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ChangeWave Research: Corporate Software Purchasing Trends

ChangeWave Research Report:Corporate Software Spending: 90 Day OutlookUnmistakable Signs of Improvement Going Forward

Overview

After a two-year downward spiral, ChangeWave’s latest corporate software spending survey is picking up unmistakable signs of an improved spending environment going forward.

While overall spending is still contracting, the 90-day outlook points to a dramatic lessening in the rate of decline – a critically important indicator that suggests business software spending could be coming out of recession sooner than expected.

The ChangeWave survey of 1,775 respondents involved with software purchasing in their company was conducted April 16-27, 2009.

Improved Software Spending Going Forward

Better than one-in-ten software buyers (11%) say their company will spend more on software over the next 90 days – 2-pts better than our January survey. And while 26% still say their company will spend less – that’s a huge 13-pt improvement over previously.

There were other promising signs of improvement in terms of corporate capital budgets. While 36% said their company’s cap budget had been adjusted lower over the past 90 days, that’s a 10-pt improvement just since January. A total of 6% say their cap budget has actually increased –1-pt better than previously.

This information is from ChangeWave Research and contains confidential business information.It may not be copied or distributed without permission. ©2009 ChangeWave Research. All rights reserved.

May 11, 2009


Leading Software Categories

A key focus of this survey is on corporate spending increases and decreases within specific software categories.

Similar to our overall findings, corporate spending still remains negative in all but one of the software categories we looked at – but the rate of contraction has slowed dramatically.

Here’s a look at one of the big winners in our current survey, Data Storage (Net Score = 0; up 11-pts).

Data Storage Software

Data Storage software spending has stabilized going forward, with 14% of companies increasing their spending on data storage over the next 90 days while 14% are decreasing their spending – an 11-pt net improvement over the previous survey. Importantly, Data storage software is the first category in nearly a year to stabilize in terms of spending going forward.


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(Note that another 45% say their data storage spending will remain the same for the next 90 days and 26% say they aren’t purchasing in the next 90 days but are considering it for the future. For complete results on the individual software categories, see page 12).

A second category on the verge of turning positive is Virtualization software (-1; up 11-pts).

Virtualization Software

A total of 14% of respondents say their company is increasing Virtualization Software spending going forward while only 15% say it is decreasing – a net 11-pt improvement from previously.

Other software categories that – while still negative – have shown the biggest improvements since the previous survey include Business Intelligence/Reporting and Analytics (BI; -5; up 16-pts) and Customer Relationship Management (CRM; -5; up 14-pts).

Reasons Behind the Improvement

We asked our software buyers to tell us the key reasoning behind their software spending plans for the next 90 days. Three stand out:

While 22% still cite a general slowdown in business conditions and capital budgets as the factor most driving their purchasing decisions – that’s 2-pts improved from previously.

Similarly, while 27% still say their company currently doesn’t need to purchase any new software – that’s also 2-pts improved from previously.

In another positive sign, 6% of corporate respondents now say a general improvement in business conditions and capital budgets is driving their software purchasing decisions – 2-pts better than in January.


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Expected Time Period of Greatest Increase

We also asked respondents when they expect software spending in their company to show the greatest increase.

In which time period do you expect software spending in your company to show the greatest increase, compared to the previous 90 days?

Current Survey Apr ‘09

2Q 2009 (Apr-Jun 2009) 5%3Q 2009 (Jul-Sep 2009) 10%4Q 2009 (Oct-Dec 2009) 17%1Q 2010 (Jan-Mar 2010) 16%2Q 2010 (Apr-Jun 2010) 9%3Q 2010 (Jul-Sep 2010) 4%4Q 2010 or Later 12%Don't Know 27%

While just 15% said either 2nd or 3rd quarter 2009, the peak of the bell curve fell in 4th Quarter 2009 (17%) and 1st Quarter 2010 (16%).

