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January1991 MAPVol.II,No.2 APublicationfromINPUTSMarketAnalysisProgram U.S. Application Solutions Market Forecast, 1990-1995 Note:ThisResearchBulletinispublishedaspartof expendituresonapplicationssoftware taIhnNanPtuUaTfl'olslUao.swSss.eisMssadmrrekanetwtnAonffarltoyhmseiCsahPparppoltgiercraamtI.iVoTnhosfemsIaoNtfPetUrwTia'arSle pfirgoudruecstsarweilslhroewanchin$3E4x.h7ibbiitlli1.on. These productsmarketandturnkeysystemsmarketwithin theUnitedStates. Thefullreport,U.S.Application Themarketforturnkeysystemsisabout SolutionsMarket, 1990-1995, willbeavailablein halfofthemarketforapplications FIeNbPrUuaTryh,as19p9u1b.lisPhleedasietsnfootreectahstastoifnapprpiloircayteiaornss osonfttwuarrnek.eyInsy1s9t8e9m,s.$9.T5hebilmlaironkewtasgrsepwent brseeopfiotnrwgtasar.dedpSrrteoasdrsutecitdnsgtaionngde1tt9hu9er0rntbkheeecyatsuwyssoetmeoamfrstkihenettswsioemcidtlioafrrfsietraierenest oonnllyy89%%icnom1p99o0u,nadneddiasnnfuoarelclays,tteodrteoagcrhow ofthefactorsandtrendsthatimpacttheirgrowth. $15.4billionin1995,asshowninExhibit 2. ApplicationSolutionsMarket Overview Thesemoderate-to-lowCAGRscompareto thepreviousfive-year(1985-1989)CAGRs Amanrukmetbefracotforescoanroemciocn,vteercghinnoglowghiiccahl,aonvder poafrnid2m31a%r1y%fodrfroairpvtpelurirwcnaaktseiyotnhsseyssctooefnmttswi.anrueTihnpgerosdturcotnsg ifurprhtssoorhsoomeerleoefwpmmeudtreaaanctuwvciiaeieacetsnnoxxrtrtntpegs,hsseprlecppnewmuoaoorrdiaglwuroiligrtptltodtihkldhiuusycee,ochr;ootn.teognf.tssfortTthfiyowhhfeBneiwtoeeyalurhutlreoarhattsvpprniuh,eoiptkderrfslcwewaniikmalysaklcipllulreaipsdpteydalnyd.eipiesl.scopcgteynolGaaessimtrtomctipifossaoeovowttnmnefwhitssleiteohlynwnwltaiir,lnle ygmhwmet3cihexoiori0lepamwnonl%erpeiwi1bcuvctcga0etteohornee%rmmomddri,ppwontsutuwtgdo.touotheren1reirorFie5knrawstoxsc%tt,rpurtsehneearhwtirataotoihtisoifnrepeeokgsmhsnnsnehoelacet/ionnrerxaPwlptddatt.CymswtipefhogaarMionenbrrvefatrseooveims,iuwtyanopttehaiuflahaanns3arrrnldfte%wasyrif,-mtp.loahe5elrmer%mebass2seonp5,ndei%arn-l UprfaorsrtoeedaruwnceitxlolsvpeepgrniardcleiklwtuCu1prAe2oGs%vRoeirnnotfa1hp91ep94l0f%i.i.cvaeTtB-hiyyoeena1sgr9rs9po5oew,frttiuhwosaderre gIasnrhniodapwdmttdeuhinrttonifsko,neapyotpotslhiydecseracttlekiimeonsynisnafgroseroh:cfaetrswdtawhraaertpeirmoupdnuaictctts ©1991byINPUT.Reproductionprohibited. Exhibit1 U.S.ApplicationsSoftwareProductsMarket 1989-1995 Exhibit2 U.S.TurnkeySystemsMarket 1989-1995 35r- 30- _ 25- I 20- 2 ©1991byINPUT.Reproductionprohibited. •Slowe—reconomicgrowthoverthenextfive short-term,unitshipmentsarecurtailed, years Theeconomicassumptionsused butoverthelongtermtheirpresence byINPUTinits1990forecastsreflect willhaveasignificantpositiveimpacton significantlyreducedoveralleconomic applicationssoftwareexpenditures. A growthinthenearterm,followedby fewyearsago,onlythebiggest modeststeadygrowththrough1995. companiescouldaffordthiscapacity. ThenominalGNPconsideredinthe1990 Nowthe$50-million-and-undercompany forecastsisformuchlowergrowthin canaffordlarge-scaleautomation,which 1990(5.4%versusapreviouslyprojected opensupnewuntappedmarketsfor 7.7%inINPUT'S1989reports)andno applicationssolutions. gainin1991(5.4%versus7.8%). These — economicassumptionswerepublishedby •Continuingdeclineinhardwareprices INPUTinOctober. Sincethattime,the Turnkeysystemsvendorshavebeen economymayhaveworsened. plaguedwithdeclininghardwareprices