Software_market January 2004

Software Market Research Methodology and Definitions, 2003-2004
Gartner Dataquest Guide

Publication Date: 16 January 2004

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©2004 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Software Market Research Methodology and Definitions, 2003-2004
Gartner Dataquest Guide

Publication Date: 16 January 2004

Authors

Colleen Graham Nicole Latimer Fabrizio Biscotti Joanne Correia Chad Eschinger Chris Pang Thomas Topolinski

This document has been published to the following Cluster codes: SOFT-WW-GU-0011

For More Information... In North America and Latin America: In Europe, the Middle East and Africa: In Asia/Pacific: In Japan: Worldwide via gartner.com:

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Entire contents © 2004 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice. 119016

Table of Contents
1. Page Market Share and Forecast: Overview and Methodology .......................................................................... 1 Market Share and Forecast Overview ....................................................................................................... 1 Market Share Methodology ........................................................................................................................ 2 Research Process ........................................................................................................................................... 4 Forecasting Methodology............................................................................................................................ 5 Software Revenue Components and Licensing Models.............................................................................. 7 Software License Revenue Recognition .................................................................................................... 7 Understanding Components of Recognized Revenue ............................................................................ 7 Abstract Components vs. Real World Complexity.................................................................................. 8 Types of Software Licenses.......................................................................................................................... 9 Software Segmentation .................................................................................................................................. 13 Product Market Definitions....................................................................................................................... 13 Composite and Stand-Alone Views ......................................................................................................... 13 Stand-Alone and Composite Views..................................................................................................... 14 Infrastructure Software Definitions.............................................................................................................. 15 AD Software ................................................................................................................................................ 15 Requirements Management.................................................................................................................. 15 Business Process Analysis..................................................................................................................... 15 Database Design (Data Modeling)....................................................................................................... 15 Object-Oriented Analysis and Design................................................................................................. 15 Language-Oriented Development Environments ............................................................................. 16 Integrated Services Environments ....................................................................................................... 16 Traditional (Client/Server) AD Tools.................................................................................................. 16 Business Rules Engine ........................................................................................................................... 16 Business Process Management............................................................................................................. 17 Automated Testing (Distributed and Mainframe) ............................................................................ 17 Software Change and Configuration Management .......................................................................... 17 Other AD Software................................................................................................................................. 17 Application Integration and Middleware ............................................................................................... 17 Adapter Suite .......................................................................................................................................... 18 Application Platform Suite ................................................................................................................... 18 Application Servers................................................................................................................................ 19 Business Process Management............................................................................................................. 19 Integration Suites ................................................................................................................................... 19 Message-Oriented Middleware............................................................................................................ 19 Object-Request Brokers ......................................................................................................................... 20 Enterprise Portal Server ........................................................................................................................ 20 Transaction Processing Monitors ......................................................................................................... 20 Other Middleware.................................................................................................................................. 20 BI Tools ......................................................................................................................................................... 21 BI Platforms............................................................................................................................................. 21 Enterprise Business Intelligence Suite................................................................................................. 21 Collaboration Software and Knowledge Management Tools .............................................................. 21 E-Mail and Calendaring ........................................................................................................................ 21 Real-Time Collaboration ....................................................................................................................... 22 Team Support.......................................................................................................................................... 22 Data Warehouse Tools................................................................................................................................ 22 Data Mining Tools .................................................................................................................................. 22 Data Quality Tools.................................................................................................................................. 22 Extraction, Transformation and Loading Tools ................................................................................. 22 Database Management Systems ............................................................................................................... 22 Pre-relational DBMS .............................................................................................................................. 22
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3.

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Software Market Research Methodology and Definitions, 2003-2004

Table of Contents (Continued)
Page Relational DBMS.................................................................................................................................... 23 Embedded DBMS .................................................................................................................................. 23 Mobile Embedded DBMS ..................................................................................................................... 23 Desktop DBMS Products ...................................................................................................................... 23 Object-Oriented DBMS ......................................................................................................................... 23 Embedded Software Tools ........................................................................................................................ 23 Network and Systems Management Software ...................................................................................... 23 DBMS Management .............................................................................................................................. 23 Application Management..................................................................................................................... 24 Availability and Performance, Other NSM........................................................................................ 24 Network Management .......................................................................................................................... 25 Configuration Management................................................................................................................. 25 IT Service Desk....................................................................................................................................... 25 Asset Management ................................................................................................................................ 26 Job Scheduling........................................................................................................................................ 26 Output Management............................................................................................................................. 26 Security Software ....................................................................................................................................... 26 Antivirus ................................................................................................................................................. 27 Content Filtering.................................................................................................................................... 27 Network Security................................................................................................................................... 27 Intrusion Detection................................................................................................................................ 27 Encryption .............................................................................................................................................. 28 Security Event and Performance Management................................................................................. 28 Security Administration Software....................................................................................................... 28 Storage Management................................................................................................................................. 29 5. Enterprise Application Software Definitions ............................................................................................. 31 Customer Relationship Management ..................................................................................................... 31 Sales ......................................................................................................................................................... 31 Marketing................................................................................................................................................ 32 Customer Service and Support............................................................................................................ 32 Enterprise Resource Planning .................................................................................................................. 33 Manufacturing ....................................................................................................................................... 33 Human Capital Management .............................................................................................................. 33 Financial Management Systems .......................................................................................................... 34 Computer(ized) Maintenance Management System........................................................................ 35 Enterprise Asset Management............................................................................................................. 35 Supply Chain Management...................................................................................................................... 36 Supply Chain Planning......................................................................................................................... 36 Supply Chain Execution ....................................................................................................................... 36 Warehouse Management Systems....................................................................................................... 36 Transportation Management Systems ................................................................................................ 36 International Trade Systems/Global Trade Management ............................................................... 37 Sourcing and Procurement................................................................................................................... 37 Project Portfolio Management.................................................................................................................. 38 Design and Engineering............................................................................................................................ 39 6. Emerging and Merging Markets .................................................................................................................. 41 Composite Markets.................................................................................................................................... 41 Business Activity Monitoring................................................................................................................... 41 Collaborative Commerce .......................................................................................................................... 41 Corporate Performance Management..................................................................................................... 41 Contract Management............................................................................................................................... 42
©2004 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 16 January 2004

