Q&A WITH ANTHONY PICARDI OF IDC
To Anthony Picardi, competition in the $118 billion global software market is a lot like a sailboat race. The 49-year-old group vice-president for worldwide software at International Data Corp. in Framingham, Mass., says if you draft on somebody else's wind, you are sure to lose. When competitors try to cover you, the only choice is to break away and get clear air.
Picardi ought to know. When he isn't crunching numbers in IDC's vast databases, he can be found on the cold seas near his home in Marblehead, Mass., racing his sleek 26-foot sailboat. Before joining IDC in 1989, Picardi headed marketing for a Boston-based software startup. Prior to that, he was busy earning a PhD in systems analysis at MIT. In late December, he shared some thoughts and predictions about the coming year with Business Week's Neil Gross.
Q: What's the big trend for 1998?
A: Globalization of the business market, and all its implications. New geographic areas are opening up. Companies from China and Japan are pushing harder in the U.S. There's increased competition at home and abroad. So businesses need better information about their customers. And everyone needs a quicker response time.
Q: Does that open up new opportunities for software vendors?
A: Yes. The whole supply-chain area is one example. Traditional applications, such as back-office accounting, are no longer these little islands. Everything must be integrated -- all the way from point of sales back through inventory, distribution, and manufacturing. Before the middle of 1996, say, the only way to connect all [these functions] was through electronic data interchange. The technology was expensive and arcane. Now, you have the Internet, where everyone is wired with the common TCP/IP protocol. This has brought a change in mindset. Managers can think through the whole process of getting a widget from concept to product, up to and including customer feedback. They can conceive of the supply chain, think out of the box, and get with their customers and partners.
Q: How does the Year 2000 problem affect this picture? [See BW's December 29, 1997 story, "Year 2000: The Meter's Running."]
A: About 18 months ago, maybe 30% to 40% of the people we surveyed told us they would fix Y2K problems by purchasing integrated financial applications from SAP, PeopleSoft, Baan, and other suppliers of enterprise resource planning software. A lot of recent growth in the enterprise application market has been the result of Y2K. But after 2000, expect those types of applications to tail off. Instead, there will be an increase in more strategic applications, including things like supply-chain software, customer life-cycle management, and sales-force automation.
Q: What sectors of the software industry, if any, have been hurt by Y2K?
A: The tools industry has been hit. Growth rates have shrunk three or four percentage points, down to single digits. That's because at many companies, the Y2K problem consumed the attention of in-house developers who would normally be building new applications. Instead, they're maintaining the old stuff, and putting on hold a lot of purchases of high-end tools. MIS people continue to buy databases. But the integrated tools market took it in the ear. To varying degrees, companies like Antares, Cognos, Unified, Dynasty, and Forte have experienced a slowdown.
Q: What kind of revenues are we looking at for calendar 1998?
A: In 1997, worldwide sales of packaged software probably came to about $118 billion. In 1998, that should grow to $133 billion. Of that, the broad category called "applications" grew somewhat faster. This includes everything from word-processing programs up to enterprise applications, but not tools or operating systems. In 1998, sales of applications will be about $62 billion, up 14.8% from 1997. By 2002, applications will make up pretty much one half of the entire market. But that's a whole other story. We'll be talking more about that.
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