andprofitmarginsforyears. As Theimpactofaslowedeconomyon personalcomputersbecameavailableat applicationssoftwareproductswillbe lowerpricesandthroughalternative modest;prepackagedsolutionsare distributionchannels,theadvantagesof favoredasthetrendtooutsourceallbut aturnkeysolutionwereeroded. key"crownjewel"ISprojectscontinues. Turnkeyvendorshavehistoricallysold Ontheotherhand,userexpenditureson minicomputersystems,whoseprices turnkeysystemsarecurtailedbecausein remainedhighandrelativelystableuntil paunrecchoansoemsi—cbduonwdnlteudrno,rulanrbguenhdalreddw—aarree PwoCrsksetraotdieodnsthaenirdpUopNuIlaXriitnyc.omTmheercuisaelof delayed. Additionally,significant andbusinessareasisspreading;butas turnkeyactivityisinthemanufacturing usespreads,workstationpricingwill industrysectorswhich,whenhitby erodealso,againleavingtheturnkey recession,restrictcapitalexpenditures. vendorwithlowmargins. Manyturnkey — vendorsandVARsaretherefore •Morepowerfuldesktopsystems minimizingorexitingtheturnkey Growthinthelow-endPCmarkethas businessinfavorofapplicationssoftware slowed;thegreatestgrowthisinmore- productsandrelatedservices,thereby powerful386-and486-basedproducts joiningtheapplicationssoftwareand/or andworkstations. Salesofhigher-end professionalservicesdeliverymode. personalcomputersandworkstations — willdriveahigherinvestmentin •Architecturesandstandards Initially, applicationssoftwareproductsper themovementtowardclient-—server computer. Theimpactshouldbegintobe architecturesandstandards including felttoagreaterdegreeby1992. vIeBnMd'osrSsAtAan—dawirldlsdsiumcihniasshUtNhIeXneaenddfor PositionimpactsofOS/2andmore- newapplicationssoftwareproductsand powerfulPCshadpreviouslybeen turnkeysystems. Thereasonsarethat anticipatedby1990. Thehardware newplatformsandsystemssoftware trendispresent,buttheexpected productsarestillinthedevelopment systemsandapplicationssoftware stagesandafullmigrationfromtheuser productssectorgainsarelagging. standpointwilltakeaminimumof severalyearstoreachfullswing.These Thecurrenteconomicdownturnis platformsneedtobeinplacebefore causinghardwarecuts,especiallyatthe applicationssoftwareproductscanbe PCandworkstationlevel. Thus,inthe purchased. Intheearlypartofthe ©1991byINPUT.Reproductionprohibited. 3 —— forecastperiod,adifficultselling havealsomadeUNIXeasiertouse,and environmentwillexistuntilthenew moredevelopmentworkisunderwayon technologiesaremoreentrenched. UNIX-basedapplicationsolutions. — — •Customerindigestion Becauseofthe •Globalization Applicationssoftware transitorynatureofarchitecturesand productsthatdealwiththeincreasingly standards,customersaredevelopinga integratedworldwidemarketsforlarger temporarilycautiousattitude. Inthe corporationscreateawholenewsector meantime,vendorsneedtoprovidewell- forapplicationsolutionvendors. informedsalesforces,extensive Applicationsaddressingcustomsissues, educationandtrainingcapabilities,and currencytranslationandotherneeds anall-encompassingsalesapproach. offerproductopportunitiesonan SaleswillnotbemadetotechnicalIS internationalscale. msoalnuatgioenrssbaelcoonem;enionwt,egarsataepdp,ltichaetsiaolne ApplicationsSoftwareProductsby alsoencompassesoperatingexecutives PlatformSize andend-userdepartments. AsshowninExhibit3,moreisspenton wOinlltohfefebrringehwteorppsiodret,unaintiuemsbfeorrgofroawrteahs wsoofrtkwsatraetiporno/dPuCc-tbsatsheadnapopnlimcaaitnifonrsameand