Bottom Line: ChangeWave’s latest corporate software spending survey is picking up substantial signs of an improved spending environment going forward. While overall spending is still contracting, the 90-day outlook points to a dramatic lessening in the rate of decline – a critically important indicator that suggests business software spending could be coming out of recession sooner than expected.


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Summary of Key Findings

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The ChangeWave Alliance is a group of more than 20,000 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.

Helping You Profit From A Rapidly Changing World ™www.ChangeWave.com


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Individual Software Category Spending – Still Negative But Improving Most Improved Categories Data Storage Software (even; 11-pt improvement) Virtualization (-1 pt; 11-pt improvement) Business Intelligence (-5 pts; 16-pt improvement) CRM (-5 pts; 14-pt improvement) ERP (-11 pts;13-pt improvement) ECM (-11 pts;11-pt improvement)

Reasons Behind the Change Only 22% still cite a general

slowdown in business conditions as driving their purchasing decisions – 2-pts improved from previously

While 27% say company currently doesn’t need to purchase any new software – its 2-pts less than previously

6% say a general improvement in business conditions is driving their software purchasing decisions – 2-pts better than in January

When is Software Spending Expected to Show Greatest Increase 2Q 2009 – 5% 3Q 2009 – 10% 4Q 2009 – 17% 1Q 2010 – 16% 2Q 2010 – 9% 3Q 2010 – 4% 4Q 2010 or Later – 12%

Unmistakable Signs of Improvement in Software Spending Going Forward Better than one-in-ten

software buyers (11%) say company will spend more on software next 90 days – 2-pts better than previously

While 26% still say their company will spend less – it’s a huge 13-pt improvement over previous survey

Corporate Cap Budgets Start to Stabilize 6% said their company’s

capital budget increased over past 90 days –1-pt better than previous survey

While 36% said cap budget had adjusted lower – that’s a 10-pt improvement since previous survey

http://www.ChangeWave.com/


Table of Contents

Summary of Key Findings.............................................................................................5

The Findings...................................................................................................................7

Overall Software Purchasing Trends...........................................................................7

A Closer Look at Software Categories .....................................................................15

ChangeWave Research Methodology........................................................................23

About ChangeWave Research....................................................................................23


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I. The Findings After a two-year downward spiral, ChangeWave’s latest corporate software spending survey is picking up unmistakable signs of an improved spending environment going forward.

While overall spending is still contracting, the 90-day outlook points to a dramatic lessening in the rate of decline – a critically important indicator that suggests business software spending could be coming out of recession sooner than expected.

The ChangeWave survey of 1,775 respondents involved with software purchasing in their company was conducted April 16-27, 2009.

Part I. Overall Software Purchasing TrendsImproved Software Spending Going Forward

Better than one-in-ten software buyers (11%) say their company will spend more on software over the next 90 days – 2-pts better than our January survey. And while 26% still say their company will spend less – that’s a huge 13-pt improvement over previously.

How would you characterize your company's spending plans for software over the next 90 days compared to the previous 90 days?


Previous Survey Jan ‘09

PreviousSurveyOct ‘08

PreviousSurveyJul ‘08

PreviousSurvey Apr ‘08

Previous SurveyJan ‘08

We are planning to spend more for software compared to previous 90 days

11% 9% 8% 12% 12% 16%

We are planning to spend less for software compared to previous 90 days

26% 39% 40% 25% 25% 22%

There has been no change in spending plans for software compared to previous 90 days

57% 46% 45% 57% 55% 54%

Don't Know/Other 6% 5% 7% 6% 8% 8%


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Capital Spending

Thinking about your company's overall capital budget for 2nd Quarter 2009, have there been any adjustments made over the past 90 days?

