Software growth will be modest in 2004-5

Rethink IT, May, 2004

Hopes of a major software revival this year are not high, according to the latest predictions from Gartner Group.

The research company said that the weakness of the dollar against the euro artificially inflated growth reported by US software houses last year and the outlook for enterprise spending this year remains "modest".

Once currency fluctuations were taken into account, last year's 8% increase in sales among the top 25 software companies was in fact 3-4%, said analyst Joanne Correia.

"The outlook from corporations is very cautious," said Correia."Even though we have bottomed out, we're not going to see a swing to 15% growth over the next couple of years."

Gartner Dataquest is projecting 7.4% growth in software in 2004, although a large piece of that will be upgrades to Windows desktops and Microsoft Office.

Surveys of corporate customers indicate that spending will remain conservative at 2-5%. Corporate spending is being driven by requirements to meet industry regulations and build out companies' technology infrastructures.

Gartner estimates that software revenue will grow about 8.5% in 2005 and 7.5% in 2006