Spending on Application Management Services and Software as a Service to Continue at a Healthy Pace

FRAMINGHAM, MA – MARCH 31, 2003 – Compared to other IT services markets, the worldwide markets for Application Management (AM) services and Software as a Service (SaaS) remain two of the healthier segments within the IT services landscape, according to IDC.


Whether it's the mature applications management sector or the newer software as a service opportunity, the market for services around the management and provisioning of applications software is gaining in significance despite challenging times for the IT software and services industries. While customers are struggling to cut software costs and management complexity, software suppliers are determined to increase overall product and services revenues, develop long-term income streams that are more predictable than one-time license fees, and build customer loyalty.

Applications management or software as a service can be a complementary solution to both customer and vendor challenges. In addition, technologies such as Web services and business models such as subscription pricing for software are exposing new opportunities to provide over-and under-served software customers with application offerings delivered as a service.

IDC has just completed two research studies that forecast the AM services and SaaS markets through 2007. This research reveals that in 2002, approximately $12 billion was spent worldwide on application management services. IDC forecasts the overall five-year compound annual growth rate (CAGR) for the worldwide AM services market to be 10.7%.

"The spending for AM services in 2002 represents a healthy 9% increase over 2001," said Jessica Goepfert, program manager for IDC's AppSourcing research program. "Given the growth and resiliency of this market, it's no wonder vendors from all walks of IT are clamoring for a piece of the pie. 2003 should be an interesting year indeed."

In 2002, customers spent over $2.3 billion worldwide on the SaaS market. IDC expects this customer spending to grow at a 28% 5-year CAGR, reaching $8.0 billion in 2007. This growth has been fueled in part by customer demand for low-cost, rapidly implemented solutions to their business process problems. In addition, vendor offerings have matured.

"While most companies still choose to run their applications in-house, spending on software as a service is predicted to continue to grow," said Amy Mizoras, program manager for IDC's AppSourcing research program. "This growth will come from midmarket companies or divisions of large organizations that are looking to focus on their core competencies and reduce the cost of running applications."

The IDC study, Worldwide and U.S. Application Management Services Forecast and Analysis, 2003-2007 (IDC #28958), presents IDC's latest five-year forecast for the worldwide market for application management (AM) services. The purpose of this document is to identify and quantify the impact of recent trends and events influencing spending on AM services over the time of the forecast period. The document presents IDC's predictions and assumptions relating to market forces impacting the AM market, and analyzes the impact they will have on the market forecasts. It also identifies pockets of growth within the U.S. AM services opportunity.

IDC's study, Worldwide and U.S. Software as a Service Market Analysis and Forecast, 2003-2007: Beyond ASP (IDC #28995), presents IDC's predictions and assumptions relating to market forces impacting the software as a service market, and analyzes the impact they will have on the market forecasts. The report examines the key buyer and suppliers trends that are strongly impacting the development of the market today, and what forces will shape the market of tomorrow. Finally, the report looks at how worldwide spending on software as a service varies by region and identifies the not-to-be-missed opportunities for companies providing software as a service and their partners.

To purchase these documents, call IDC's volume sales hotline at 508-988-7988 or email ctoffel@idc.com.

For more information about IDC's Appsourcing research, please contact Virginia Lehr at 508-935-4188 or at vlehr@idc.com.

About IDC

IDC is the foremost global market intelligence and advisory firm helping clients gain insight into technology and ebusiness trends to develop sound business strategies. Using a combination of rigorous primary research, in-depth analysis, and client interaction, IDC forecasts worldwide markets and trends to deliver dependable service and client advice. More than 700 analysts in 43 countries provide global research with local content. IDC's customers comprise the world's leading IT suppliers, IT organizations, ebusiness companies, and the financial community. Additional information can be found at http://www.idc.com/.

IDC is a division of IDG, the world's leading IT media, research and exposition company.

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