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Market analysis

Compared to last quarter, most companies reported a decline in Q1 2015 revenues, however year-over-year revenues increased. The largest sequential decline was reported by SAP, whose revenue fell by 25.6%. On a year-over-year basis, VMware reported the highest revenue growth at 11.1%. Cloud services provided a significant boost to most companies’ revenues, notably SAP and Microsoft, whose cloud revenues grew by 130% and 106%, respectively, when compared to Q1 2014.

Geographically, growth in the software market was spearheaded by the Americas, especially the US. The EMEA market also showed moderate growth, most notably in Western Europe. On the other hand, Asia-Pacific showed mixed results, with Japan outperforming other countries.

Many service providers are shifting their product strategy after struggling to gain significant market traction for cloud infrastructure as a service (IaaS). As a result, many service providers have made changes to their platform and some have or plan to completely end investments in cloud IaaS offerings. All providers seek contractual commitments that do not allow the provider to substantially modify or discontinue the offering without at least 12 months notice. However, global spending on IaaS is expected to reach almost US$16.5bn in 2015, an increase of 33% from 2014, with a compound annual growth rate (CAGR) from 2014 to 2019 forecast at 29%, but this is due to more demand from current clients, not an increase in the number of clients.1

Spending in the enterprise software market is on pace to total US$320bn in 2015, a 2.3% increase from US$313bn in 2014. However, this is lower than the US$335bn forecast by Gartner in late 2014. The downward revision is the result of substantial reduction in office suite spending caused by the accelerating adoption of Office 365. Office 365 is disrupting traditional revenue flows because its cost is prorated over the life of the subscription, resulting in significantly lower revenue growth compared to traditional “out of the box” software modules. Another reason for a lower forecast in the enterprise software market is the rising US dollar, which will greatly reduce earnings realized in non-US currencies.2

Adobe’s Q1 2015 revenue of US$1.1bn was similar to Q4 2014’s revenue. Adobe and Microsoft Corporation formed a strategic partnership to integrate Adobe’s Marketing Cloud Solutions with Microsoft’s Dynamics CRM. The integration will improve how enterprises manage their marketing, sales and services to better engage with their customers.

  1. Gartner, May 2015
  2. Gartner, April 2015

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