Software Market Research Methodology and Definitions, 2003-2004

v

Table of Contents (Continued)
Page DBA Software Tools ................................................................................................................................... 42 ERP II and Enterprise Application Suite................................................................................................. 42 Mobile and Wireless Packaged Applications Software......................................................................... 42 Mobile and Wireless Infrastructure Software Platforms....................................................................... 42 Order Management .................................................................................................................................... 42 Product Life Cycle Management.......................................................................................................... 42 Smart Enterprise Suites.............................................................................................................................. 43 Supplier Relationship Management ........................................................................................................ 43 Web Services Software ............................................................................................................................... 43 Other Markets ............................................................................................................................................. 43 ASPs and Application Hosting ............................................................................................................ 43 Open Source Software ........................................................................................................................... 43 Software Solutions Markets .................................................................................................................. 43 New Categories ...................................................................................................................................... 44 7. Operating System Definitions ....................................................................................................................... 45 Operating Systems...................................................................................................................................... 45 Unix .......................................................................................................................................................... 45 Linux ........................................................................................................................................................ 46 iSeries (OS/400)...................................................................................................................................... 46 zSeries (OS/390) ..................................................................................................................................... 46 Windows Desktop .................................................................................................................................. 46 Windows Server ..................................................................................................................................... 46 Other OS .................................................................................................................................................. 46 8. Platforms .......................................................................................................................................................... 47 Java ............................................................................................................................................................... 47 .NET.............................................................................................................................................................. 47 9. Worldwide Geographic Regional Definitions............................................................................................. 49 Asia/Pacific Region.................................................................................................................................... 49 Countries of Specific Interest................................................................................................................ 49 Rest of Asia/Pacific................................................................................................................................ 49 Western Europe Region ............................................................................................................................. 49 Countries of Specific Interest................................................................................................................ 49 Rest of Western Europe ......................................................................................................................... 49 Central/Eastern Europe Region............................................................................................................... 49 Countries of Specific Interest................................................................................................................ 49 Rest of Eastern Europe .......................................................................................................................... 49 Japan Region ............................................................................................................................................... 49 Countries of Specific Interest................................................................................................................ 49 Latin America Region ................................................................................................................................ 50 Countries of Specific Interest................................................................................................................ 50 Rest of Latin America ............................................................................................................................ 50 Middle East and Africa Region ................................................................................................................ 50 Countries of Specific Interest................................................................................................................ 50 Rest of Middle East and Africa ............................................................................................................ 50 North America Region............................................................................................................................... 50 Countries of Specific Interest................................................................................................................ 50 10. Research Metrics ............................................................................................................................................. 51 11. Exchange Rates................................................................................................................................................ 53 12. Vertical Market and Company Size Segments............................................................................................ 55 13. Channel Definitions........................................................................................................................................ 59 Appendix A — Glossary of Terms ...................................................................................................................... 61
©2004 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 16 January 2004

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Software Market Research Methodology and Definitions, 2003-2004

List of Figures
Figure Page 1-1 Software Segmentation Structure.......................................................................................................... 2 1-2 Infrastructure Software Segmentation Structure ................................................................................ 3 1-3 Applications Software Segmentation Structure .................................................................................. 4

List of Tables
Table 2-1 2-2 11-1 12-1 12-2 A-1 Page License Type Matrix .............................................................................................................................. 10 Software Revenue Components Broken Down by Software Business Model.............................. 11 Prevailing Annual Exchange Rates, 2000-2002.................................................................................. 53 Vertical Market Segmentation.............................................................................................................. 55 Company Size Segments ...................................................................................................................... 57 Report Glossary ..................................................................................................................................... 61

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16 January 2004

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Software Market Research Methodology and Definitions, 2003-2004

©2004 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

16 January 2004

Chapter 1 Market Share and Forecast: Overview and Methodology
Market Share and Forecast Overview
Gartner Dataquest's software industry research covers key areas of the enterprise infrastructure and application software markets worldwide. Our research programs include Infrastructure Software Worldwide (SWSI-WW), Applications Software Worldwide (SWSA-WW) and regional research programs, such as Software Europe (SWSF-EU) and Software Applications Asia/Pacific (SWSF-AP). While some research encompasses the entire software industry, the majority of research is done at the segment level. Gartner Dataquest breaks the software industry into logical segments, which allows for in-depth and segment-specific research. The segments for which software revenue is analyzed are comprehensively defined in Chapter 4 and Chapter 5 for the purpose of providing clarity and guidance to survey participants and those that use Gartner Dataquest's research. These definitions are revised, altered or expanded each year to reflect changes in software technologies and the software marketplace. Data is not collected or published for every product category defined in this document. Some subsegment details are included for clarification only. Within each of these segments, research documents produced will include some, or all, of the following:
■ ■ ■ ■ ■

Vendor Market Share Market Forecasts Market Trends Research Briefs User Wants and Needs

Of these reports, the two foundational documents are the Vendor Market Share and Market Forecasts. To produce market share reports, Gartner Dataquest collects, estimates and classifies vendors' software revenue in terms of license, updates, technical support and other services — that is, the revenue received by the vendor, as opposed to the price paid by the end buyer of the software. Our research covers software vendors worldwide by selected software categories, as defined in this guide. Based on this research, Gartner Dataquest develops and maintains a database of information on software supply by vendor, revenue, region and software segments. In addition, Gartner Dataquest also analyzes segment and vendor revenue by platform, vertical industry, enterprise size and sales channels (direct, indirect and others) for most of the markets. Our surveys cover about 800 enterprise software vendors active in one or more of the following product segments: application development (AD) software, application integration and middleware (AIM), database management systems (DBMS), business intelligence (BI) and data warehousing tools, network and systems management (NSM) software, customer relationship management (CRM) software, project portfolio management (PPM) software, enterprise resource planning (ERP) software, supply chain management (SCM) software, and collaborative and knowledge management tools. Figure 1-1, Figure 1-2 and Figure 1-3 outline the relative structure of these segments and their subsegments.
©2004 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 1

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Software Market Research Methodology and Definitions, 2003-2004

Figure 1-1 Software Segmentation Structure
Software Segmentation

Infrastructure Software

Enterprise Application Software

AD AIM BI Tools Collaboration Software and Knowledge Management Tools DBMS Data Warehouse Tools NSM Software Security Software

CRM ERP SCM PPM

119016-01-01

Source: Gartner Dataquest (December 2003)

Market Share Methodology
Gartner Dataquest's vendor market share methodology combines primary and secondary sources to produce the Gartner Dataquest Market Statistics reports. Gartner Dataquest interviews all major vendors in covered product categories within the software industry in the following regions: Asia/Pacific, Europe, Japan, Latin America, Middle East and Africa, and North America. This primary research is supplemented with additional research to verify market size. Sources of data used by Gartner Dataquest include, but are not limited to:
■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

Interviews with the channel including manufacturers, distributors and resellers Information published by major industry participants Estimates made by reliable industry spokespersons Government or trade association data Published product literature and price lists Relevant economic data Articles in the general and trade press Published company financial reports Reports from financial analysts Information and data from online and CD-ROM data banks Demand-side (end-user) surveys

Particularly significant sources of information are those published by vendors to the Securities and Exchange Commission (SEC) and other non-U.S. government agencies. The data is used by Gartner Dataquest to prevent "double counting" revenue in more than one segment. Information filed with the SEC and other government agencies is used to cross-reference analyst estimates and is the final check as separate segment and market estimates are rolled-up. For more information on this process, see the "Research Process" section below.
©2004 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 16 January 2004

Market Share and Forecast: Overview and Methodology

3

Figure 1-2 Infrastructure Software Segmentation Structure
Infrastructure Software