Current Survey Apr ’09




PreviousSurveyApr ‘08

PreviousSurveyJan ‘08

Yes, 2nd Quarter 2009 Capital Budget Has Been Increased Over the Past 90 Days

6% 5% 4% 9% 8% 11%

Yes, 2nd Quarter 2009 Capital Budget Has Been Adjusted Lower Over the Past 90 Days

36% 46% 43% 28% 26% 22%

No, 2nd Quarter 2009 Capital Budget Has Remained the Same

49% 42% 45% 55% 55% 56%

Don't Know/No Answer 8% 7% 7% 7% 11% 12%

There were other promising signs of improvement in terms of corporate capital budgets. While 36% said their company’s cap budget had been adjusted lower over the past 90 days, that’s a 10-pt improvement since January. A total of 6% said their cap budget had actually increased –1-pt better than previously.


8


Leading Software Categories

A key focus of the survey was on corporate spending increases and decreases within specific software categories.

Similar to our overall findings, corporate spending still remains negative in all but one of the software categories we looked at – but the rate of contraction has slowed dramatically.

First, a look at one of the big winner in our current survey, Data Storage (Net Score = 0; up 11-pts).

Data Storage Software. Data Storage software spending has stabilized going forward, with 14% of companies increasing their spending on data storage over the next 90 days while 14% are decreasing their spending – an 11-pt net improvement from the previous survey.

Importantly, Data storage is the first category in nearly a year to have stabilized in terms of spending going forward.

(Note that another 45% say their data storage spending will remain the same for the next 90 days and 26% say they aren’t purchasing in the next 90 days but are considering it for the future. For complete results on the individual software categories, see page 12).

A second category verging on turning positive is Virtualization software (-1; up 11-pts).


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Virtualization Software. A total of 14% of respondents say their company is increasing Virtualization Software spending going forward while only 15% say it is decreasing – a net 11-pt improvement from previously.

Other software categories that – while still negative – have shown the biggest improvements since the previous survey include Business Intelligence/Reporting and Analytics (BI; -5; up 16-pts) and Customer Relationship Management (CRM; -5; up 14-pts).

Business Intelligence/Reporting Software:

Customer Relationship Management Software (CRM):


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Planned Enterprise Resource Planning (ERP; -11; up 13-pts) software buying also looks significantly better going forward…


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Enterprise Resource Planning Software (ERP):

…as does Document/Enterprise Content Management (ECM; -11; up 11-pts).

Document & Enterprise Content Management (ECM):


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SUMMARY OF SOFTWARE CATEGORY FINDINGS

And over the next 90 days, do you think your company's software spending in each of the following areas will increase, decrease, or remain the same compared to the previous 90 days?

SignificantIncrease

SlightIncrease

SlightDecrease

SignificantDecrease

Net Diff

Score

ChangeFrom

PreviousSurvey

Remain the

Same

Not Purchasing In Next 90 Days But

Considering for Future

Data Storage Software (n=638) 2% 12% 9% 5% 0 +11 45% 26%Virtualization Software (n=534) 2% 12% 10% 5% -1 +11 43% 28%Business Intelligence/Reporting and Analytics (BI) (n=479)

3% 10% 13% 5% -5 +16 43% 26%

Customer Relationship Management (CRM) (n=507)

2% 10% 12% 5% -5 +14 44% 27%

Enterprise Resource Planning (ERP) (n=480)

1% 8% 13% 7% -11 +13 48% 23%

Document and Enterprise Content Management (ECM) (n=519)

2% 6% 12% 7% -11 +11 48% 25%

Supply Chain Management (SCM) (n=417)

1% 6% 13% 6% -12 NA 52% 22%

Sourcing and Procurement (n=446)

1% 6% 13% 7% -13 NA 48% 24%

Human Resource Management Systems (HRMS) (n=459)

1% 6% 13% 9% -15 NA 49% 23%

Product Lifecycle Management (PLM) (n=399)

1% 5% 14% 9% -17 NA 49% 23%


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Reasons Behind the Improvement

We asked our software buyers to tell us the key reasoning behind their software spending plans for the next 90 days. Three stand out:

Looking at the following areas, which one is most driving your software purchasing decisions?





