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Package software market swells

The worldwide packaged software market grows to about $122 billion in 1997, up 12 to 15 percent, according to preliminary research by International Data Corporation.

The worldwide package software market grew to about $122 billion in 1997, up 12 to 15 percent, according to preliminary research released today by International Data Corporation.

The globalization of businesses, the Year 2000 issue, and better packaged software products offset pricing pressure, said Clare Gillan, vice president, Applications and Information Access Research at IDC. She said the pricing pressure was due to competition at the desktop as vendors try to spread the use of the software.

The study looked at total packaged software and then broke down three areas: system infrastructure software, application development tools, and applications solution software.

Despite its small percentage growth over last year's results, IBM (IBM) held its top spot for the most revenue generated for packaged software vendors with a 2.3 percent growth rate over last year. But Microsoft (MSFT) is closing in on that top spot with another year of growth at 39 percent.

"Microsoft is closing in [on IBM] and will likely overtake them in 1998," said Gillan, considering that IBM is growing so slowly and Microsoft is growing at a much faster rate. In 1997, IBM generated $13.3 billion, compared to Microsoft's $12.6 billion.

SAP was the fastest growing vendor at 61 percent growth over last year's results. Gillan said most of SAP's revenue growth came from its R3, integrated enterprise application. She does not expect that high level of growth in 1998, due to a combination of maturity in the high end market and more competition in the medium and lower end. "In the high end, they are a clear leader, but in medium and low end, where they are looking for new growth opportunities, they have much more competition," Gillan said.

Worldwide revenue for system infrastructure software reached $35.1 billion, an increase of 13.2 percent. IDC said the growth was boosted by the high volume, low-price strategy of Microsoft. IDC also said the growing need to manage complex, multitier system infrastructures contributed to the increase. The market is expected to exceed $53 billion by 2001, despite declines in revenue from IBM OS due to pricing pressures.

The application development tools market, including combined revenues of programmer development tools, object tools, and information access tools, is estimated at $31 billion, 12.6 percent over last year's revenues.

The scope of development tools and strength in RDBMS (relational database management systems) allowed Oracle (ORCL) to overtake IBM for the number one position with a 12.2 percent market share. IDC expects Java, component-based development, and Web-related tools to contribute to a 12 to 13 percent compound annual growth rate through 2001.

Worldwide applications solution software revenues reached $56 billion, a 16.9 percent increase over 1996. Increases in the client-server enterprise applications segment, spanning accounting, human resources, distribution and manufacturing, contributed significantly to the overall applications solutions software market growth.