Predictions of anemic growth for IT spending in the coming years mean that software vendors and IT consultants will end up vying for bigger pieces of the proverbial pie.
If you're interested in a cynic's-eye view of all the marketing and posturing going on in the software industry today, take a look at these figures, culled from a report called "Stack Wars Intensify," by Merrill Lynch analyst Kash Rangan. The total market spend for enterprise applications is a mere $21 billion-$23 billion, while the total spend for consulting and services is a whopping $550 billion.
This casts a glaring light on the push toward enterprise services architectures, composite applications, on demand, software as a service, and a host of other recent industry initiatives. With consulting and services far outstripping applications for the lion's share of IT budgets, it's no wonder that each of these initiatives in some way seeks to position its respective proponents to either retain a large chunk of consulting and services spend (for on demand and software as a service) or shift more of that spend to the applications side (for service architectures and composite applications).
So heavily weighted is consulting and services that it's almost ironic that industry iconoclast Marc Benioff of Salesforce.com is proclaiming that the "end of software" is a potentially revolutionary event. Software is chump change compared to consulting and services.
Of course, the end of any part of the $679 billion spent on IT is more fantasy than reality. And Benioff isn't really talking about ending software, just shifting applications license revenues over to his software-as-a-service model. Likewise, it's important to bear in mind that service architectures and composite applications are similarly about shifting spending from services and middleware to applications and applications vendors.
With overall growth shrinking, applications companies like SAP and Oracle have to fund their double-digit growth plans by grabbing IT dollars from the consultants. From the applications vendors' perspective, companies are wasting a tremendous amount of IT budget on custom integration and applications development services, money that could be more effectively spent on packaged applications that deliver out-of-the-box innovation without requiring a hefty service fee.
The services companies are taking one of two possible tacks. Some are postulating that the perpetual license model for applications software, and the requirement to staff an IT department with systems and applications administrators, is vulnerable to a potentially more cost-effective model such as on-demand and software as a service. Others -- IBM Global Services in particular -- are saying that innovation can no longer come from a packaged software solution, and that custom consulting is the way to go.
Of course, they're all right, depending on the customer and its specific requirements. That's the beauty of the IT industry's complexity. Every solution has at least one place where it fits like a glove.
The real question in all of this is: Will you spend less on IT in the coming years? This cynic's answer is no. But that's okay; no IT manager or CIO actually wants a smaller budget. That would mean IT's allocation would be spent by some other department.
And, to be just a little cynical, who would want that?