CRM, virtualization and collaboration show strongest growth in software market

IDG News Service - The global software market grew 4.7% in the first half of this year to $167 billion, with CRM (customer relationship management), virtualization and collaboration coming in as the fastest-growing segments, according to figures released Wednesday by analyst firm IDC.

Economic difficulties in Western Europe dragged down the market overall, but software sales in the U.S., Latin America, Russia, China and other areas showed growth, according to IDC.

Applications software was the fastest-growing segment overall, with a 5.1% uptick, "largely driven" by collaboration and CRM software, IDC said.

Within collaboration applications, team collaborative and enterprise social software "stand out with strong growth rates over the last two years," according to IDC.

Enterprise social software's share of the segment has grown from 3% in 2008 to 11% this year. Team collaborative application sales rose 15% in the first half of 2012, according to the report.

Three of four CRM market subcategories showed double-digit growth so far this year, with contact center applications seeing a single-digit increase, IDC said. Customer service, sales and marketing had a roughly 12% growth rate overall.

Some of this growth can be reflected in the performance of Salesforce.com, the industry's largest pure cloud software vendor, which has products in all four CRM categories and is nearing $3 billion in annual revenue.

CRM is also driving new license sales as companies replace aging on-premises systems with cloud-based offerings from Salesforce.com and other vendors. Some 59% of Constellation Research's clients are considering a CRM system replacement, said analyst and CEO Ray Wang in a recent interview.

On the infrastructure side, virtual machine and cloud system software grew 17.8% in the first half of this year.

"Virtual machine software unit shipments still remain healthy and growing, but have seen some slowdown in mature markets that have high virtualization rates," IDC analyst Gary Chen said in a statement. "Business models are shifting as well, with the hypervisor drawing less direct revenue and increasingly becoming an embedded feature of operating systems and cloud system software."

Other factors impacting the virtualization market include stiffer competition for VMware from the likes of Red Hat and Microsoft, as well as the rise of open-source cloud software such as OpenStack, according to Chen.

Despite the gains in these software categories, this year is "the beginning of a more conservative growth period with gains in the single digits, down slightly from the growth experienced in 2010 and 2011," IDC said in a statement.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com