software market trends

Because the business software market evolves so quickly, it is important to keep track of the latest software market trends so that you can utilize technology as a strategic advantage for your company. Technological and functional improvements in business software can have a big impact on how you do business. The following are the top 8 recent software market trends we have observed in our software evaluation work.

Merger Mania

Mergers, acquisitions, partnerships and strategic alliances between business software vendors have been very active the past decade. These mergers can have an impact on your business systems, so you need to be prepared for the day that your software vendor may be acquired.

Databases

On the technical side, the software vendors have really focused on three databases – Oracle, Microsoft SQL Server, and IBM DB2. Another database worth mentioning is Progress (particularly in the manufacturing and distribution industries). Access and Pervasive SQL are very common for vendors that are focusing on the lower end of the market. These relational databases allow business software vendors to store and retrieve data and provide excellent ad hoc reporting capabilities.

Functional Expansion

The software vendors are continuing to add new functionality to their software. They are working to become a “one-stop-shop” to provide all of the functionality you need from one vendor. They are doing this through product development as well as acquisition. This has led to an explosion of new development and functionality available including Customer Relationship Management (CRM), Human Resources/Payroll, and e-commerce functionality to name a few.

Tier 1 Vendors Moving to the Mid-Market

Because there are only so many Fortune 500 companies, and most of them already have an ERP system, Tier 1 vendors such as Oracle, and SAP (see the tier chart in the Software Market Overview) have been expanding their marketing efforts downward to penetrate the middle market. They are doing this with different strategies including offering scaled down, pre-configured versions of their applications, trying new methods of implementation, pursuing new distribution channels to sell and implement their software, and acquiring mid-market software. (A good example of this approach is SAP’s acquisition of the Business One software product for the middle market). The tier 1 software vendors have had varying levels of success in the mid-market.

Tier 3 & 4 Vendors Moving to the Upper-Market

On the other side, software vendors that have traditionally focused their applications towards smaller organizations (see the tier chart in the Software Market Overview) are moving their products upward to target the tier 1 and 2 enterprise markets. These vendors have significantly improved functionality and scalability allowing smaller companies to grow without having to change systems. The challenge these vendors face is having an implementation channel that can handle more complex software implementations. 

Software as a Service (SaaS)

Over the past few years, the Software as a Service (SaaS) model has been gaining market acceptance. Software as a Service means that a software vendor hosts a software application where customers access the software system and data via the internet. The SaaS model can be particularly appealing for smaller companies that have limited technology personnel. SaaS implementations for certain types of software such as Customer Relationship Management (CRM), HR/Payroll, Project Management, and low end accounting software have been growing. ERP systems for mid to large companies on the other hand have not seen widespread acceptance yet due to cost and security concerns.

Internet Capabilities

The Internet has opened up new opportunities for conducting business in today's economy. The software vendors have developed functionality to take advantage of this technology including web browser access, web portals for customers and suppliers, mobile technologies, e-commerce capabilities and much more.

Software Vendors are Hungry

The software vendors are starting to recover from the slower economy, so now would be a good time to get a good deal on new software as they are eager to sign new business. However, this buyers market is beginning to become much busier so the sooner you move forward, the better!