ChangeWave Research Report:

Corporate Software Spending: 90 Day Outlook

Sharpest Decline for Software Purchasing on Record

October 31, 2008

Overview

ChangeWave’s latest corporate software survey, conducted October 6-15, 2008 shows a striking deterioration in software purchasing plans for the next 90 days. In a sharp reminder of the severity of the current U.S. recession, the spending decline is now hitting all software categories – the first time this has occurred in a ChangeWave survey.

A total of 1,841 respondents involved with software purchasing in their company participated in the current survey.

Hard Times for Software

Two-in-five corporate software purchasers (40%) now say their company will spend less on software over the next 90 days – a whopping 15-pts worse than our previous survey in July.

Only 8% say they’ll spend more – 4-pts worse than previously. 

What’s Driving the Slowdown? Nearly one-in-four corporate respondents (23%) cite a general slowdown in business conditions and capital budgets as driving their software purchasing decisions – a 9-pt increase since July.  Another 31% say their company currently doesn’t need to purchase any new software – 1-pt more than previously. 

In a further ominous finding, when asked if there had been any recent changes in their company’s overall capital budgets, eleven times as many respondents said their budget had been adjusted lower over the past 90 days (43%) than said it had been increased (4%).

Moreover, in a follow-up question on buying plans for the next 90 days, half of respondents (50%) reported their company has No Plans to Purchase Software, a 6-pt jump from previously, and the highest level recorded since we began asking this question in July 2007.

Software Categories

One of the survey’s key focus points is on whether companies are going to increase or decrease spending within specific software categories.

In a clear sign of recessionary times, all software categories are experiencing decreased spending going forward – with Document & Enterprise Content Management (ECM; Net Score = -26), Enterprise Resource Planning (ERP; -24), Business Intelligence (BI; -21) and Customer Relationship Management software (CRM; -20) taking the biggest hit.

Even Virtualization (-13) and Security (-7) software categories that have held up much better in 2008 than the rest – are experiencing decreased spending going forward. 

Virtualization Software. The current survey points to negative growth for virtualization software, with just 12% saying their company is increasing virtualization spending over the next 90 days and 25% saying it is decreasing – a net 15-pts worse than 3 months ago.

We note that among companies purchasing Virtualization software, two major vendors – Microsoft, (MSFT; 24%; +3) and Citrix (CTXS; 17%; +2) – each show increases in share going forward. On the other hand, VMware (VMW; 67%; down 1-pt) is showing reduced visibility for the third consecutive survey since January.

It’s important to remember that while Microsoft and Citrix continue to garner a larger share of the pie, the overall virtualization market is slowing and the projections are for a tough 4th quarter.

Business Intelligence Software. BI Software purchasing has been registering negative growth in our software surveys since January 2008, but a comparison of the current results to the previous 4 surveys shows it has suddenly taken a considerable turn for the worse.

Within this shrinking universe, IBM (IBM; 16%; up 3-pts) continues to show momentum in terms of BI software sales, while by a slight margin Microsoft (MSFT; 20%; unchanged) is now the leading vendor for companies purchasing BI software going forward.

Two other major vendors each show a drop in BI market share, led by Oracle (ORCL; 13%; down 13-pts), and SAP (SAP; 18%; down 4-pts).

Security Software. Security software is also registering negative growth for the first time this year in a ChangeWave survey.  Only 13% of respondents say their company is increasing security software spending over the next 90 days while 20% say it’s decreasing (net 11-pts worse than July).

Planned CRM software buying also looks significantly weaker going forward…

Customer Relationship Management (CRM) Software.

…as do each of the following corporate software categories:

Enterprise Resource Planning (ERP) Software:

Document and Enterprise Content Management (ECM):

Data Storage Software:

Database Management Software:

Sharpest Decline for Corporate Software On Record 40% of respondents say their company will spend less on software over the next 90 days – a whopping 15-pts worse than July Only 8% say they’ll spend more – 4-pts worse What’s Driving Slowdown? 23% cite a general slowdown in business conditions and capital budgets – 9-pts more than in July survey Another 31% say their company currently doesn’t need to purchase new software – up 1-pt

Spending Decline Cuts Across All Software Categories Hardest Hit by Decreased Spending Next 90 Days ECM (-26 Net Difference Score) ERP (-24) BI (-21) CRM (-20) Database Mgmt (-18) Even the Categories That Held up Better During 2008 are Now Experiencing Decreased Spending Virtualization (-13) Security Software (-7)

Half of Companies Not Planning to Purchase Software Next 90 Days 50% report No Plans to Purchase Software in the next 90 days, a 6-pt jump from previously Another Ominous Sign – Capital Budgets Adjusting Lower 43% say their 4Q Capital Budgets have been adjusted lower over past 90 days Only 4% say their Capital Budgets have been increased

 

This report presents the findings of our latest ChangeWave Alliance survey on corporate spending for software. The survey was conducted October 7-15, 2008 and a total of 1,841 Alliance members involved with IT spending in their company participated.

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