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Enterprise Software Spending Grew 8.5% In 2010

Microsoft led with a 22% market revenue share, driven by Windows 7, Office 2010, and strategies for enterprise platforms, found Gartner study.

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Worldwide spending in the enterprise software market grew by 8.5% in 2010 to $245 billion, after a 2.5% decrease in 2009, which suggests enterprises are pulling out of the recession and investing in organizational growth, according to a study released Thursday by Gartner.

Some regions fared better than others, with Japan and Western Europe reporting modest growth in enterprise software investment and Asia/Pacific seeing growth in the mid-to-high teens, which was double the market average.

With the worldwide economy growing somewhere between 2 to 3%, the growth in enterprise software spending at more than 8% represents a good economic indicator of a stabilizing worldwide economy, said Tom Eid, research VP at Gartner, in an interview.

"We're moving into a period of buying software for growth and new revenue delivery, as opposed to limited buying, cutting costs, and reducing costs," Eid said.

Microsoft led the software vendor pack as it increased its worldwide enterprise software revenue market share to 22.4% in 2010. The revenue increase was driven by Windows 7 operating system and Microsoft Office 2010 software. Yet Microsoft's software strategies aimed at enterprise application and infrastructure software programming platforms helped as well, according to the report.

"One of things that is helping [to drive enterprise software growth] is that some of the largest software vendors like Microsoft and Oracle are doing a very good job at selling much deeper and more comprehensively into the enterprise," Eid said.

IBM maintained its second-place ranking from 2009, with its software revenue increasing by 5.7% in 2010. Big Blue held its position primarily due to its WebSphere, Tivoli, information management, operating system, and Rational brands. IBM would've been in the top spot if the ranking didn't include Microsoft's Office and Windows 7, the report noted.

Oracle showed the strongest growth out of the top five vendors in 2010, as it increased its revenue 19.4%. All its software markets saw growth, but the fastest growth came from its business intelligence, security, IT operations, and data integration and quality tools offerings. Gartner expects Oracle to continue its market momentum this year with its industry offerings, middleware, data quality and integration tools, master data management, database customer relationship management, and supply chain management products.

However, among the top 25 vendors, VMware was the growth leader, with about 41% gain in revenue in 2010, followed by Adobe with more than 29%, and Salesforce.com with more than 28%. The top 25 vendors grew more than 11.5% overall, in terms of revenue, and held a 68% market share of the software market, with more than $165 billion.

The Gartner findings point to a worldwide comeback of organizational investment in growth, which will then spur innovation in the software industry, Eid said. He predicts similar, if not higher growth this year.

"As the general economic marketplace gets healthier and grows, it creates additional, applicative effects in the IT industry," Eid said. "Once we know that the overall economy is recovering, the value [that] industries deliver through their IT systems will exceed whatever macro level economic growth is occurring."

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