Microsoft was hard on IBM's heels in the package software market last year, but SAP saw the most impressive growth rate.
The market swelled by almost 15 per cent in 1997, according to research by IDC, but the rate of growth was anything but uniform. Although IBM managed keep its place at the top, its package sales grew by a mere 2.3 per cent, which could enable Microsoft - with a 39 per cent growth rate last year - to overtake in 1998.
SAP achieved the highest growth rate with a 61 per cent increase in revenues, which IDC attributes to the popularity of its integrated enterprise application, R/3.
Applications software achieved the highest growth within the package market with a 16.9 per cent rise. The most substantial improvement was in client/server enterprise applications, including accounting, human resources, distribution and manufacturing.
Clare Gillan, the IDC analyst who wrote the report, expects the applications market to remain steady at 15 per cent through to 2001 because of continued business process re-engineering trends.
Arthur Hochberg of rival research firm Dataquest pointed to other factors driving the corporate move to packages rather than homegrown software.
He said: "The millenium bug has a big influence on the trend to buy rather than build", and added: "Package software is generally written in a more modern language than inhouse systems. It costs much less to buy the software and call in a consultant to customise it than starting from scratch."
But Hochberg predicted however that this market will slow from now on because most major millennium-related purchases should have been made already to meet the 2000 deadline.
There was slower growth in the other subsections of the package market, systems infrastructure software and development tools.
Sales of the former increased by 13.2 per cent during 1997, because of the need for more systems tools to manage the prevalent heterogeneous system infrastructures. Gillan also listed Microsoft?s high volume, low price strategy in this market as a factor.
Hochberg commented: "The systems infrastructure tools market is growing rapidly, and even more so at the high end than the low end, because companies are using more heterogeneous systems which require more software to manage. This growth will continue as the trend is intensifying if anything."
While IDC found that sales of development tools have increased by over 12 per cent, many analysts regard this market as stagnant.
Hochberg explained: "Companies have gone for buying business applications rather than building their own software. This is partly because they have to divert development funds for EMU and Y2K compliance.
Lauren Lachal, an analyst at Ovum, agreed: "The trend is moving away from custom built to package. The application development software market is mature but Web developments are the only exciting element at the moment."
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