Investing in New-New, New-Old, or Old-Old Enterprise Software Markets

Includes: ORCL, SAP
by: Dennis Byron

Forrester Research released a 2010 enterprise-software spending forecast on February 17, based on demand-side research, that illustrates the important new-new/new-old/old-old spending pattern that IT investors need to keep in mind. The key finding according to the press release is that most 2010 enterprise software will be made for upgrading existing financial and similar applications.

That's actually the case every year. Without getting down into the weeds of IT market research, in any given year, only about 5% of the quarter trillion dollars spent on enterprise software is spent for new software. A half or more is old-old spending, spent on maintaining existing software. That is not all waste as many SAP and Oracle (NASDAQ:ORCL) bashers contend. What IT users want is the content maintained, not the software. That includes tax tables and such.

But what Forrester is talking about is the difference, new-old spending. New seats. New modules.

That should be good news for SAP, Oracle, etc. And make sure you know which enterprise software market you are investing in (new-new, new-old, old-old) before you invest. Software suppliers only get to play in all three if they are in that much maligned category of established and old and last generation and all those bad things pundits talk about.