US software sales start picking up

Hint of an upturn

Encouraging signs for software sales
Monday 1st September 2003

Times have been bad for many businesses recently, but the enterprise software sector has been especially hard hit, writes Fran Howarth of Bloor Research.

A large part of the reason why the sector has fared worse than might have been expected is that so many companies have had bad experiences implementing technology such as enterprise resource planning systems. Other business applications implementations have also caught out companies - not only is this technology complicated to implement, but integration and customisation needs add greatly to the time and cost involved in a project.

As a result, enterprise application vendors have closed fewer sales; these sales have taken longer to close than previously and are smaller generally than deals of recent years. Companies have reacted to the downturn and to the problem of runaway projects by choosing to implement point solutions for areas of particular pain, rather than trying to fix everything in one go.

But signs from the US may show the tide is turning. People have tried to predict the long-overdue economic uptick for some time, but their hopes were dashed time and time again. The first signs of economic recovery came with the second quarter results of this year. Companies from banks to pharmaceutical concerns are coming out of the woodwork with better results - some even showing a return to profit. Even some of the software vendors have shown an improved performance, including SAP and PeopleSoft, although some industry watchers are wondering whether they can repeat their "rabbit out of a hat" second-quarter performance.

According to the US Commerce Department, the US' GDP grew at 3.1% in the second quarter of this year, compared to an earlier performance expectation of 2.4%. For the whole of 2003, the International Monetary Fund expects growth to accelerate in the second half of the year, with growth of 3.5% in 2004. This contrasts with growth rates of 0.3% in 2001 and 2.4% for 2002.

But the largest surprise contained in the figures is that the overall growth rate has been boosted by an 8.2% rise in sales of equipment and software. This is the fastest that such spending has risen for approximately three years, according to the Financial Times. While a return to the previous stellar rates of growth may be some way off and may never happen, perhaps the end is at least in sight.

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