The growth of the cloud computing movement, best typified in this sector by Salesforce.com, threatens to chip away at this industry's profitability
Los Angeles, CA (PRWEB) November 01, 2011
Revenue for the Business Analytics and Enterprise Software Publishing industry is expected to increase to $32.1 billion during the five years to 2016, according to IBISWorld, the nation’s largest publisher of industry research. Continued strength in corporate profit, coupled with limited opportunities for growth given the weak demand environment, will drive firms to invest in streamlining operations. This strategy aims to boost profitability, rather than expansion operations that are designed with growth in mind.
The Business Analytics and Enterprise Software Publishing industry in the United States remains strong, despite the hiccups of the 2009 recession. Revenue is expected to be $27.3 billion in 2011, representing an increase of 10.7% from 2010. While the annualized five-year growth rate is a more humble 5.2%, this industry has demonstrated that while it is vulnerable in economic slowdowns, it can do extremely well in improving economic conditions. In particular, the current economic climate is almost tailor-made to support this industry. Corporate profitability has risen, but consumer demand is stagnant, as individuals who are wracked with job insecurity are reticent to spend or go into debt. As a result, corporations are seeking to improve productivity rather than expand their scope. In fact, business intelligence software exists in order to improve operational effectiveness.
Nevertheless, the Business Analytics and Enterprise Software Publishing industry does face some looming threats. This industry's profitability hinges upon a price structure that is entirely divorced from production costs. While corporations are willing, so far, to support massive profit margins at enterprise software firms, excessive and prolonged profitability is unlikely. According to IBISWorld analyst, David Grimes, the threat is more likely to come from outside than within; this industry traffics in licenses for corporations to run software on their own computers. “However, the growth of the cloud computing movement, best typified in this sector by Salesforce.com, threatens to chip away at this industry's profitability,” says Grimes. “Cloud computing offers slightly less-exorbitant pricing policies and reduced initial investments.” While fears about data security and the costs of switching will likely keep existing customers where they are, new customers in the market for software solutions will increasingly look toward the cloud. Furthermore, there is a limit to the number of companies in need of enterprise software solutions; saturation may soon strike. While this industry generally charges annual subscription fees, indicating accumulative growth, that growth may slow dramatically. IBISWorld anticipates this trend will take place over the five years to 2016, with revenue set to grow at an average annual rate of 3.3% to $32.1 billion.
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