Wednesday, December 21, 2011

Enterprise Software Spending to Slow Down - Business Analytics to the Rescue?

Few months ago, I floated this hypothesis that the software spending generally has a lag of 1-2 quarters to hardware spending and given that hardware spending is slowing down now with Cisco, Juniper, Brocade, EMC, NetApp, (and chip companies prior to that) all coming out with revenue and EPS warnings, software spending could slow as well further down the road.

Now, if ORCL’s  warnings from last night and following quote from an analyst were to be taken seriously, this hypothesis is unfortunately is coming true.  

                   Jason Maynard, an analyst at Wells Fargo Securities, said in a Dec. 19 report that corporate spending on hardware and software may fall 8 percent in the first quarter, a steeper drop than the average 7.3 percent average decline during the quarter in the past 10 years. (Source: Business Week )

The Enterprise Software Industry has enjoyed 12-13 quarters of continuous growth and it is a well-known fact that the spending is cyclical in nature.  May be, the industry should prepare for couple of quarters of slow growth (or no growth.) 

I am off the opinion that a full blown contraction in software spending will not occur. There is a pent up demand and those demand dollars are shifting to the cloud for SaaS, PaaS, IaaS and all other types of aaS as these XaaS become a preferred choice. That is precisely what may have caused the bloody hiccups (the reaction on Oracle's stock in financial markets) at Oracle.

This may be just an aberration for the tech industry and it may require new economy companies to prove that is just an aberration and not a trend . (Please see this blog - Oracle earnings - an aberration or a trend? )

Coming to the Analytics topic - in good times or bad times, more so in bad times, business analytics has become a tool of necessity, a must-have weapon to understand what levers to pull to run the business more effectively, more efficiently and identify the right resources to be delivered to grow and optimize the business in tough times.  

Data is a strategic asset and Business Analytics provides tactical tools to exploit that asset, companies will mine data even deeper with more sophisticated tools to get even more deeper insights if the signs of slow down loom on the horizon.

It is yet to be seen that the business spending on analytics will slow as well.  I will take a different stance here and will form another hypothesis that the spending will likely increase over the next couple of quarters.

1 comment:

  1. There are some software which are quite beneficial in increasing the profitability of the business and also decrease the complexity and time taken to perform a task. so its always a good idea adopting such software.