PreviousSurvey Apr ‘08

Previous SurveyJan ‘08

We currently do not need to purchase any new software

27% 29% 31% 30% 27% 29%

General slowdown in business conditions and capital budgets

22% 24% 23% 14% 13% 9%

Existing software is getting outdated and must be replaced

19% 19% 20% 19% 22% 23%

Enhancing our ability to innovate and develop new products and services

9% 7% 8% 10% 11% 11%

A general improvement in business conditions and capital budgets

6% 4% 4% 5% 5% 5%

New software capabilities are accelerating the replacement cycle

5% 4% 4% 6% 6% 6%

Improved customer service 4% 4% 4% 6% 6% 7%We are waiting for new technology enhancements before purchasing new software

3% 3% 2% 3% 3% 4%

New software is easier to use 1% 2% 1% 1% 2% 2%Other 3% 3% 4% 3% 3% 2%

While 22% still cite a general slowdown in business conditions and capital budgets as the factor most driving their purchasing decisions – that’s 2-pts improved from previously.

Similarly, while 27% still say their company currently doesn’t need to purchase any new software – that’s 2-pts less than previously.

In another positive sign, 6% of corporate respondents now say a general improvement in business conditions and capital budgets is driving their software purchasing decisions – 2-pts better than in January.


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Expected Time Period of Greatest Increase

We also asked respondents when they expect software spending in their company to show the greatest increase.

In which time period do you expect software spending in your company to show the greatest increase, compared to the previous 90 days?


2Q 2009 (Apr-Jun 2009) 5%3Q 2009 (Jul-Sep 2009) 10%4Q 2009 (Oct-Dec 2009) 17%1Q 2010 (Jan-Mar 2010) 16%2Q 2010 (Apr-Jun 2010) 9%3Q 2010 (Jul-Sep 2010) 4%4Q 2010 or Later 12%Don't Know 27%

While just 15% said either 2nd or 3rd quarter 2009, the peak of the bell curve fell in 4th Quarter 2009 (17%) and 1st Quarter 2010 (16%).

Open Source Software

We also asked about Open Source, and found a significant increase in the use of open source software since January – particularly with regards to Data Storage and Virtualization.

Focusing on Open Source software, for which of the following areas – if any – does your company currently use an open source software solution? (Check All That Apply)



Data Storage Software 13% 8%Virtualization Software 8% 5%Customer Relationship Management (CRM) 7% 4%Document and Enterprise Content Management (ECM) 7% 4%Business Intelligence/Reporting and Analytics (BI) 6% 3%Enterprise Resource Planning (ERP) 4% 2%Human Resource Management Systems (HRMS) 4% NASupply Chain Management (SCM) 4% NAProduct Lifecycle Management (PLM) 3% NASourcing and Procurement 3% NADo Not Use Any Open Source Software 49% 51%Don't Know 15% 17%Other 6% 5%


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Part II. A Closer Look at the Software Categories

We also asked respondents about the specific types of software their company is currently using within each category.

Customer Relationship Management (CRM) software

Which of the following types of Customer Relationship Management (CRM) software does your company currently use? (Check All That Apply) (n=331)


Customer Services and Support 49%Sales Force Automation 42%Analytics 27%Integrated Call Center 18%Marketing Automation 18%Complete CRM Package 14%Partner Relationship Management 13%Partner Opportunity Management 6%Don't Know/Other 11%

Types of CRM Software. Among respondents who say their company currently uses CRM software, Customer Services and Support (49%) is the leading type used, followed by Sales Force Automation (42%).


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Document and Enterprise Content Management (ECM) software

Which of the following types of ECM software/services does your company/ organization currently use? (Check All That Apply) (n=315)


Document Management 73%Records Management and Archiving 47%Web Content Management 46%E-Mail Management 45%Transactional Content Management (incl. imaging and output management)

21%

Digital Asset Management 15%Don't Know /Other 4%

Types of ECM Software. Among respondents who say their company currently uses ECM software, Document Management (73%) is the leading type they’re using. Records Management and Archiving (47%) comes in a distant second, followed by Web Content Management (46%) and E-Mail Management (45%).


