make corporate O/S spending decisions but as a developer (power-user?) I'll take a crack at guessing. The latest O/S offerings (you know who you are) are a solution looking for a problem. Users, particularly corporate ones, aren't looking to solve O/S problems anymore, the ones they have work fine. Perhaps they're buying stuff (applications layer software) that get their job done instead, eh? The rationale among people is becoming "if it ain't broke, why fix it?". Spend the dollars on items that will help us solve our problems and the O/S ain't among the problems we need to solve.

    Just a guess on my part!

    -Max
    Max Peck
  • Metrics?

    Toby,
    Isn't it just as possible that O/S spending is down because companies bought into and switched(almost wholesale) to windows 7? I can't see the adoption of iOS and Android in the workplace really hitting the desktop/laptop market that hard. How did O/S sales look pre Win7 when everyone in the world was solidly on XP?
    MrSmith317
    • Re: I can't see the adoption of iOS and Android ... really hitting the desk

      Tell that to HP and Dell.
      ldo17
  • the graph shows brakedown to 'software' and 'devices'

    yet the article talks about 'OS'. Does it mean that when a company buys a computer (desktop, laptop, or server) it accounts for 'device' cost separately and 'OS' cost separately?
    Or it means that the text has little to do with the graph that comes with it?
    ForeverSPb
  • Strange data set

    Seems like there would be on offset somewhere that is not tablets/smartphone. Likely the data center to support cloud services.
    jgoode1
  • Maybe There is

    The OS is perhaps the least important commodity in a company. It is only a way to get from a to be but only a and to a lesser extent b is meaningful to the function and mission of the corporation. The reality is that from Windows NT and 2000 the real improvements have been minimal. The OS upgrading is more a result of software providers no longer supporting an OS than any other reason. Many companies also upgrade only because the OS does not have the drivers, etc. For newer hardware, a marketing function, not a limitation of the core OS.

    I was visiting a doctor this week and he is still running Win98 for his office system. Not sure how he is networked. He has a client database that exchanges date with the University Health Care network that is on Win2000 at my hospital. He also is using WordPerfect, Lotus Notes and Lotus Organizer. He explained that everything he uses is what he actually needs to fund his practice, a group of some 45 doctors plus staffing. A few years ago he hired an IT group to survey the office and develop a few plan. Their final report was full of glitz and grammar but nothing his practice team found that actually improved service deliver. They decided to slow down and revisit the matter down the road. They now are testing a Linux system running Wine and have found all of there software will run with no issues whereas they experience problems with their software when testing 7 and to a lesser degree XP. As a Notes and Lotus Organizer user, I know older versions of Notes and the last international of Organizer tend to crash or note even open when usingcompatibilty mode in 7.

    Their current conclusion is updating Windows will be too costly just to arrive at the status quo because of the need to change applications and rewrite or patch their custom programs. Linux offers them an alternative the so far in there testing requires no changing of apps or rewriting programs. As he said, they are only changing because they can not get drivers.
    BrianLevyEsq