Financing options are the newest front in the vendor war for a greater share of the IT budget, according to Forrester Research, Inc., an independent technolology and market research firm. "Research confirms that more and more enterprises of all sizes continue to evaluate software-as-a-service (SaaS) to defer capital outlays and infrastructure costs. In response,
many on-premise software companies are using financing to make the purchasing options appear more attractive," the research by R. "Ray" Wang, Merv Adrian and Emily Van Metre says. The report says these vendors are not only offering a variety of flexible payment programmes through direct and partner channels but are also offering to consolidate IT spending through programme extensions that include the bundling of professional services and training.
Forrester says that constrained growth in IT budgets is driving enterprises to defer capital outlays. "With service-oriented architecture (SOA) projects on the horizon, enterprise resource planning (ERP) upgrades looming, and middleware ecosystem standardisation projects being planned, IT budgets for the next five years appear to be increasingly constrained," it says.
Despite continued growth in investments, recent Forrester research says overall software spending growth has slowed down from 10 per cent in 2005 to seven per cent in 2006. Hence, enterprises are seeking capital deferment as one approach to pay for future investments.
"Rising interest rates are compelling enterprises to ‘lock in’ on financing. With 17 consecutive interest rate hikes by the US Federal Reserve, recent Bank of Japan rate increases, and planned increases by other Central banks, the era of ‘cheap’ capital appears to be ending. Where possible, enterprises continue to lock in financing terms at historically low rates for all types of investments, including software. Vendors with the financial muscle to provide attractive financing terms see opportunity here," it says.
According to Forrester, SaaS options are driving familiarity of alternative payment, pricing, and licensing options. While actual adoption of SaaS remains much lower than on-premise deployment, interest continues to show growth.
many on-premise software companies are using financing to make the purchasing options appear more attractive," the research by R. "Ray" Wang, Merv Adrian and Emily Van Metre says. The report says these vendors are not only offering a variety of flexible payment programmes through direct and partner channels but are also offering to consolidate IT spending through programme extensions that include the bundling of professional services and training.
Forrester says that constrained growth in IT budgets is driving enterprises to defer capital outlays. "With service-oriented architecture (SOA) projects on the horizon, enterprise resource planning (ERP) upgrades looming, and middleware ecosystem standardisation projects being planned, IT budgets for the next five years appear to be increasingly constrained," it says.
Despite continued growth in investments, recent Forrester research says overall software spending growth has slowed down from 10 per cent in 2005 to seven per cent in 2006. Hence, enterprises are seeking capital deferment as one approach to pay for future investments.
"Rising interest rates are compelling enterprises to ‘lock in’ on financing. With 17 consecutive interest rate hikes by the US Federal Reserve, recent Bank of Japan rate increases, and planned increases by other Central banks, the era of ‘cheap’ capital appears to be ending. Where possible, enterprises continue to lock in financing terms at historically low rates for all types of investments, including software. Vendors with the financial muscle to provide attractive financing terms see opportunity here," it says.
According to Forrester, SaaS options are driving familiarity of alternative payment, pricing, and licensing options. While actual adoption of SaaS remains much lower than on-premise deployment, interest continues to show growth.