IT Software Spending To Focus On Upgrades

The focus on upgrading software is the result of a backlog that occurred during the economic recession, study shows.
More than half of IT software budgets this year will be dedicated to upgrading and improving existing applications, rather than implementing new software, a survey of IT executives shows.

The focus on upgrading software is the result of a backlog that occurred during the poor economic conditions last year, the Forrester Research study released Wednesday showed. As a result, companies plan to play catch up this year.

Forrester's survey of nearly 2,200 IT executives at large corporations and small and medium-sized businesses found that 41% of enterprises and 21% of SMBs plan to upgrade existing finance and accounting software, and 48% and 19%, respectively, plan to upgrade customer relationship management applications. For industry-specific software, 52% of enterprises and 18% of SMBs expected to upgrade.

The study found more than 20% of SMBs with concrete plans to implement new CRM or information and knowledge management software in 2010 or later. The finding represented the fastest growing SMB software markets in 2010.

Many firms were putting aside the hype around new technologies that have hit the market in the last few years in favor of improving already-installed technologies, Forrester said.

"As long as businesses are prioritizing cost cutting and efficiency improvements, tech vendors must provide clearer business justifications for their offerings and demonstrate the functional fit with business requirements that their solutions provide," Forrester analyst Holger Kisker said in a statement.

While cloud computing continued to interest enterprises, software-as-a-service applications were driving the market for new implementations more. About a third of large corporations surveyed subscribe or plan to subscribe to SaaS application in the next 12 months.

However, the finding does not mean a third of all business transaction volume would run on SaaS applications, Forrester said. Rather, the number reflects any SaaS application running in an enterprise. Most of the applications are not mission-critical.

The full survey is encompassed in two separate reports entitled The State Of Enterprise Software And Emerging Trends: 2010 and The State Of SMB Software And Emerging Trends: 2010.