Application Development Requirements Management BPA Database Design (AKA Data Modeling) OOA&D Language-oriented Development Environments ISE Traditional (Client/server) AD Tools BRE BPM Automated Testing (Distributed and Mainframe) SCCM Other AD Sosftware Business Intelligence Tools BI Platforms EBIS Other BI Software Database Management Systems Pre-relational DBMS Relational DBMS OODBMS Embedded DBMS Mobile Embedded DBMS Desktop EBMS Products OODBMS Network and Systems Management Software DBMS Management Application Management Availability & Performance Network Management Configuration Management Job Scheduling Output Management ITSD Asset Management Other NSM
Source: Gartner Dataquest (December 2003)

Application Integration and Middleware Adapter Suites APS Application Servers Integration Suites MOM ORB Enterprise Portal Server TPM Other Middleware

Collaboration Software and Knowledge Management Tools Email & Calenaring Real Time Collaboration Team Support Data Warehouse Tools Data Mining Tools Data Quality Tools ETL Tools

Security Software Antivirus Content Filtering Network Security Intrusion Detection Encryption Security Event and Performance Management Security Administration Software

119016-01-02

©2004 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

16 January 2004

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Software Market Research Methodology and Definitions, 2003-2004

Figure 1-3 Applications Software Segmentation Structure

Enterprise Application Software Segmentation

Customer Relationship Management

Enterprise Resource Planning

Sales Marketing Customer Service and Support

Manufacturing HCM FMS EAM CMMS Supply Chain Management Project Portfolio Management

SCP SCE WMS Transportation Management Systems International Trade Systems/Global Trade Management Sourcing and Procurement
119016-01-03

Source: Gartner Dataquest (December 2003)

Gartner Dataquest believes its market share data is the most accurate and meaningful available. Despite the care taken in gathering, analyzing and categorizing the data, careful attention must be paid to the definitions and assumptions, as various companies, government agencies and trade associations may use slightly different definitions of product categories and regional groupings, or they may include different companies in their summaries. These differences should be kept in mind when making comparisons between data and numbers provided by Gartner Dataquest and those provided by other research organizations.

Research Process
At least annually, the Gartner Dataquest software analysts review the lists of vendors and the software segments that will be researched. This review allows for new vendors to be added, defunct vendors to be removed, and any adjustments that need to be made for mergers and acquisitions. The same is true for the software product categories as emerging software segments can be added or outdated segments can removed from the research agendas. A company model is updated for all vendors, large or small, but it is most critical for large vendors that participate in multiple software sectors (such as Microsoft) or multiple industries (such as IBM). The company model divides the revenue that the vendor reports to the SEC (or non-U.S. government agencies) into manageable and logical segments, usually by division or business
©2004 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 16 January 2004

Market Share and Forecast: Overview and Methodology

5

unit. Then, the business unit revenue estimate is further broken down to the product level in collaboration with multiple analysts as necessary. By creating a single company model, the Gartner Dataquest software analysts ensure that no double-counting of revenue occurs. All analysts' detailed estimates of product, service, maintenance and other revenue must add up to the same revenue number that the vendor files with the SEC or other non-U.S. government agencies. While estimating vendors' product-level new license revenue, software analysts use the means outlined in the "Methodology" section above to cross-check and verify that their estimates are as accurate and reflective of market activities as possible. Once product-level new license revenue has been estimated, the data undergoes a series of reviews and revisions with other Gartner Dataquest analysts covering the market. Once consensus has been reached, the data is published. Gartner has a long history of providing end-user clients with independent research on products, vendors and technology trends. Vendor-share measures provide some partial, but interesting, insights into the health and viability of particular software vendors. However, end-users should realize that vendor share is not the complete story, as other factors also contribute to a vendor's viability. End users should base their vendor selections on a range of criteria, including the requirements of the applications they are running, and the size and growth of the vendor's installed base, as well as the vendor's innovation, research and development, scalability, third-party software support, and execution. If you are selecting a vendor and a product, you should also consult the relevant Gartner Magic Quadrant and Gartner Datapro product notes.

Forecasting Methodology
In general, Gartner Dataquest forecasts are developed in accordance with a multi-step methodology. This methodology prescribes a highly structured approach to forecasting that involves three broad process steps. In the first step, the latest available market data is carefully reviewed and compared to the most recently completed forecast. The methodology then directs the formulation of assumptions about the future with consideration given to factors that could cause the forecast to stray in one direction or the other and to potential market discontinuities. On this score, the methodology commands forecasters to consider the complete range of influences that can affect a forecast, including relationships with the rest of the IT industry, general macroeconomic conditions and exchange rate fluctuations. Finally, the methodology dictates an iterative approach to a final forecast in which successive preliminary forecasts are reviewed, critiqued and revised by all those involved in the forecast process in Gartner's analyst community. An integral part of this final step involves comparing forecasts in one sector to those in related markets up or down the value chain and across the entire software industry. Gartner Dataquest's structured methodology leaves specific issues of technique open to forecaster discretion. In general, Gartner Dataquest uses a variety of forecasting techniques in its forecast efforts, depending on the product or technology being forecast. Experience has shown that sole reliance on statistical techniques tends to produce inferior forecasts. Consequently, we use a mix of quantitative statistical and qualitative judgmental methods to generate forecasts. All-in-all, statistical techniques are heavily used in the early parts of our process to anchor our preliminary forecasts in historical fact. Judgmental techniques are then used to shape the final forecast according to the consensual feel of analysts, and are based on information gathered during research with end users, such as User Wants and Needs surveys, CIO surveys and other mechanisms that provide qualitative information on the state of the market.
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Software Market Research Methodology and Definitions, 2003-2004

Gartner Dataquest aims to provide clients with forecasts that are useful, credible and as accurate as possible. Because it is impossible to be 100 percent accurate, it is important to provide clients with details of the assumptions that drive the forecast. For several years, the process of developing IT market forecasts has been undergoing continued refinement at Gartner Dataquest. Today, the process draws on Gartner Dataquest industry experts and client feedback to devise a forecast that is consistent internally and meets client expectations. The process assimilates vast amounts of disparate and aggregated data that are molded into a forecast that is scrutinized and scrubbed by many seasoned analysts. Forecasts are reviewed quarterly to ensure they reflect current analyst opinion. The quarterly analysis of a sample of key vendors is used to fine-tune the forecast, if necessary.

©2004 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

16 January 2004

Chapter 2 Software Revenue Components and Licensing Models
Software License Revenue Recognition
Compared with 10 years ago, today's software vendors offer a much wider variety of contract terms and conditions, pricing models, billing and payment models. And the pace of contract innovation only seems to be escalating. Sometimes, it is the customers that are demanding variations from a "standard" contract. Other times, it is the vendor that is adjusting the terms and conditions to make the customer "sticky" or to smooth the vendor's revenue recognition on its income statement. Gartner Dataquest anchors our published vendor revenue estimates for publicly traded companies to the revenue numbers reported in the vendor's SEC filings, or the international equivalent. We assume that the vendors are following generally accepted accounting principles (GAAP) and Financial Accounting Standards Board (FASB) guidelines for how and when to recognize software contract revenue. In general, if a software vendor contract contains contingencies, all or part of the revenue must be deferred until the contingencies are removed and "delivery" is thereby completed. The effect of contracts that require or permit revenue deferral is that, in any particular quarter, the software vendor's revenue will typically be made up of revenue from current quarter sales closing activity, but also from previous quarters' activity. For example, the value of a newly closed maintenance contract is always posted as an asset to the balance sheet and later recognized as revenue on the income statement over many quarters. Depending on the terms and conditions of a particular contract, software license revenue might be recognized over many quarters as well, rather than in the quarter the sales activity was closed. Software license contracts, popularly called any of the following — term, lease, rental, subscription — may result in gradual recognition of software license revenue by the vendor, rather than a big lump in a single quarter.

