Worldwide Software Deployment and Support Services

According to IDC Research the worldwide market for software deployment and support services will be increasing steadily over the next four years; the latter will lead the two in revenue generation. In 2006 the global, “support and deployment services market was $60 billion,” by 2011 that amount will increase to $76 billion, a compound annual growth rate (CAGR) of 4.9 percent. Last year most of the spending in this market belonged to the United States which at $30.3 billion spent just over half of the worldwide total. This trend will be present in 2011 as well; the U.S. is then expected to spend $37.9 billion, just under half what the rest of the world will. Outside the U.S. last year Europe, the Middle East, and Africa were second in the spending line with $21.5 billion, the Asia Pacific region spent $5.8 billion.

Of the dollars spent in the U.S. in 2006, $18.6 billion was spent on support services; IDC anticipates this to grow to $24.2 billion by the end of the projection period. These figures demonstrate that it is support services that bring in the majority of the revenue; last year deployment brought in $11.7 billion and by 2011 it will be $13.6 billion. As for what these dollars were spent on IDC states that $8.7 billion was spent on software support for applications. “The next-largest segment was system infrastructure software services, with $5.9 billion of spending,” and the smallest segment was support services for application development tools, with $4.0 billion.” The stateside spending is reflective of spending in general. Worldwide, “Software support for applications accounted for the majority of spending in 2006 at $17.1 billion.” Following this was system infrastructure software support, with $11.5 billion of spending. Application design and development tools pulled up the rear at $7.7 billion.

In this growing market, enterprises are looking for vendors to simplify the deployment and support process. IDC says, “Increasingly, enterprises demand a single point of contact for supporting their applications and they are tired of dealing with many different providers’ processes, procedures, and methods and they need vendors and service providers to consolidate.” This creates an opportunity in the vendor community: “The provider that successfully offers software support and deployment service consolidation for its customers will be able to use that lead as a strong competitive differentiator against its foes.” Vendors are responding to this.

Providers of software support services are now moving towards being a “one stop-shop;” they now try to offer, “more integrated support services covering multiple vendors’ software products.” Added to this breadth of services is the quality of the services provided, “Developing stronger and more integrated customer relationships is a prime source of competitive advantage.” Furthermore, providers are looking at deepening relationships with one another; IDC suggest this will ultimately, “lead to an integration and consolidation within the provider market as they form alliances to develop more efficient methods of supporting each others’ products and services.” It is important to realize that, “More and more support services are the real source of income, continuing to provide long after the initial product sale is complete.” But it is not only for this reason alone that vendors want to capture the services market.

Though the larger part, support services are still only a piece of the overall market. This element’s importance as a revenue generator should not be underestimated, but it can be further capitalized upon. “Feedback from the support relationship is returned to product development and used to better improve specific products and general product direction. This feedback loop is an imperative part of the relationship, helping vendors to stay on top of client needs and drive further benefit into their products and services.”

Clearly there is a lot at stake in this arena and IDC notes that, “the very nature of software support and deployment services continues changing.”

A more complete version of this post, including links to market research, can be found at the website of Analyst Views Weekly.

More information on this topic can be found in the Software section of Northern Light’s Software, Computers, & Services Market Intelligence Center.

And in the following articles:

The Worth of Open Source? Open Question
BusinessWeek Online, June 26, 2007
For all the success of open-source software—developers the world over flock to the code available freely over the Internet—its purveyors able to thrive as public companies are few. Linux operating system seller Red Hat has generated billions in value for investors, but its shares have slipped 3% in the past year amid new competition. Novell, which supports a version of Linux, has been criticized for striking a cooperation deal with Microsoft seen by many as a threat to the spread of Linux.

‘Bandido’ Software Pirate Sentenced to 51 Months
InformationWeek, June 26, 2007
The feds called Hew Raymond Griffiths one of the most notorious leaders of the underground Internet piracy community. His extradition was one of the first for an intellectual property offense. A man, known as the Bandido and described by U.S. prosecutors as the leader of one of the oldest and most renowned Internet software piracy groups, was sentenced to 51 months in prison.

IBM Sees Software Acquisitions Key to Profit Rise
Reuters, June 18, 2007
International Business Machines Corp. is banking on software, which accounts for 20 percent of revenue but generates 40 percent of pretax earnings, to lift overall profitability of a company that spans computer hardware, services and software.

Competing as Software Goes to Web
New York Times, June 5, 2007
Can two bitter rivals save the desktop operating system? In the battle between Apple and Microsoft, Bertrand Serlet and Steven Sinofsky are the field generals in charge of competing efforts to ensure that the PC’s basic software stays relevant in an increasingly Web-centered world.


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