Enterprise software vendors will try to hold the line on prices this year because they're more interested in market share than profitability, according to a Gartner report released yesterday.
In the report from the Stamford, Conn.-based IT research firm, analysts predict enterprise software spending will decline 1.2 percent in 2015, with revenue totaling $654 billion. Raising prices could take software vendors out of a sales cycle, leading to lost clients.
IT Spending Down
But despite their best intentions, some vendors may have to raise prices after all.
Gartner predicts worldwide IT spending will total $3.5 trillion this year, a 5.5 percent decline from 2014. Analysts attribute the decline to the rising US dollar, which could force the hand of some cash-strapped vendors.
"We want to stress that this is not a market crash,” John-David Lovelock, research vice president at Gartner, said in a statement. “Such are the illusions that large swings in the value of the US dollar versus other currencies can create. However, there are secondary effects to the rising US dollar. Vendors do have to raise prices to protect costs and margins of their products, and enterprises and consumers will have to make new purchase decisions in light of the new prices."
Gartner researchers also forecasted budgets for data center systems in local spending to remain stable for the year. Users will extend life cycles and defer replacements as a means of offsetting the price increases, they reported.
“The overall near-term data center weakness is slightly offset by a more positive outlook for the server market,” researchers wrote. “The server market is benefiting from a stronger-than-expected mainframe refresh cycle, as well as increased expectations for hyperscale spending.”
Got Digital, Anyone?
Gartner also expects companies will spend more on consulting as they move toward building a digital enterprise.
“Vendors have demonstrated their ability to stimulate new demand from buyers looking for help with navigating business and technology complexities,” according to Gartner officials, “particularly related to building a digital business. However, the forecast for implementation services has been slightly reduced. Increasingly, buyers prefer solutions that minimize time and cost of implementation, driving demand for more-efficient delivery methods, out-of-the-box implementation and lower-cost solutions.”
Communications Spending Hot
Other highlights from the Gartner report included:
- Communications services will continue to be the largest IT spending segment in 2015 (nearly $1.5 trillion). It is also seeing the strongest decline among IT sectors.
- Mobile phones lead the device segment. Apple phone growth in China helps.
- Overall smartphone unit growth will start to flatten, and the PC and tablet market will continue to weaken. Expect a delay in Windows 10 inventory in the second half of the year.
- Storage and network markets are both expected to see weaker growth in US dollar terms.