Understanding Components of Recognized Revenue
Gartner Dataquest identifies four main components of software company recognized revenue:
■ ■ ■ ■

Product new license revenue Product update license revenue Technical support revenue Services/training/consulting revenue

And optionally, a fifth:
■

Hardware revenue

Product new license revenue is the only metric tracked by Gartner Dataquest software analysts and the one on which estimates of software vendor market share and market size are based. Gartner Dataquest considers the best method to quickly identify shifts in technology trends in the software market is through observing changes in measures of new license revenue. Changes in vendor new license revenue shows trends faster than changes in total company revenue because new license revenue clearly reveals which product categories are accelerating and which are declining.

©2004 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

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Software Market Research Methodology and Definitions, 2003-2004

Looking only at total revenue can mask a steep descent in demand in a category because total revenue includes revenue from updates and upgrades, which is revenue from sales activity that occurred long ago. Updates do not track to what customers are buying new in current quarters. Therefore, new license revenue is much better for revealing important inflection points. It's better to use a leading indicator rather than a lagging one.
■

New license revenue — New license revenue is the initial fee charged by a vendor to use a given version of a software product. New licenses can include first-time use of the software by a customer, as well as the adoption of new modules by a customer or the addition of new seats, new processors or more million instructions per second (MIPS). This is the software company revenue component tracked by Gartner Dataquest software industry analysts and the basis of software market vendor share and market size reports. Upgrade revenue — Upgrade revenue is revenue from customers that purchase a special product license that expands the established license to cover more users, CPUs, storage or other product license metrics. License upgrades are sometimes offered to allow a user to license a package that includes multiple components, one of which the customer already owns. Gartner Dataquest recognizes upgrade licenses as product license revenue. Update revenue — Software is licensed for a specific product version at time of purchase. Update revenue is a fee paid to allow the user to update their license to allow the use of a new version. Customers can purchase update licenses as new versions become available (a common approach for PC software) but enterprises usually contract for an annual service that includeds the right to install all new version of the product released during the contract period. The fee is usually a percentage of the initial purchase price of the software (see "new license revenue" above). New versions of the product may or may not become available during any given contract period. In general, an update contract includes the right to receive both the minor "dot" versions, for example, from version 7.2 to 7.3, as well as the right to receive major upgrades, for example, from 7.5 to 8.0. Gartner Dataquest recognizes all update license revenue, whether received as part of a service contract or as a separate update license as service revenue. Technical support revenue — Technical support revenue is typically an annual fee, usually based on the percentage of the initial purchase price of the software (see "new license revenue" above) charged by a vendor for technical support of the software product purchased. Technical support can include phone support as well as Web-based support, but does not usually include physical, on-site support. Training, consulting and other services revenue — Training, consulting and other services revenue may be a one-time charge or a contract, which will be recognized over time.

■

■

■

■

Abstract Components vs. Real World Complexity
If only the real world were as neat and tidy as the conceptual world. Unfortunately, updates are not always sold in contracts as described above. Many vendors selling PC software have historically sold updates on a one-off basis, especially in the consumer and small office/home office (SOHO) segments. Only recently has Microsoft begun to offer "right to update" contracts, such as Software Assurance to enterprise-class customers. Siebel has always offered right-to-update contracts, but the updates covered are only the minor dot versions. When a current Siebel customer wants to move to a major update, that must be negotiated as if it were a new product, and Siebel accounts for it as a new license sale.

©2004 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

16 January 2004

Software Revenue Components and Licensing Models

9

The SEC and FASB have a lot to say about when elements of contracts for software products and services revenue can or must be recognized on the income statement as revenue. However, these regulatory bodies do not require that public companies decompose revenue into line items, such as license, maintenance, consulting and others. Software vendors that do choose to decompose their revenue for public reporting purposes do not use consistent terminology among themselves. Terms such as product, license, new license, update license, maintenance, technical support and services are used differently by different vendors in publicly filed reports. Regulatory authorities do not dictate what words, such as license, maintenance, updates, support and others, mean in a public report. In fact, these words are used at the vendor's discretion. The vendor decides how to describe its business to its investor community and how much it wants to disclose without giving competitors an edge. Practice varies widely, as stockholders seem ineffective in demanding greater visibility into financial reporting.

Types of Software Licenses
Gartner Dataquest identifies and defines the following software licensing models:
■ ■ ■ ■

Perpetual license Term license Subscription license Appliance license

The two key differences between these models are whether updates or technical support is included with the software license and the length of time before the vendor is contractually able to charge the customer for another license.
■

Perpetual license — A perpetual license is when, once the customer pays the initial fee for the new license, they have the right to use that software in perpetuity. However, this does not give the customer the right to updates without an additional fee. For that, they must sign an update contract (or buy the update one-off, if available that way). This is the type of license most preferred by users and apparently by many vendors, as it makes up over 90 percent of the software licenses sold. Term license — A term license is when, once the customer pays the initial fee for the new license, they have the right to use that software for a contractually established term. Often, the fee is paid in a lump sum upfront. Once that term is over, the customer must again pay an initial fee for a new term license. Prices probably will have changed. The customer also generally has a maintenance contract of the same duration as the term license contract. Gartner Dataquest always clarifies in the vendor interview process whether updates are included directly in the term license. (If they are, this vendor is actually using a subscription license model as defined by Gartner Dataquest.) True term license revenue (not including updates) is counted by Gartner Dataquest as new license revenue. (Some vendors call their term licenses "lease licenses" or "rental license.") Subscription license — A subscription license is when, once the customer pays the initial fee and signs the contract for the new license, it has the right to use the software developed by the vendor for a contractually specified time, as in a term license. Unlike in a term license, as defined by Gartner Dataquest, the customer also has the right to subsequent updated versions of the software as well as a certain amount of technical support. If a vendor claims to be using a subscription license model, the analyst must research

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©2004 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

16 January 2004

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Software Market Research Methodology and Definitions, 2003-2004

that vendor's contract practices to discover if it's definition of "subscription license" matches Gartner Dataquest's software subscription definition. Gartner Dataquest identifies and defines two types of subscription license:
❑ ❑

The customer buys and runs the subscription in-house The customer buys the subscription that is hosted by the same software vendor. Some examples are sales force.com in CRM, SupportSoft in help desk and Opsware (formerly Loudcloud) in systems management.

