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June 19, 2012

Cloud and SaaS continue to be the focus for cash strapped IT departments

While overall enterprise IT spends fall, Cloud and SaaS are becoming increasingly prominent in IT refresh cycles.

By Allan Swann

The worldwide spend on enterprise application software is predicted to increase by 4.5% in 2012, according to Gartner, down from it’s original projections of 5% made earlier this year. However, SaaS and cloud-based services are forecast to grow in usage, expanding from 11% of enterprise application spending in 2010 to 16% by 2015.

The worldwide spend on enterprise application software is expected to total $120.4 billion in 2012, a 4.5 percent increase from 2011’s $115.2bn, as the industry continues to struggle in the ongoing financial crisis.

"The global marketplace is still experiencing a series of conflicting and contrasting economic news reports, and the full impact of the economic uncertainty on the enterprise software markets may not be readily assessable until the end of the first half of 2012," said Tom Eid, research vice president at Gartner.

ERP remains the largest enterprise application software market with revenue projected to reach $24.9bn in 2012, followed by office suites at $16.5bn. BI revenue is forecast to reach $13bn, and CRM is on pace to exceed $13bn this year.

"Spending in 2012 is anticipated to focus on industry-specific applications; upgrades to established, mission-critical software; integrating and securing established systems and infrastructure; and software as a service (SaaS) deployments representing extensions to, or replacement of, existing applications and new solutions," said Eid.

Shifts in IT spending from ‘megasuites’ of software to more automated processes, means that vendors offering SaaS, IT asset management and virtualization capabilities will continue to benefit. More industries are shifting their IT spends from larger upfront capex to subscription-based solutions and "pay as you go" offerings as they go through technology refresh cycles.

"After more than a decade of SaaS and cloud service use, adoption continues to grow and evolve within the enterprise application markets. This is occurring as tighter capital budgets demand leaner alternatives, popularity and familiarity with the model increase, and interest in SaaS and cloud computing grows," said Eid.

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