By Paul Carton and Jim WoodsA greater-than-expected pullback is occurring in software spending.
ChangeWave's latest corporate software survey points to a striking deterioration in software spending plans for the next 90 days. Moreover, in a sharp reminder of the severity of the current U.S. recession, the purchasing decline cuts across all software categories.
The ChangeWave survey was conducted Oct. 6-15, and 1,841 respondents involved with their company's software spending participated.
Software Industry Faces Hard Times AheadIn the most-telling finding of the survey, 40% of corporate software purchasers said their company will spend less on software during the next 90 days -- a whopping 15 points worse than the previous ChangeWave survey in July.
Only 8% said they'll spend more -- four points worse than previously.
What's Driving the Slowdown?Twenty-three percent of corporate respondents cited a general slowdown in business conditions and capital budgets as driving their software purchasing decisions -- up nine points since July. Another 31% said their company currently doesn't need to purchase any new software.
Compounding the matter, when asked if there had been any recent changes in their company's overall capital budgets, 11 times as many respondents said their budget had been adjusted lower during the past 90 days than said it had been increased.
In a further ominous sign, 50% of our respondents reported that their company has no plans to purchase software during the next 90 days -- a six-point jump from previously and the highest level we've seen since we began asking this question in July 2007.
Software Spending Trends Downward in All CategoriesA key focus of this survey was whether companies plan to increase or decrease their spending within specific software categories. For the first time in a ChangeWave survey, all software categories are experiencing decreased spending going forward.
Even virtualization (-13) and security (-7) -- software categories that have held up much better during 2008 than the rest -- are now experiencing decreased spending going forward.
Virtualization Software Just 12% of respondents said their company is increasing virtualization spending during the next 90 days, while 25% said it is decreasing -- a net 15 points worse than three months ago.
Two major vendors,
Microsoft (MSFT) -- up three points to 24% -- and
Citrix (CTXS) -- up two points to 17% -- look poised to increase their share of the virtualization market going forward.
But, although they're garnering a larger share of the pie, it's happening as the overall virtualization market has slowed and projections going forward look even worse.
And what about industry leader
VMware (VMW), which is down one point to 67%?
For the third-consecutive survey, it continues to show slightly reduced visibility.
Security SoftwareSecurity also registered negative growth for the first time this year in a ChangeWave survey. Only 13% of respondents said their company is increasing security software spending during the next 90 days, while 20% said it is decreasing (a net 11 points below July).
Business Intelligence (BI) SoftwareBI has consistently shown negative growth in our software purchasing surveys since January 2008, but it has suddenly taken a considerable turn for the worse.
Within the shrinking BI purchasing universe,
IBM (IBM) -- up three points to 16% -- continues to show sales momentum. But Microsoft -- unchanged with 20% -- is now the leading vendor for companies planning to purchase BI in the next 90 days.
On the down side,
Oracle (ORCL) -- down 13 points to13% -- and
SAP (SAP) -- down four points to 18% -- both show declines in BI market share going forward.
The Bottom LineThe recession is sparing few sectors, as even the once-mighty have fallen on hard times.
With companies slashing their spending budgets in an attempt to salvage their 2008 bottom lines, software purchases have been landing in the expendable column. All of this points to a very soft future for corporate software spending for the next 90 days, and probably for much longer.
Paul Carton is the Director of Research for the ChangeWave Alliance Research Network. Jim Woods is a Senior Editor for ChangeWave. The Research Network is a group of 20,000 highly qualified business, technology and medical professionals -- as well as early adopter consumers -- who work in leading companies of select industries. ChangeWave surveys its Network members weekly on a range of business and consumer topics, and converts the information into a series of proprietary quantitative and qualitative reports.