■

Appliance license — An appliance license is where a software program is sold on a hardware device branded by the same vendor. The software is sold as a package of hardware and software. Sometimes, the software is available as only software, but most commonly the software is available only on the vendor's appliance, board or blade, not for installation on a general-purpose computer, or the software works fully only in conjunction with the purchase of the hardware. In some cases, the appliance or board may contain custom hardware components, but in other cases, may be quite generic. Examples include the firewall market, where end-buyers consider software-only solutions, such as Checkpoint, alongside appliance solutions, such as NetScreen. In the network management market, NetScout Systems embeds its agents in probes (boards), whereas Hewlett-Packard agents are software-only. When Gartner Dataquest reports on such a software market, the imputed value of appliance and board hardware is excluded.

Table 2-1 details the different types of software licenses.

Table 2-1 License Type Matrix
Gartner Dataquest Concept Perpetual License Term License Subscription License Appliance License
Source: Gartner Dataquest (December 2003)

Length of Term Forever Term Term Forever

Includes Updates No No Yes Varies

If vendors do not provide revenue line-item information that breaks software revenue into its various components, Gartner Dataquest uses the following matrix of the ratios used for each licensing business model to attribute revenue to Gartner Dataquest's concepts of software revenue components (see Table 2-2). If the vendor's licensing model, managerial accounting and investor reporting practices do not match up to Gartner Dataquest's definitions, then additional adjustments may need to be made to estimate the Gartner Dataquest new license revenue, update revenue, technical support revenue and others. To better serve clients, Gartner Dataquest is constantly seeking to provide the best and most current software industry analysis possible. As vendors modify and evolve licensing and pricing models to achieve a competitive edge, Gartner Dataquest reviews and revises it's models and rules to keep up with industry practices.

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Table 2-2 Software Revenue Components Broken Down by Software Business Model (Percent)
Gartner Dataquest Concept New License Update License Technical Support Hosting Hardware Total Perpetual License 100 0 0 0 0 100 Software with an Appliance/Board 30 0 0 0 70 100 Subscription License Without Hosting 70 20 10 0 0 100 Subscription License With Hosting 65 20 10 5 0 100

Term License 100 0 0 0 0 100

Notes: Term license is applied when the vendor does not include updates in the license. Gartner Dataquest does not include "hosters" that are merely reselling a third-party vendor's software intellectual property. Such a hoster is a distributor, not a software vendor earning license revenue from its own software intellectual property. Source: Gartner Dataquest (December 2003)

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Chapter 3 Software Segmentation
Product Market Definitions
The software market segments covered contain a wide variety of products and technologies. To better understand the range of vendors and products included in this program, this document provides a taxonomy for the market and definitions of the specific segments. Note that the inclusion of a segment in this list does not indicate the level of coverage (if any) committed to it. The segmentation of software infrastructure products and application packages poses significant challenges, including:
■ ■ ■

Products are very often used in ways that differ from their intended purpose. The positioning of a product by a vendor may not match the actual functionality of the product. Product sets and suites are evolving and devolving. Products are, therefore, moving across segment boundaries, and new segments must be created and old segments must be revised. In many markets, the lines between segments are blurring. Important attributes, which may be of interest in their own right, do not necessarily constitute a unique market.

■ ■

Gartner Dataquest segments products into mutually exclusive groups to minimize the double-counting of vendor revenue. Chapter 6 provides details of emerging software market opportunities which don't fit the standard categories listed in Chapter 4 and Chapter 5. Gartner Dataquest's classification of a product takes into account a variety of factors, including the product's technical features, target audience, competitive positioning and perceived usage of the product by customers. Wherever possible, Gartner Dataquest intends to position a product within one specific segment. However, in cases where the vendor and Gartner Dataquest see the product being used in multiple segments, percentages of the total new license revenue will be allocated to the appropriate segments, to avoid doublecounting.

Composite and Stand-Alone Views
In general, to produce the market share and forecast for a specific software market, the Gartner Dataquest software group counts new license revenue of appropriate stand-alone products and does not attempt any estimate or adjustment to count revenue from functionality embedded within software products that are not part of the specific software market being studied. However, in several software markets, a shift is occurring as increasing numbers of vendors are producing software that fits into one segment but selling it as additional functionality embedded in products sold in another segment. An example of this would be SAP's Business Warehouse (SAP BW), which is sold as a separate product and as a bundle in the mySAP application suite. SAP BW, sold as a separate product, is the only SAP revenue counted in the stand-alone view of the BI market. However, when sizing the composite view of the BI market, we formulate an estimate of the revenue that SAP generates for the entire SAP BW solution, including when it is sold as part of the mySAP application suite. This, then, is SAP's revenue in the composite view of the BI market.

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Looking only at stand-alone products would end up showing the trends of only one side of the software market, completely missing the relevance of vendors that are exploring this strategy of embedding functionality to make their core products more attractive and competitive. These software vendors are beginning to capture increased numbers of customers that are choosing to use this embedded functionality rather than purchasing a stand-alone product from a traditional vendor. As a result, Gartner Dataquest has developed a methodology to allow us to view the market from a stand-alone perspective to identify trends occurring among traditional vendors, as well as from a composite perspective, which incorporates the activities of non-traditional vendors that are impacting the software market by embedding software functionality targeted at one market into software products sold into another segment.

Stand-Alone and Composite Views
Gartner Dataquest looks at certain software markets affected by this new trend from two perspectives: stand-alone and composite. We refer to these perspectives as "views" and not as markets since they are simply different ways of looking at the same market.
■

Stand-alone products are those that are sold on their own as distinctive solutions. Looking at the market from a stand-alone perspective means considering only those products that are sold into a specific software market and not including any revenue from products from other segments that may include similar embedded functionality. When Gartner Dataquest creates composite views of various markets, we estimate revenue that can be attributed to functionality embedded in products not being marketed and sold primarily for their capabilities in that market. To this estimate, we add the amount of licenses generated by products sold as stand-alone; hence the term "composite." The view can be summarized with the equation:
❑

■

Stand-alone + embedded component = composite view

In terms of forecasts, Gartner Dataquest looks at the outlook of the stand-alone and composite views. Of the two, the composite view is projected to grow more rapidly because, as vendors and technologies consolidate, and as functionality is embedded in other software, more enterprises will find this embedded functionality to be adequate in meeting their needs, and thus will not need to purchase a stand-alone product.

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Chapter 4 Infrastructure Software Definitions
The focus of infrastructure software is to increase the performance of IT resources. In this category, we gather software primarily for use by IT professionals. These definitions are how Gartner Dataquest views the market as of August 2003.

AD Software
The AD software market is comprised of tools that represent each phase of the software development life cycle (planning, design, construction, automated software quality and operation life cycle).

Requirements Management
Requirements management tools streamline development teams' analysis of requirements, captures requirements in a database-based tool to enable collaborative review for completeness, ease use-case or test-case creation, provides traceability and facilitates documentation and versioning/change control. The database approach uses special-purpose repositories that are part of the requirements management solution or ship with a general-purpose commercial database integrated with the tool.

