The U.S. economy has had its ups and downs in recent months, buffeted by high energy prices and a questionable housing market. On the business-software side, doubts remain about the viability of some information-technology vendors. Nevertheless, the outlook for the supply chain management applications market in 2007 and beyond is "healthy," according to a recent report by Mark Hillman and John Fontanella, analysts with AMR Research Inc. The big "enterprise" software providers are enjoying strong demand for their product suites, even as some "best-of-breed" vendors find a favorable environment for sales. Overall IT investment remains strong, AMR says, with 61 percent of firms surveyed saying they would increase spending, at an average annual growth rate of 11.3 percent. More than a third of that spending is being generated by line-of-business (LOB) and departmental budgets that lie outside of the corporate IT function. "Qualitatively," says Hillman and Fontanella, "LOB buyers are increasingly pushing decisions as they strive to deliver on business goals."
Thirty-seven percent of LOB buyers expect software innovation to accelerate, versus just 15 percent of those on the IT side. And nearly half - 47 percent - expect innovation to come from smaller software vendors, rather than their enterprise competition or in-house developers. This split between LOB buyers and the IT function indicates "an underlying tension" in corporate organizations, AMR notes. Those on the LOB side, not surprisingly, are looking for applications that meet their immediate business needs - a search that often takes them to best-of-breed vendors. But IT managers, who view the business from a higher level, must address such issues as integration and maintenance of systems across the organization. One result of this split is greater attention by companies to vendors who adopt a service-oriented architecture (SOA), allowing for smooth integration of disparate systems. AMR's latest report on SCM spending appears to signal a swing of the pendulum back to best-of-breed applications, after years of progress by enterprise vendors in gobbling up market share (and, frequently, the best-of-breed vendors themselves). But smaller providers shouldn't get too complacent. "This shift does not mean that the balance of power has shifted to best-of-breed vendors," AMR says. "Instead, we see that although enterprise vendors dominate in market share, buyers are willing to address functional gaps or the need for process innovation with best-of-breed products."
Enjoy curated articles directly to your inbox.