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Enterprise Software: Vendors Insulated from Recession Worries?

By Dick Weisinger

“The likelihood of recession is rising, because that’s the solution to the inflation problem — that’s what the Fed is telling you. The process won’t be painless,” said Neil Dutta, head of U.S. economics at Renaissance Macro Research, told the New York Times.

But Forrester Research is predicting, as reported in theRegister, recession or not, enterprise software vendors won’t see that much of an impact even if the US goes into recession.

The Forrester report said that “software solutions are mission-critical in nature and vital to the day-to-day operations of a modern enterprise. Leading software vendors can raise prices consistently without losing demand, resulting in high and stable margins. With average software gross margins of 70 percent, software companies can efficiently control their spending and protect margins in downturns; they can then allow these margins to increase with economic growth.”

Additionally, even if other industries are hit with recession woes, the Forrester report thinks that businesses will still see the benefit of pushing forward with technology investments, particularly those targeting digital transformation and software modernization.

“Vertical [software-as-a-service] pure-plays have a big opportunity to replace legacy custom-built software with modern cloud applications. This underserved market is also grabbing the attention of major cloud service providers, which are now focusing on vertical strategy…to customize cloud technologies to business requirements.”

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