Business Process Analysis
The fundamental analysis of business processes and management systems is to improve them for cost reductions, faster time-to-market, lowered risk or higher business value. Business process analysis (BPA) can point out opportunities for optimization, automating manual processes, reducing error cycles and identifying revenue leakage points. It uses objective, quantitative methods and tools to analyze, redesign and transform business processes, including supporting organization structures, information systems, job responsibilities and performance standards. In some cases, BPA could point out the need for wholesale change implied in a full business process re-engineering (BPR) effort.

Database Design (Data Modeling)
Database design software includes logical (entity relationship) and physical (table, column and key) design tools for data. Physical data modeling is becoming almost mandatory for applications using relational database management systems (RDBMS). Strong support for physical modeling is paired with facilities to manage multiple models, to sub-model or extract from larger models and to reverse-engineer a database design from established tables. Developers are a secondary market, often targeted with a subset of the complete functionality.

Object-Oriented Analysis and Design
Object-oriented analysis and design (OOA&D) tools support object analysis and design technologies, and they commonly use Unified Modeling Language (UML) notation with a variety of methodologies to assist in the creation of highly modular and reusable software. Applications, data, networks and computing systems are treated as objects that can be mixed and matched flexibly rather than as components of a system with built-in relationships. As a result, an application need not be tied to a specific system or data to a specific application. (The UML standard from the Object Management Group has become the defacto standard for OOA&D tools).

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Language-Oriented Development Environments
Language-oriented development environments typically are built around a compiler and a language, such as COBOL, C/C++, Fortran, ADA and PASCAL, among others. These tools generally include graphical user interface (GUI) builders, debuggers, editors and other utilities that are integrated into the environment.

Integrated Services Environments
An integrated services environment (ISE) is a suite of integrated development tools, frameworks and technologies used for building service-oriented and composite applications. Most often, these applications will implement a service-oriented architecture (SOA) and will use the techniques of servicesoriented development of applications (SODA) [see "Producer Platforms and SODA Will Shift the AD Approach," T-16-5731]. ISEs are producer platforms (for creating services), much as application servers are provider platforms (for hosting services). Seven basic characteristics of an ISE define the completeness of its support for SODA:
■ ■ ■

Design — Specification of application requirements Modeling — Definition of application structure Fabrication — Writing code, creating components and wrapping legacy resources. Nominally, this is the function of an integrated development environment (IDE). Assembly — Aggregation of components, alignment of inputs to outputs, translation of input or output data Orchestration — Flow control and process management Automation — Hiding complexity and removing the need to write code Variability — Rapid change management. The variability of a system may be inversely proportional to its automation.

■ ■ ■ ■

Traditional (Client/Server) AD Tools
Traditional AD tools include all traditional client/server development environments, and may be client/server fourth-generation languages (4GLs) targeting older technologies (that is, VisualBasic targeting the Microsoft COM/DCOM environment) and third-generation language (3GL) generators for Cobol, C or C++ targeting the Multiple Virtual System (MVS) or Unix.

Business Rules Engine
Business rule engine (BRE) business change has been a constant companion of systems development since the inception of IT, but a growing number of factors has led to the increase of change necessary to remain competitive in business. This increase in the frequency of change is leading to new approaches to alter the business rules embedded in business process flows, applications and even in the enterprise architecture. Enterprises are more pressed to become adaptable and apply the knowledge captured in rule sets to outflank competitors and respond to changing business environments. They can no longer wait for professional programmers to change applications written in traditional programming languages. Business users want to change rules without going through a long-running change process that is, at best, measured in days and, at worst, measured in weeks and months. Therefore, rules engines allow even end users to make dynamic "real time" changes to their applications in an abstracted level of language.

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Business Process Management
Business process management (BPM) is a general term describing a set of services and tools that provide for explicit process management (that is, process analysis, definition, execution, monitoring and administration), including support for human and application-level interaction. BPM has emerged from many sources — workflow, applications, collaborative tools, integration brokers, Web integration servers, application servers, development tools, rules engines and commerce offerings. BPM leverages tools to analyze and model processes, using a graphical process designer targeted for business analysts that extract process flow and architect new business process flows. A runtime execution engine (underlying state machine) executes the defined process flow, stepping through the defined process flow. As the process flow is executed, applications (that is, legacy, packaged, external business-to-business [B2B] and Web services) may be invoked, as will tasks that humans have to complete. The runtime environment maintains the status (state) of each process instance. As the many instances of multiple process types execute, they can be monitored (that is, process performance, degree of completion and out-of-bounds conditions) and administered (that is, for process termination and load balancing or rerouting). Post-completion analysis is also possible, as the state data is archived for BI potential.

Automated Testing (Distributed and Mainframe)
Automated testing applies commercially or internally developed software or services to assist in the testing process. Automated tests provide consistent results and data points. The benefits are repeatability, ease of maintenance, the ability to efficiently use resources in off-peak hours and the capability to create reports based on the executed tests.

Software Change and Configuration Management
Software change and configuration management (SCCM) is a set of disciplines to stabilize, track and control an agreed to set of software items. It includes version management, change management, defect tracking, change automation and other related processes.

Other AD Software
Other categories of AD software, not directly covered in the market research, include:
■ ■ ■ ■ ■

Methodware Process management tools Component-based development tools Legacy understanding, legacy extension and legacy transformation tools IT metadata repositories

Application Integration and Middleware
AIM is defined as the system software or runtime infrastructure used to provide intra- and inter-application communications. Intra-application middleware is used for the construction of individual multitiered applications. Inter-application middleware is used for communication between individually designed applications. Gartner Dataquest includes all runtime platforms, such as application servers, transaction processing monitors (TPMs), object request brokers (ORBs) and object transaction monitors (OTMs), as middleware, making our definition broader than other popular definitions. Elsewhere, middleware is sometimes
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limited to program-to-program communications services, such as messageoriented middleware (MOM) and remote procedure calls (RPCs) (communication middleware). A definition that only includes communications middleware is too narrow. Many other types of software "sit in the middle" (between the application, the operating system and the network), acting as glue. It is good to have one general term (middleware) rather than multiple terms for each form of such software. Note also that application servers, TPMs, ORBs and OTMs (what we call platform middleware) do the same thing that MOM and RPCs do. That is, they send messages between programs, although they also do other things, such as managing system resources, the operating system and network transport service. In the IT marketplace, AIM is often referred to as enterprise application integration (EAI).

