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Enterprise Software in South Africa 2009
World Wide Worx, Oct 2009
Enterprises cutting back on software
19 October 2009:- An increasing number of South African enterprises are cutting back on information technology spend as a proportion of their overall turnover, according to a new study released today.
The Enterprise Software in South Africa 2009 report, compiled by software consultancy nFold and technology market research organisation World Wide Worx, showed that 39% of medium and large organisations in South Africa were budgeting to spend more than 1% of their turnover on information technology. In 2005, 63% of these organisations planned to spend more than 1% of their turnover on IT.
“There has been a dramatic shift in corporate IT spending patterns,” says nFold managing director Sandy Pullinger. “When we conducted the survey in 2005, only 19% of companies budgeted for IT spend on an ad hoc basis or ‘as needed’. This year, that proportion has leaped to 32%.”
The biggest gap has appeared in software spend, where only 16% of companies had budgeted “as needed” in 2005. This number has climbed to 38% this year.
“It is clear that software forms less of an upfront purchasing priority today than four years ago, but that doesn’t mean software has declined in importance,” says Pullinger. “We find that senior decision-makers in the organisations are more involved in large software purchasing decisions than ever before, with a quarter of companies reporting that financial decision-makers now play a role in the decisions. Previously, financial executives played almost no key role here.”
The pressure of recession has meant that companies are paying closer attention to where operational spend is going, but also that they are taking longer to upgrade software.
The number of companies evaluating their software needs on an ad hoc basis has also increased dramatically, leaping from less than 20% to more than 35%. This finding is in line with budgets becoming more unpredictable. The most typical time period for reviewing software needs is annually, with roughly a third of companies doing so. However, this is from a situation where, four years ago, half of companies reviewed their software needs at least every six months.
One area in which emphasis has increased is on mobile applications – a major trend reported earlier when preliminary findings of the study were released. This backs up separate research by World Wide Worx that confirms the growing business importance of mobility in both the enterprise and among small and medium enterprises.
Virtualisation and SOA are not just buzzwords
Earlier in 2009, preliminary data released from the study indicated that more than 40% of Chief Information Officers (CIOs) in South Africa have implemented Virtualisation and Service Oriented Architecture (SOA), and more than 60% of those have been satisfied with the results. This is the key finding of the “Enterprise Software in SA 2009” research study, announced today by nFold and World Wide Worx.
Virtualization is the creation of a virtual version of an operating system, server, storage device or network resource, while service oriented architecture refers to a collection of business services which communicate and work together via agreed standards.
“The result will come as a surprise to many skeptics”, says Sandy Pullinger, MD of nFold. “Two years ago, it looked as though SOA was a buzzword invented by the software industry to make more money, rather than delivering on the promise of better integration. And few people had considered virtualising their infrastructure.”
More than a third - 38% of CIOs – picked mobility as one of the top three trends to act on in the next three years. Pullinger says: “Most software vendors whose roadmaps I have seen, know that their applications must work on any device - especially mobile phones. And the availability of GPS maps and directions, and niche industry applications like inventory management and sales force tools , are changing the local landscape rapidly. The battle between Apple and Google for mobile application penetration is raging.”
Arthur Goldstuck, MD of World Wide Worx, agrees. “It backs up our Mobility research, which shows that this is the one technology trend that is making a dramatic impact on corporate, small and medium enterprises, and the daily lives of all consumers.”
Open Source, which was expected to increase substantially in importance, appears to have entered a period of assessment among corporations in South Africa. Usage of open source in one form or another has increased from 50% to only 52% of respondents over the last two years.
“The trend shows it is not growing as fast as it once did, but open source is still mainstream. Predictions that the free model was doomed to failure are clearly wrong”, says Pullinger.
The category of use that has shown the most dramatic increase is server application software, followed closely by open source databases. A remarkable 19% of respondents are using open source desktop application software like OpenOffice, but only 10% use Linux as a desktop operating system.
The study also shows trends in business needs, financial implications, software selection and vendor satisfaction. For example, the key problem companies experience with software is still that the costs are too high. They are more satisfied with local than international vendors. And the most popular complaint about vendors is that they don’t understand what companies need.
One CIO respondent commented: 'IT solutions should support the people that support the business strategy, jointly working towards the same goals'.
Microsoft still dominates the software arena, but its dominance has diminished.
Communication is the most important use of software. People are more likely to buy off the shelf software, rather than building it.
“The study has lots of meaty software facts and figures that are important for the strategies of CIOs and software vendors alike.” Pullinger concludes.
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