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Legacy, SaaS, Packaged Software Vie for the Corporate Buck

By CIO Update Staff

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Even thought most companies are warming up to the idea of Cloud computing and it's close cousin, software as a service, it will be some time before these competing technologies push aside in-house, packaged software for mission critical computing.

This is because modernizing key legacy applications is the top software initiative for businesses this year, according to a new survey by Forrester Research. The survey of more than 2,200 IT executives and technology decision-makers in North America and Europe is Forrester's largest annual study of software spending and adoption trends for both enterprises and small and medium-size businesses (SMBs) and is part of Forrester's Business Data Services (BDS) series. BDS provides an extensive data set for B2B Market Research professionals' go-to-market strategy assessments.

"The costs of operating monolithic legacy applications makes them unsustainable, and these survey results show that firms are seeking efficient ways to modernize," said Jean-Pierre Garbani, vice president and principal analyst at Forrester, in a press release. "Companies are willing to adapt their business processes to cheaper packaged software solutions rather than wait for custom applications. Automation is the key to IT's future."

Updating key legacy applications was cited as the top initiative for both enterprises and SMBs at 64% and 55%, respectively. More than one-quarter of enterprises and more than one-fifth of SMBs said that updating and modernizing key legacy applications is very important. Other key highlights of the survey include:

Software budgets will hold relatively steady - Enterprises allocated 16% of their IT operating budgets toward expensed software costs in 2008 and plan to allocate 17% over the next year. SMBs allocated 19% toward expensed software costs in 2008 and plan to allocate 19% in the next 12 months.

Reducing IT costs and improving integration are top goals - Eighty-one percent (81%) of enterprises consider reducing IT costs to be an important goal, with improving integration between applications not too far behind at 77%. Seventy-one percent (71%) of SMBs consider improving integration to be important, with reducing IT costs and using information technologies to increase innovation next.

Software-as-a-service (SaaS) concerns and barriers have diminished - Compared with 2008, the 2009 landscape for SaaS is looking brighter, but there are still some bumps along the road to adoption. Currently, at 31%, security concerns are the most commonly cited reason why enterprises aren't interested in SaaS. At 39%, total ownership costs represent the top concern for SMBs that aren't interested in SaaS.

Packaged applications are preferred - When implementing a major application, a packaged application or application modules are the most preferred deployment options for 33% of enterprises and 45% of SMBs. The next preferred option for both is a tailored solution assembled from existing custom and packaged application modules. Few firms prefer to turn to SaaS or a hosted solution.

The State Of Enterprise Software: 2009 report is currently available to Forrester RoleView clients and can be purchased directly at www.forrester.com/go?docid=54466. The State Of SMB Software: 2009 report is currently available to Forrester RoleView clients and can be purchased directly at www.forrester.com/go?docid=54556.