Adapter Suite
Adapters are some combination of design tools and runtime software that act as glue to link applications, considered as sources or targets (or both), to the enterprise nervous system (ENS), that is, the integration middleware infrastructure that transports, transforms and routes data between systems. An adapter deals with a group of touchpoints (one or more entry/exit points, collectively an "interface") for a source or target. On the other hand, an adapter links to the ENS. Adapters recognize events, collect and transform data, and exchange data with the ENS. They also handle exception conditions, and can often dynamically (or with minor reconfiguration changes) accommodate new revisions of back-end applications. A comprehensive adapter suite should include adapters for common technologies (Component Object Model [COM], Enterprise JavaBeans [EJB] and Web services), industry protocols (electronic data interchange [EDI], SWIFT and RosettaNet) and applications (SAP or PeopleSoft). Adapter development kits (ADKs) are also needed when no prepackaged adapter is available for a particular (often proprietary) application. Adapter suites are available as part of an integration broker solution (for example, SeeBeyond, Tibco, Vitria and webMethods) and as unbundled solutions (for example, Actional, iWay, Peregrine, Sybase and Tavis) for use with integration brokers, or "lightweight" integration, often in composite application scenarios in conjunction with application servers.

Application Platform Suite
An application platform suite (APS) is an assembly of essential software infrastructure products sufficient to enable, at run time, the fundamentals of modern e-business applications. Gartner Dataquest defines minimal APS infrastructure as consisting of:
■ ■ ■

An application server An enterprise portal server An integration suite

A good APS will include other product categories, such as an integrating development framework and integrated systems management. In fact, these added product types will probably become the key features to attract future users to the vendors' APS offerings. Colloquially, an APS is also referred to as an "e-business platform." A user can assemble an APS from different vendors' component parts, but increasingly, leading software vendors offer an all-inone, "one stop shopping" APS assembled from their own products. The configuration of an APS reflects the central importance of component architecture, service-oriented architecture, Web services, portal-style user interaction and application integration to most modern business applications. Users
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facing the job of developing and deploying increasingly complex e-business applications look for solutions that offer simpler procurement of tools, moreproductive development of software, and more-effective maintenance and management of applications. Vendors have targeted their APS products at meeting these essential requirements of modern enterprise computing.

Application Servers
An application server is a modern form of platform middleware. It is system software that resides between the operating system on one side, the external resources (such as DBMS, communications and Internet services) on the other side and the users' applications on the third side. The function of the application server is to act as host (or container) for the user's business logic while facilitating access and performance of the business application. The application server must perform despite the variable and competing traffic of client requests, hardware and software failures, distributed nature of the larger-scale applications and potential heterogeneity of data and processing resources required to fulfill the business requirements of the applications. A high-end online transaction processing (OLTP)-style application server delivers the business applications with guaranteed levels of performance, availability and integrity. An application server also supports multiple application design patterns, according to the nature of the business application and the practices in the particular industry for which the application has been designed. It typically supports multiple programming languages and deployment platforms, though most have a particular affinity to one or two of these. Some application servers implement standard application protocols, such as Java 2 Enterprise Edition (J2EE) and others, are entirely proprietary. At present, the proprietary application servers are typically built into packaged applications, such as portals and e-commerce solutions, and are not offered as standalone products. These application servers are not estimated in this report. Only J2EE-compliant application servers are estimated.

Business Process Management
See the definition under AD Software.

Integration Suites
By definition, an integration broker provides transformation and intelligent routing. The broker itself is just one component of a suite of related middleware tools, which may also support BPM or a message warehouse (for example, a mechanism to store and retrieve messages to be retransmitted or analyzed later). Broker suites must have a repository for metadata descriptions of the input/output message formats (for example, a message dictionary) and transformation/routing rules. They also include development tools for defining transformation rules and routing flows, security facilities, and administration and monitoring facilities to manage broker configuration. Virtually all provide adapter development tools, off-the-shelf adapters for packaged applications and their own MOM, in addition to gateways to external platform middleware and MOM products. An integration broker may run directly on the operating system (OS) or be hosted by platform middleware (for example, a TPM or ORB).

Message-Oriented Middleware
MOM products provide connectionless program-to-program communications services for intra-application and inter-application (for example, integration) purposes. Interactions may be asynchronous (one-way, store-and-forward) or synchronous (one way or two-way request/reply exchanges). MOM products complement application servers by providing features, such as guaranteed

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once and only once delivery, broad platform support (they run on many operating systems) and property- or subject-based publish-and-subscribe. Unlike RPCs or basic application servers, MOM products also support one-to-many (1:m), many-to-one (m:1) or many-to-many (m:mn) delivery. All major Java application servers and most integration suites now include a bundled MOM service, often based on the Java Message Service (JMS) standard. However, stand-alone (unembedded) MOM products are also still sold.

Object-Request Brokers
Gartner Dataquest considers ORBs to be platform middleware rather than communications middleware because of the many environmental and resource management services that such products provide (especially program activation, which RPCs traditionally did not offer). From 1994 through 1998, ORB vendors as diverse as Iona, Inprise and Microsoft added transaction management and other features traditionally found in TPMs to their ORBs to enable demanding, production applications. Most ORB products thereby evolved into OTMs, just as TPMs added component interfaces and also evolved into OTMs from a separate starting point. More recently, the ORB vendors have added support for Web browser clients through various mechanisms. Although these products began as ORBs, there is relatively little structural difference between a Web-enabled ORB and a Web-enabled application server except that the ORB programming application programming interfaces (APIs) may be in terms of Common Object Request Broker Architecture (CORBA) or Component Object Model Interface Definition Language (COM IDL) rather than JavaBeans, ActiveX Controls or other APIs. However, ORB functionality can be — and often is — used as communications middleware. All leading ORB products, as well as the CORBA specification, during the past 10 years, have delivered full functionality of platform middleware.

Enterprise Portal Server
An enterprise portal server is used by enterprises to build a gateway, providing access to and interaction with relevant information, applications and business processes for select targeted audiences, delivered in a highly personalized manner. A portal product is a type of platform middleware, but it may also be considered a form of integration middleware because it may include gateways, transformation functions and some type of intelligent routing (for example, it can include some form of basic integration broker).

Transaction Processing Monitors
The earliest form of platform middleware was the TPMs. Products, such as IBM's CICS and IMS, and Unisys' TIP, have been used on mainframes since the late 1960s, and Unix TPMs, such as Tuxedo, originated in the 1980s. Over the years, these products added support for distributed servers, intelligent desktop clients (rather than dumb terminals) and Web browser clients, and are now adding component-style programs, such as JavaBeans. There is little essential technical difference between most of these TPM products and the newer flavors of platform middleware, such as Web application servers and ORBs. That is, they can all act as Web application servers.

Other Middleware
Other categories of middleware, not directly covered in the market research, include:
■ ■

RPC — Communications middleware products, which provide synchronous, request/reply communications via RPCs Data management middleware — Products that enable programs to read from and write to databases or files on other computers
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■

Open database connectivity (ODBC) drivers and database gateways — Products for remote file access and other products oriented toward providing communication of queries and data to and from a DBMS are examples of data management middleware. Web-to-host middleware — Products that facilitate the support of HTML or Java-based clients from host-based applications Componentware — Reusable business objects, application templates, models and technical components

■ ■

BI Tools
BI software tools allow the storage, access and analysis of data in a data warehouse. This includes online analytical processing (OLAP) tools, executive information systems, query-and-reporting tools, multidimensional tools and decision support systems.

