How the Recession Could Flatline Vertical App Sales

A conversation with yet another customer today (these talks are providing some great blog fodder) exposed how this financial services company is looking to cut some of its industry-specific applications in favor of more generic, open software packages.

Drilldown specific-apps aside, I could see how vendor consolidation could prove a real issue moving forward for software providers looking to expand their product portfolio. Cost-cutting and the recession hits specific industries the most and leaves vendors operating in what I consider somewhat inefficient business models at risk. Just recently, Gartner stated they expect vertical-market IT spending in the U.S. to increase just 0.1 percent in 2009. Financial services, needless to say, is expected to be the weakest with 2.2 percent decline this year.

If you’re a vendor, why pay a premium price to acquire a functionality set from a smaller company that customers will increasingly have the option to build themselves with a software platform, or in the case of open source, allowing customers operating in that industry to build themselves and let the vendor leverage?

The continued emergence of cloud computing and software applications acting as platforms on which businesses can extend the software into new capabilities is going to lead to more efficient, and more consolidated, software packages and offerings.