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February 16, 2010

IT software budgets to focus on existing applications, says Forrester

Due to the backlog of business application software upgrade activities during the poor economic environment

By CBR Staff Writer

More than half of IT software budgets in 2010 will go toward ongoing operations and maintenance of existing applications, rather than implementing new software offerings, according to a recent survey by Forrester Research.

The survey of nearly 2,200 IT executives and technology decision-makers at enterprise and small and medium-size businesses (SMBs) in North America and Europe found that the poor economic environment last year created a backlog of business application software upgrade activities for firms, and many plan to address the issue this year.

According to Forrester Research, 41% of enterprises and 21% of SMBs surveyed plan to upgrade existing finance and accounting software, 48% of enterprises and 19% of SMBs plan to upgrade their customer relationship management (CRM) applications, while 52% of enterprises and 18% of SMBs plan to upgrade industry-specific software.

In addition, more than 20% of all SMBs plan to implement CRM or information and knowledge management (I&KM) software in 2010 or later. While cloud computing has many enterprises interested, growth of software-as-a-service (SaaS) applications is driving the market more, and Infrastructure-as-a-service (IaaS) is slow.

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The research firm said that about one-third of all enterprises have subscribed or plan to subscribe to SaaS applications in the next 12 months.

Stefan Ried, senior analyst at Forrester, said: “Many vendors mainly position their cloud services toward SMBs with a belief that they will jump on the bandwagon first because they often have more limited IT budgets than larger enterprises.

“Instead, vendor strategists should investigate specific adoption levels by industry, region, or company size to identify their sweet spot for an SMB cloud offering. Large enterprises even adopt some cloud services significantly faster than SMBs.”

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