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Business Intelligence/ Reporting and Analytics (BI) software

Which of the following types of Business Intelligence/Reporting and Analytics (BI) software does your company currently use? (Check All That Apply) (n=273)


Business Intelligence and Reporting Tools* 69%Performance Management (e.g., Financial Planning & Budgeting)

51%

Analytical Applications 45%Analytic Infrastructure (e.g. Data Warehouses, Integration)

36%

Predictive Analytics/Data Mining 31%Don't Know/Other 3%

Types of BI Software. Among respondents who say their company currently uses BI software, Business Intelligence and Reporting (69%), Performance Management (51%) and Analytical Applications (45%) are the leading types they’re using.


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Enterprise Resource Planning (ERP) software

Which of the following types of Enterprise Resource Planning (ERP) software does your company currently use? (Check All That Apply) (n=573)


Financial/Accounting 69%Human Resources 46%Order Management 38%Procurement (as part of ERP package) 36%Supply Chain Management (as part of ERP package) 33%Manufacturing 29%Complete ERP Package 26%Don't Know/Other 2%

Types of ERP Software. Among respondents who say their company is currently using ERP software, Financial/Accounting (69%) is the leading type used. Human Resources (46%) comes in a distant second.


19


Supply Chain Management (SCM) software

Which of the following types of Supply Chain Management (SCM) software does your company currently use? (Check All That Apply) (n=187)


Order Management 64%Supply Planning 49%Inventory Optimization 39%Sales and Operations Planning 39%Warehouse Management 39%Demand Planning 37%Transportation Management 22%Global Trade Management 12%Don't Know/Other 4%

Types of SCM software. Among respondents who say their company currently uses SCM software, Order Management (64%) is the leading type used. Supply Planning (49%) ranks second.


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In terms of virtualization, we asked respondents which enterprise applications/technologies their company is currently running on virtual servers.

Virtualization

Which of the following enterprise applications/ technologies - if any - does your company or organization currently run on virtual servers (e.g., servers running VMware, Microsoft Hyper-V, Xen, etc.)? (Check All That Apply) (n=439)


Customer Relationship Management (CRM) 30%Document and Enterprise Content Management (ECM) 30%e-Commerce Applications 29%Business Intelligence/Reporting and Analytics (BI) 26%Enterprise Resource Planning (ERP) 18%Human Resource Management Systems (HRMS) 15%Supply Chain Management (SCM) 15%Manufacturing Applications 13%Sourcing and Procurement 13%Product Lifecycle Management (PLM) 10%Other 15%

Types of Virtualization Technologies. Among respondents who say their company is currently running applications on virtualization servers, Customer Relationship Management (30%), Document and Enterprise Content Management (30%), and e-Commerce Applications (29%) are the leading types they're using.


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We also asked about current use of cloud computing:

Cloud Computing

Public cloud computing (i.e., "renting" or provisioning the remotely hosted computing resources of a service provider) can be broken down into three main categories: Software as a Service (e.g., Salesforce.com), Platform as a Service (e.g., Google AppEngine), and Infrastructure as a Service (e.g., Amazon EC2).For each of the following areas, please tell us if your organization currently supports applications running on Software as a Service (e.g., Salesforce.com), Platform as a Service (e.g., Google AppEngine), or Infrastructure as a Service (e.g., Amazon EC2). (n=115)

Software as a

Service (SaaS)

Platform as a

Service (PaaS)

Infrastructure as a Service

(IaaS)

Do Not Support Using Cloud

Computing/No Answer

Business Intelligence/Reporting and Analytics (BI)

11% 2% 4% 82%

Customer Relationship Management (CRM) 38% 5% 4% 52%Document and Enterprise Content Management (ECM)

