The first quarter 2016 report on trends in software spending is out. According to a March 2016 Digital Infrastructure report from 451 Alliance, 2Q 2016 Corporate IT Spending Trends – Spending Slows, 20 percent of survey respondents say their companies will spend less this quarter on software – up from 18 percent in the last survey. Only 16 percent will increase their budgets.
For the first time in eight years, January purchases haven’t shown an increase over the prior period. That signals IT spending is still pretty tight, especially where major software investments are concerned.
Or does it?
Some categories are trending up
It’s true that overall software sales are slowing. But the report also shows a pointed increase in some segments like digital marketing and analytics.
Digital marketing platforms, like Hubspot, ExactTarget, Marketo and many others, let you automate and optimize your inbound campaigns. They manage your blog and social media posts, collect contact information, automate follow-up emails and a host of other funnel management activities. They also contain (or integrate with) content management systems to handle digital assets that double in volume every few years.
Aside from traditional file-based content – documents, webpages, customer records and the like – the Internet of Things (IoT) is multiplying the volume of unstructured data pouring in. That’s why better analytics and business intelligence software is so critical. Without it, we’ll never make sense of the flood of data from mobile devices, sensors and social media.
Yet capital expenditures are trending down
So, which is it? Are we spending more on software, or less?
Despite these hot categories, overall capital expenditures for software are slipping. While 12 percent say their capital budgets have increased, far more – 20 percent – say they’ve shrunk. Most cite a general dampening of business conditions (and therefore budgets) as the cause.
Yet there’s no doubt that business software needs a periodic update or even a major upgrade. From productivity and collaboration suites to massive enterprise billing and supply chain applications, all of them have to keep pace with changing business requirements.
At any given time there’s a certain portion of companies that have to spend money on such upgrades. That being the case, how can capital budgets for software (and hardware, for that matter) continue to slide?
The virtual shift from capital to operational
The answer is under our noses – virtually.
Mass migration to the cloud isn’t just about its elastic storage and processing powers. The avalanche of software-as-a-service (SaaS) offerings has changed the entire landscape. Including how we budget for software.
Many traditional software purchases, especially large enterprise applications with multi-year licenses, are considered capital expenditures. Most SaaS applications, however, are by subscription and are operational expenses. You use what you need and pay as you go – just like cloud infrastructure services.
SaaS revenues show steady and continuous growth since 2010. According to Statistica, they’ll rise to $32.8 billion in 2016, a one-year increase of nearly 17.5 percent. So while capital software purchases are declining, SaaS subscriptions are not. That makes the question of whether software is in a slump a little hazy.
Want to keep on top of the changing landscape of enterprise software applications? Let Paranet’s managed services team help. With our cloud-based infrastructure and SaaS offerings, you get predictable operational expenses, instead of ever-changing capital budgets. Schedule a consultation to learn more.