Enterprise software revenue in the Asia-Pacific region, excluding Japan, is expected to grow 10.2 percent to reach US$22.1 billion in 2010, according to Gartner.
In a report released Monday, the research firm said this marks an "upturn" from an expected 6.6 percent growth for 2009. However, the projected 2010 revenue is still lower than the 13.8 percent growth registered in 2008, Gartner said.
Despite the slowdown in growth, worldwide, the Asia-Pacific region will enjoy the highest compound annual growth rate (CAGR) at 10.8 percent.
As a result of positive outlook for the Asia-Pacific software industry, compared to the United States and Europe, major vendors will continue to target "higher-growth markets" in this region, Yanna Dharmasthira, Gartner's research director of software markets, said in the report.
"However, business customers will continue to have strong bargaining power in the region," said Dharmasthira, adding that some markets in the region are traditionally more price-sensitive, a trait that has been more pronounced in the economic downturn. "We expect to see more intense vendor competition in Asia-Pacific, from multinational vendors as well as prominent local country vendors."
Dharmasthira noted that the region will continue to have significant positive potential for future IT investment due to its relatively low penetration and large domestic user base.
Gartner said infrastructure software will account for 64.4 percent of overall enterprise software spending in the Asia-Pacific region next year, with a major portion invested in operating systems, database and security software. The research firm also predicted that data integration tools and virtualization software will grow the fastest over the next five years.
Application software expenditure is projected to grow 9.9 percent over the same period. ERP (enterprise resource planning) and office suites will remain the largest segments, while Web conferencing and project and portfolio management will have the fastest CAGRs over the forecast period.
Four largest software market in APAC
According to Gartner, China, India and Vietnam will remain markets with the highest growth in the region. In addition, the world's two most populous nations will continue to benefit from their large potential domestic demand and government stimulus packages, as well as relatively low market penetration.
China will continue to lead software demand in the region followed by Australia, South Korea and India.
China's software demand is predicted to grow at 12.2 percent this year and 14.5 percent in 2010, said Gartner. It added that the local government's stimulus package will cushion the negativity from the country's high dependency on exports.
India is expected to register growth of 10.1 percent this year and 11.8 percent in 2010. Despite being impacted by the economic downturn, India's lower dependence on exports than China will prove an "advantage", Gartner said, adding that the former's largely untapped market and strong pool of IT skills will sustain India's local software demand.
For mature markets such as Australia and Singapore, the outlook will continue to be positive in 2010. Gartner explained that revenue in mature markets is supported by a consistent maintenance revenue stream, strong vendor channel and service infrastructure, as well as positive expectations for end-user software budget increases in 2010.
Dharmasthira said: "With the economic slowdown, end-user organizations will prioritize IT as a way to cut costs and enhance their organizational efficiency and competitiveness, which is critical in the current environment."
The region's second largest market, Australia will experience a slight dip in growth this year at 5.4 percent, which will pick up in 2010 to 8.2 percent, said Gartner, noting that the country was less affected by the recession than other mature markets in the region. In addition, Australia has the advantage of a well-established IT infrastructure and well-developed sales and service infrastructure.
According to Gartner, South Korea with its 2 percent growth will be slowest among the four largest market, but the market will see "notable" growth of 6.5 percent in 2010. Gartner added that South Korea has a well-developed and IT-savvy market, and revenue will come from its large installed user base, specifically from maintenance and budget.