12% 6% 10% 72%

e-Commerce Applications 11% 12% 10% 67%Enterprise Resource Planning (ERP) 4% 1% 3% 92%Human Resource Management Systems (HRMS)

10% 3% 3% 83%

Manufacturing Applications 1% 2% 2% 95%Product Lifecycle Management (PLM) 4% 3% 3% 90%Sourcing and Procurement 7% 1% 3% 90%Supply Chain Management (SCM) 4% 3% 1% 92%


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Service-Oriented Architecture (SOA)

Service Oriented Architecture (SOA) is the approach of designing software applications so that business function or data is exposed to other applications as a reusable "service." These services can be combined to create or automate business processes. How would you describe the current status of Service-Oriented Architecture (SOA) planning and deployment in your company?


We Already Have a Full SOA Deployment 4%We Have a Limited SOA Deployment, And Plan to Expand it in the Next 12 Months

6%

We have a Limited SOA Deployment, But Won't Expand it in the Next 12 Months 9%We Will Deploy SOA Within the Next 12 Months 3%No Plans to Deploy SOA in Next 12 Months 64%Don't Know 14%

Which of the following SOA technologies has your company deployed or will you begin deploying over the next 12 months? (Check All That Apply) (n=385)


Application Server (e.g., IBM's WebSphere, BEA's WebLogic, JBoss) 34%Enterprise Service Bus (IBM, Oracle, Tibco, etc.) 30%Messaging Server (MQ, JMS, etc.) 28%SOA-Enabled Packaged Application (e.g., SAP, Oracle) 20%Enterprise Application Integration (EAI) or B2B Integration Software (e.g., Tibco, webMethods, SeeBeyond)

18%

Business Process Management (Lombardi, SAP, IBM, etc.) 18%SOA Framework (e.g., IBM Retail Industry Framework) 9%Services Governance or Management Software (e.g., AmberPoint,Systinet, Actional)

5%

Don't Know 15%Other 6%


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II. ChangeWave Research Methodology This report presents the findings of our latest ChangeWave Alliance survey on corporate spending for software. The survey was conducted April 16-27, 2009 and a total of 1,775 Alliance members involved with IT spending in their company participated.

ChangeWave's proprietary research and business intelligence gathering system is based upon the systematic gathering of valuable business and investment information directly over the Internet from accredited members.

The Research Network is assembled from senior technology and business executives in leading companies of select industries. Nearly 3 out of every 5 members (56%) have advanced degrees (e.g., Master's or Ph.D.) and 93% have at least a four-year bachelor's degree.

The business and investment intelligence provided by ChangeWave provides a real-time view of companies, technologies and business trends in key market sectors, along with an in-depth perspective of the macro economy – well in advance of other available sources.

III. About ChangeWave Research

ChangeWave Research, a subsidiary of InvestorPlace Media, LLC, identifies and quantifies "change" in industries and companies through surveying a network of thousands of business executives and professionals working in more than 20 industries.

The ChangeWave Research Network is a group of 20,000 highly qualified business, technology, and medical professionals – as well as early adopter consumers – who work in leading companies of select industries. They are credentialed professionals who spend their everyday lives on the frontline of technological change. ChangeWave surveys its Network members weekly on a range of business and consumer topics, and converts the information into a series of proprietary quantitative and qualitative reports.

ChangeWave delivers its products and services on the Web at www.ChangeWave.com.

ChangeWave Research does not make any warranties, express or implied, as to results to be obtained from using the information in this report. Investors should obtain individual financial advice based on their own particular circumstances before making any investment decisions based upon information in this report.

For More Information:

ChangeWave Research Telephone: 301-250-22009201 Corporate Blvd. Fax: 301-926-8413Rockville, MD 20850 www.ChangeWave.comUSA [email protected]

Helping You Profit From A Rapidly Changing World ™www.ChangeWave.com


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