Analysts: Software market will stay steady

There will continue to be guarded optimism surrounding the enterprise software market in 2003, according to analysts.

In the coming year, Canadian companies will continue to seek out software that is less complex and easier to integrate with existing IT infrastructure, according to enterprise software analyst Warren Shiau at Toronto-based IDC Canada Ltd.

Conservatism seems to be the order of the day as companies will turn to software applications such as portals and integration tools to reduce complexity.

“You don’t see users doing these huge deals to standardize their entire enterprise on one vendor infrastructure,” Shiau said, adding that organizations are adopting software on a module-by-module basis.

“This allows midsize companies of do better than they would previously,” Shiau said. Vendors are realizing this – expect the current trend of vendor alliances to continue, he added.

“Vendors are starting to push upgrades and starting to initiate key support plans for older versions of their application suites. It may reach the point in 2003 where they actually do start moving their install base to be a major upgrade (as) you’ll see a positive influence on the applications market from that standpoint,” Shiau said.

Linux software will also continue to make strides in the new year, Shiau noted.

“Linux [has been] breaking through for the past years in terms of market share, however that doesn’t necessary translate into share of market revenue. This has always been the problem for Linux vendors,” Shiau said.

“Things that are occurring will likely make this less a problem for Linux penetration in the market. Companies like Red Hat and SuSE that needed to make profits from Linux are now joined by larger companies like IBM, Oracle, or Dell. It doesn’t matter to these vendors whether or not they make profits off of Linux itself as long as Linux is generating profits somewhere else – services, hardware or in other software sales. Once you eliminate that problem, it becomes much more likely that Linux gets a more powerful wedge in to the marketplace.”

Microsoft Corp., according to Shiau, is not really the primary target of Linux at the moment – Linux causes the most worries for UNIX.

“People who are technical people who are familiar with UNIX are going to be very comfortable with Linux. What’s happening is that users and buyers are seeing Linux as a much lower cost alternative to UNIX rather than an alternative to Microsoft,” he added.

Speaking of Microsoft, on the customer relationship management (CRM) front, expect the 2003 release of Microsoft’s CRM suite to create a buzz, according to Jacob Abramowicz, senior research analyst at Toronto-based E-Search Canada.

Microsoft won’t become the number one player in the CRM market but it will have the effect of getting more people to know more about CRM as a business process and not a technological cure-all. The market itself will finally have a better understanding of CRM – this is something that was supposed to have happened by now, Abramowicz noted

“The ‘customer-centric’ value proposition of CRM must first be founded on an ’employee-centric’ approach – the internal efficiencies are just as important as those that are customer-facing, Abramowicz said.

All things considered, 2003 will be a challenging year, he added

Overall, Abramowicz predicted the CRM market will go through a bit of a consolidation period as some of the smaller niche players will be brought up. In addition, companies will continue to adopt a vendor agnostic approach, Abramowicz said.

The overall CRM vendor trend to target key vertical industries such as financial institutions, telecommunications and manufacturing will generally begin to pay off. Companies within these verticals, who previously would have purchased an all-purpose suite are moving towards a specific specialized solution.

“This will finally pay off, although CRM vendors thought that it was going to pay off a little sooner,” Abramowicz said.