China fastest-growing enterprise software market

Enterprise software market in the country will surpass US$6 billion this year to become world's fastest-growing through 2013, according to new report.
Written by Liau Yun Qing, Contributor

China's enterprise software market is predicted to achieve a compound annual growth rate (CAGR) of 14.6 percent from 2008 to 2013, to become the fastest-growing market globally, said Gartner.

In a Thursday report, the research firm predicted that Asia-Pacific's largest software market will reach US$9.4 billion by 2013, making up 30 percent of the region's software revenue and representing 3.3 percent of total worldwide software revenue.

For the first time, too, this year will see China surpass the US$6 billion mark in software revenue, accounting for 27 percent of the region's revenue to make up 2.7 percent of the total worldwide software market, said Gartner.

The strongest growth in software spending will be seen in four vertical industries--manufacturing, financial services, communications and government. These four verticals will account for 60 percent of total software spending in China.

In the report, Hai Hong Swinehart, research analyst at Gartner, said software vendors will have strong growth potential in China, but will face the challenges found in a developing commercial environment.

In the past, Chinese enterprises have preferred to develop applications using their own labor as it costs less, said Swinehart. However, such practices have resulted in legacy and quickly obsolete software, as well as inhibited Chinese enterprises' sustainability and business IT continuity.

"Growth [in software revenue] will mainly be driven by replacing immature infrastructure with standardized systems, and the large vendors stand to benefit," she said.

While Gartner said spending across infrastructure and application software segments is expected to increase in 2010, infrastructure software will be double that of application software through 2013, with priority spending in enterprise resource planning (ERP), office suites, operating systems and database management systems.

That said, China being a hardware-centric country, spending will be focused more on infrastructure, a trend which will continue through 2013, said Swinehart. Here, the survey found that organizations in China for 2010 have indicated they will put aside about 33 per cent of their IT budgets on hardware as opposed to 23 percent on software.

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