nowaswellasinthefuture. Several minicomputer-basedproductsand,as opportunitiesarediscussedbelow. expected,userexpendituresforthis — platformsizeareexpectedtogrowtwiceas •Customizationandintegrationservices fastasfortheothertwoplatformsizes. Thesetwoareascontinuetooffer increasinglylucrativeopportunitiesfor Severalmarketsprovideparticularly applicationsolutionsvendors. As stronggrowthopportunities,includingthe purchasesofprepackagedsolutions telecommunicationsandeducationand hcoonutsienudeevteolgorpmoewnitn,ftahveosreotfwcoompletein- tirnadiunsitnrgysaepcptloircsa.tiToenlsehcaovmemutnriacdiattiioonnaslly professionalservicesareaswill beendevelopedinternally,butsince experiencehealthygrowth. deregulation,thisindustryislooking — increasinglytooutsideproviders. Another Applicationsdevelopmenttechnology strongareaforapplicationssoftware Expendituresgrowthforapplications productsandturnkeysystemsisthe softwareproductsandturnkeysystems educationandtrainingcross-industry willbeenhancedbycurrenttrendsin sector. Therelativelysmallexpenditures applicationsdevelopmenttools. 4GL, inthisareaandthefactthattechnology- CASE,andRDBMStoolsnotonly basededucationandtrainingareless enhancevendors'internalsoftware expensiveand moreconvenientthan developmentefforts,butalsoprovide instructor-ledtrainingaredrivingforcesin addedcustomizationcapabilitiesfor favorofitsmorewidespreaduse. increasedrevenues. TurnkeySystemsbySubmode Anotherapplicationdevelopmenttool tphreomgortaepheixcpaelnudsietruriensteorffaacpepl(iGcUaIt)iownill Rexaptehnedrittuhraensabnyalpylzaetftourrmnksiezye,syIsNtPeUmsT solutions. Thedevelopmentoffriendlier, analyzesexpendituresbyequipment, graphics-baseduserinterfaces,including software,andprofessionalservices,as multitaskingcapability,tothemore showninExhibit4. gwielnlereaxlpaenndd-tuhseernucmombpeurtiofngapepnlivciartoinomnesnt Esqubumiopdmee,ntfoirstthheerselaoswoensstcgirtoewdianbgove. utilizedperdesktopplatform. GUIs 4 ©1991byINPUT.Reproductionprohibited. — Eventhoughnew Exhibit3 technologiessuchasvoice ApplicationsSoftwareProducts processing,imaging,and UserExpendituresbyPlatformSize,1990-1995 CDROMaregrowth opportunitiesforturnkey CAGR vendors,theadded (Percent) expendituresonthese Mainframe 8 productswillnotbe realizeduntil1995and beyond. Userexpenditureson softwareandprofessional Minicomputer 88 1990 10 s1e0r%vicceosmwpiolulnbdoetdhganrnouwaaltly 1995 through1995. By1995, softwarewillalmostequal expenditureson Workstation/PC 20 equipment. Ofthe 18.6 softwaretotal,application softwarewillaccountfor 5 10 15 thebulkofexpenditures. $Billions Systemssoftwaresalesare limitedtooperating systemsand,toamuch lesserextent,bundled applicationdevelopment Exhibit4 toolssuchasRDBMSs. UserExpTeunrdnikteuyreSsysbyteSmusbmProoddeu,ct1s990-1995 By1995,professional serviceswillstillrepresent arelativelymodest$2.7 CAGR billionmarketforturnkey 4.8 (Percent) systemsvendors. Itwill Equipment \^ 6.5 6 rmeamnayintusrmnaklelybveecnaduosresand 23 VARswillopttoform allianceswithprofessional 3.8 servicesfirmsandsystems Software 10 integratorsandtofocuson 6.2 whattheydobest S 1990 sspoefctiwaalriezepdroadpuplcitcsa—tioanssthe 1.7 keydifferentiatingvalue Professional Z 1995 10 theyprovidetothe Services 2.7 marketplace. L Foracompleteanalysis, 10 15 20 lookforINPUT'Supcoming $Billions report,U.S.Application SolutionsMarket,1990- 1995. ©1991byINPUT.Reproductionprohibited. 5