Hardware Savings Diverted Into Innovative Software

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As businesses continue to cut back on IT infrastructure spending—on such items as PCs, telecommunications and networking devices—they are looking to roll those savings into software that can help them drive innovation and give them a competitive edge, according to Gartner analysts

Decreased spending by businesses on IT infrastructure could be an opportunity for software vendors, according to analyst firm Gartner.

In a report released on 28 July, Gartner analysts said they expect businesses worldwide will increase their software spending in 2010, particularly in Latin America and the Asia/Pacific region.

Much of that spending will come from savings from tightened infrastructure spending—in such areas as telecommunications, PCs and networks—with businesses looking for what Gartner calls “frontier applications” that are aimed at driving innovation and giving businesses a competitive edge.

“Frontier applications make major changes in business performance possible, such as leveraging the Internet for new delivery channels or using Web-based technology to improve self-service capabilities,” Gartner analyst Joanne Correia said in a statement. “Such applications are becoming increasingly essential in today’s competitive business environment.”

Gartner surveyed about 1,000 IT professionals worldwide about future IT spending. Thirty percent of respondents in the Asia/Pacific region and 28 percent in North America said they expected their IT budgets to increase in 2010. A quarter of those in the EMEA (Europe, Middle East and Africa) region said their budgets would grow.

However, software spending in North America is expected to decline 2.06 percent next year over 2009, and will grow only .45 percent in EMEA. However, in Latin America, software spending is expected to grow 2.54 percent in 2010, and 4.34 percent in Asia/Pacific.

Gartner attributes the difference to the relative maturity of the markets.

The analysts say software vendors need to find ways to help businesses find areas in which to cut costs and find ways to make those savings go further.

“Software vendors should continue to build, fund and invest in software sales and marketing programs, even during tight market conditions, to maintain customers and expand revenue opportunities,” Correia said, noting that an economic downturn presents advantages for companies with the right business plans. “Vendors need to use a consultative selling approach to understand and then address the most critical needs of IT and the business of their current and prospective clients.”

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