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Harnessing the horsemen

A report on The Future of Enterprise Software from Forrester Research predicts modest price declines and industry growth below historical highs, with new paradigms around software architecture and delivery.

Forrester analyst John R. Rymer said the shift to a new platform era driven by service-oriented architecture (SOA) will fuel annual industry growth of seven to nine per cent, well off the 15 to 25 per cent growth rate experienced during the Internet bubble.

“Even the aggressive companies are much more deliberate in their purchasing,” said Rymer, adding companies are also skeptical after the hype of the Internet bubble.

Enterprise buyers are also dissatisfied with current software pricing and licensing regimes. High maintenance costs were a concern for 70 per cent of respondents, while half were concerned with complexity and inflexibility.

Rymer said it’s a difficult needle for vendors to thread as a move toward more flexible pricing schemes entails a fundamental change in the way vendors do business.

He added customers are also making things difficult by sending contradictory signals with their desire for both more flexible pricing regimes and predictable pricing information for budgeting purposes.

SAP Canada president Bob Courteau said he’s not hearing the same concerns around licensing. While the vendor is working to accommodate changing trends, Courteau said customers are more interested in total cost of ownership and the business drivers and benefits of software adoption.

The report indicates what Forrester is calling the four horsemen of software commoditization — SOA, SaaS, open source and offshore outsourcing — will serve to hold down prices in most software spaces by fueling competition.

Rymer said because of industry consolidation most companies are doing business with one of the big four software vendors, IBM, Microsoft, Oracle and SAP. To keep them honest, Rymer said many companies are bringing open source technologies like Linux into their environments to bring a competitive factor into the mix.

“I think open source is a fact of life in the Java middleware arena, and also in server operating systems,” he said.

The major software vendors are coming onboard with SOA, but Rymer said it’s only natural they’re doing so with proprietary limits to protect their existing legacy implementations. SAP Canada’s Courteau said though that his company is encouraging its clients to move to a more open environment with its latest generation of products.

“We’re not competing by trying to close standards or develop proprietary applications,” said Courteau. “What we’re trying to do is move people to the most current SAP environments, which are open environments.”

The report indicates, however, that it’s the infrastructure vendors like BEA Systems that are driving innovation and pushing the big four to adapt.

“We’re looking at a new standards-based marketplace, we’re not going to have as much lock-in, and that’s good,” said Stuart Charlton, enterprise architect with BEA Systems Canada. “In a way, Oracle and SAP are catching up [but] they’re always going to be more proprietary then pure infrastructure vendors.”

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