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ECM: Enterprise Software Costs Fall

By Dick Weisinger

Only a few months ago Gartner predicted 12% year-on-year growth for the Enterprise software market through 2010, but a new prediction from Gartner puts those numbers in perspective. The per-unit cost of Enterprise software is dropping. Increasingly more software is being sold, perhaps to more small and medium sized companies, but prices are going down rapidly.

Gartner sees the trend as paralleling what’s happened with hardware. As prices of hardware continue to plummet, Gartner sees IT departments using the same negotiation techniques with Software vendors. The prediction is for prices to drop steeply over the next five to ten years.

The trends that are contributing to the decreasing costs include:

  1. Business process outsourcing
  2. software as a service (SaaS)
  3. low-cost development environments, like China and India
  4. modular architectures and service-oriented architectures
  5. the emergence of third-party software maintenance and support
  6. growing interest in open source
  7. the rise of Chinese software companies
  8. the expansion of Chinese, Indian and Brazilian markets

Another contributing factor may be better quality software with more flexibility for configuration. The costs of many software contracts are often burdened with large amounts of services and customization. Mammoth ERP and Enterprise software projects with heavy customizations costing tens of millions of dollars are becoming a thing of the past.

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