Enterprises win as cloud and on-site software vendors duke it out

More price cuts are expected this year because of fierce competition between cloud and on-site software providers, and enterprises will be the beneficiaries.

In particular, in the customer relationship management market, a key cloud battleground, seat prices for segments such as sales force automation are expected to decline in the next twelve months and by 25 percent through 2018, according to market research company Gartner.

This will be caused by incumbent vendors heavily discounting their cloud offerings to try and prevent their existing on-site customers from defecting to companies such as Salesforce.com and SugarCRM.

Enterprises will also benefit from increased price competition in other areas, such as database management system application infrastructure and middleware. However, the price competition in these sectors isn’t quite as ferocious.

The cloud market is going through some interesting changes at the moment. Amazon Web Services, Google and Microsoft are locked in a price war over the cost of public cloud services. At the same time, old-school vendors such as Hewlett-Packard and again Microsoft are increasingly pushing hybrid clouds, which integrate public clouds with software running in enterprise datacenters.

These developments won’t just result in lower prices, but also better management tools and security, which are both needed.

Overall enterprise software spending is on pace to total US$335 billion this year, which would be a 5.5 percent increase from 2014, according to Gartner.

Enterprises increasingly choosing cloud services over hosting software in their own datacenters have repercussions for other segments, as well. For example, server and storage sales won’t grow as much as previously thought, Gartner said. On the other hand, spending on networking hardware is anticipated to grow faster.

Worldwide IT spending is expected to total $3.8 trillion in 2015, a 2.4 percent increase from last year, according to Gartner.

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