Software

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Market analysis

The Software subsector in Q3 2015 reported modest 3% year-over-year growth, but declined sequentially by about 2%. The year-over-year growth was mostly driven by Adobe (+21%) and VMware (+10%). On a quarter-over-quarter basis, again VMware (+10%) and Adobe (+5%) reported the strongest growth. However, the quarterly growth was offset by declines at Oracle (-21%), Microsoft (-8%) and Symantec (-0.1%). Microsoft reported both year-over-year and quarterover- quarter declines due to lower revenue from phones and other devices. Earnings were also negatively impacted by revenue deferral on Windows 10 licenses due to a shift to a ratable revenue recognition model.

Worldwide spending on enterprise application software is expected to grow by 8% to reach US$149.9 billion in 2015, and to exceed US$201.0 billion by 2019. The majority of spending is going towards modernizing, functionally expanding or substituting long-standing business and office applications with cloud-based software-as-aservice. The market segments with the highest growth potential in the next four years will be marketing, ecommerce and advanced analytics software.1

Meanwhile, the global public cloud computing market is expected to reach US$70.0 billion in 2015, with the top 5 verticals (discrete manufacturing, banking, professional services, process manufacturing and retail) accounting for approximately 45% of the total spend for the market. The major opportunities for cloud within verticals come from the development of intelligent industry solutions, which are built on top of a new platform that includes cloud as well as big data and analytics, mobile and social. Furthermore, the ease of purchasing cloud-based solutions has helped transfer buying power from IT to functional lines of business like marketing, finance and operations.2

Chinese cloud service providers are expanding overseas as foreign competitors explore the possibility of entering China. Recently, Alibaba Group announced that it will make an additional investment of US$1.0 billion into its cloud computing unit Aliyun. The capital will be used to expand Aliyun’s international presence and support infrastructure, in addition to R&D in cloud computing, big data and the building of a business ecosystem. Aliyun has announced plans to set up data centers in the United States, the Middle East, Europe, Singapore and Japan.

Other major Chinese cloud service providers are also deploying active data centers in overseas markets to expand their cloud operations globally. For instance, UCLOUD, QingCloud and Tencent Cloud have announced plans to establish data centers in Hong Kong and North America. 3

The digitization of ‘everything’ has given rise to a trend where data center hardware resources are being homogenized, and customized hardware platforms are shifting towards software control, orchestration and service delivery solutions. This demand has also resulted in the emergence of software-defined infrastructure (SDI) solutions, which operate independent of any hardware-specific dependencies and are programmatically extensible. The ongoing digital transformation will utilize integrated systems, flash storage and software-defined solutions to help enable automation functions in greater depth. Specifically and ultimately, software defined technologies have the potential to help make businesses more dexterous by injecting flexibility, agility and operational efficiency onto their IT infrastructure.3

Oracle signed an agreement to acquire Maxymiser, a leading provider of cloud-based software that enables marketers to test, target and personalize what a customer sees on a Web page or app. It optimizes over 20 billion customer experiences per month for more than 250 prominent brands.4

Microsoft announced a restructuring of its phone business, including the creation of the Windows and Devices Group. This is part of the company’s strategy to create a vibrant Windows ecosystem with a single set of experiences across first-party device family and original equipment manufacturer offerings. Part of this strategy involves focusing Microsoft’s phone devices on a narrower range of customer categories and differentiating through the combination of hardware and software.

 

1. Gartner press release, Aug 2015

2. IDC press release, Jul 2015

3. IDC press release, Aug 2015

4. Oracle, Aug 2015