BI Platforms
BI platforms offer complete sets of tools for the creation, deployment, support and maintenance of BI applications. They combine database access capabilities Structured Query Language (SQL), OLAP data manipulation, modeling functions (that is, what-if analysis), statistical analysis, and graphical presentation of results (charting) to create data-rich applications, with custom end-user interfaces, organized around specific business problems, with targeted analyses and models. The BI platform segment is the less-mature segment of the BI tools market, and sells to original equipment manufacturers (OEMs) and independent software vendors (ISVs), as well as directly to IS organizations and end users. Many BI platform vendors also sell applications as the platform's justification.

Enterprise Business Intelligence Suite
Enterprise business intelligence suites (EBISs) are the successors to the basic query and reporting tools. They are supplanting or extending them, to provide support for varying levels of users, with a variety of query, reporting and (lightweight) OLAP capabilities, with minimal training. Although OLAP tool usage is spreading, basic query and reporting tools remain the most ubiquitous BI tools, especially in Europe. Because of strong Web affinity associated with EBISs, some vendors have described their EBISs as BI or Web portals. These portal offerings typically provide a subset of EBIS's functionality via a Web browser. However, the vendors have been steadily increasing this functionality to be closer to that provided by full-client desktop tools.

Collaboration Software and Knowledge Management Tools
Collaboration software and knowledge management tools are products for the management of documents and document production processes in a collaborative environment. These systems include basic document library functionality with version control and check-in/check-out abilities. It also includes content management systems intended purely to support Web content created for publication.

E-Mail and Calendaring
E-mail and calendaring software includes workgroups to global enterprise platforms, offering e-mail and potentially additional services, such as calendaring, collaborative service applications or Web-based unified messaging. These products may also include integrated directory capability.

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Software Market Research Methodology and Definitions, 2003-2004

Real-Time Collaboration
Real-time collaboration tools support interaction between participants in realtime, in a meeting or presentation format. They include application sharing and shared whiteboard software.

Team Support
Team support tools primarily provide for document-based collaboration, targeted at teams with self-administration. They need not include e-mail capability, which may be already in place. They may include some real-time collaboration capabilities.

Data Warehouse Tools Data Mining Tools
Data mining tools are used to replace or enhance human intelligence by scanning through massive storehouses of data to discover meaningful new correlations, patterns and trends by using pattern recognition technologies and statistics.

Data Quality Tools
Data quality tools are used to improve the understanding, accuracy, and integrity of data by identifying and correcting inconsistent or poor data in operational systems and the data warehouse architecture.

Extraction, Transformation and Loading Tools
Extraction, transformation and loading (ETL) tools are used to extract data from multiple data sources (typically operational applications). Using business rules, that data is integrated and transformed, then loaded to a target data warehouse or data mart (or occasionally to other application databases). Most ETL tools can access a range of data source and target types (data formats), which includes a library of built-in transformation functions, that are supported by a metadata repository and provide some degree of support for the operational aspects of data movement (that is, scheduling, job control and error handling).

Database Management Systems
A DBMS is a product used for the storage and organization of data that typically has defined formats and structures. DBMSs are categorized by their basic structures and, to some extent, by their usage or deployment. For reporting purposes, a product must be assigned to a single category, which may include the following: pre-relational DBMS, RDBMS, embedded DBMS, desktop DBMS and object-oriented DBMS (OODBMS).(The pre-relational and relational segments are subsegmented to identify the products most commonly used in the embedded market and those typically considered as desktop products.)

Pre-relational DBMS
DBMS architectures were defined before relational theory became widely used. The pre-relational DBMS generally is based on a hierarchical structure or a navigational (also known as network) structure. The pre-relational DBMS generally runs on a mainframe system or on an operating environment provided by a single computer systems' vendor. Pre-relational DBMSs are typically highly optimized for large data volumes and high transaction-processing performance.

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Relational DBMS
The RDBMS architecture is based on a formal method of constructing a database in rows and columns using rules that have formal mathematical proofs. RDBMSs originated in the work of E.F. Codd. In an RDBMS relationships between files are created by comparing data, such as account numbers and names. In addition, a RDBMS has the flexibility to take any two or more files and generate a new file from the records that meet the matching criteria.

Embedded DBMS
Embedded DBMS products are defined as products used as part of the deployment of applications that can range from a stand-alone desktop in a small LAN to a large mainframe class system. An embedded DBMS product typically does not come with a complete set of development tools, but rather requires that development be accomplished with separately acquired tools. This kind of DBMS may be bundled with an AD tool to provide a complete development environment. The DBMS should be capable of being installed invisibly when the application is installed. Products targeting the evolving mobile computing market will be included in this subsegment.

Mobile Embedded DBMS
Mobile embedded DBMS products are embedded DBMSs targeting the evolving mobile computing environment. The mobile embedded DBMS product may be bundled with sets of AD tools to provide a complete development environment, or the development tools may be acquired separately. The DBMS should be capable of being installed invisibly when the application is installed.

Desktop DBMS Products
Desktop DBMS products contain not only the database engine but also the tools, such as a forms generator and report writer, that are used to create a complete application environment. Desktop DBMS products are typically used on single-user systems running the DOS, Windows or Macintosh operating systems.

Object-Oriented DBMS
OODBMSs are DBMSs that allow the data to be defined and manipulated as objects via methods that hide the base data. The first wave of OODBMSs has added relational interfaces to an object-oriented foundation.

Embedded Software Tools
This software is researched in Gartner Dataquest's Design and Engineering Worldwide cluster. See the"2003 Technical Applications Software Guide," SEMC-WW-GU-0010.

Network and Systems Management Software
NSM is intended to represent all of the tools needed to manage the provisioning, capacity, performance and availability of the computing, networking and application environment. Gartner Dataquest divides the NSM market into nine major segments. (Not all these segments may be estimated or forecast every year.)

DBMS Management
Included here are tools for monitoring and diagnosing problems with databases, for analyzing and improving the performance of databases, and for routine administration of databases, including configuration changes. Examples include DBMS monitors, SQL turners, space tuners, reorganization tools,
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utilities, loaders and unloaders, and many others, as well as suites that may include several of the above.

Application Management
Included here are tools for monitoring and diagnosing problems with packaged (and custom Web) applications, for analyzing and improving the performance of applications, and for routine administration of applications, including some configuration changes. Examples include tools for managing message queuing (MQ) Series, e-mail servers, Web servers, J2EE and.NET application servers, ERP applications, CRM applications, e-commerce applications and others. Packages most often targeted by vendors include SAP R/3, Domino, Exchange, Siebel, BEA Web logic, and IBM WebSphere. Some vendors offer suites that manage the infrastructure behind the application as well as the application itself — thus, they may include management of DBMSs, systems and network links as all-inclusive features.

Availability and Performance, Other NSM
These are software products, including enterprisewide event consoles, that are used to monitor and manage the performance and availability of systems, networks (and increasingly storage) mainly beneath the DBMS and application layers. (Management of databases, applications and networks is covered in separate categories with those names.) In cooperation with separate security products, event management/fault management products can recognize and trigger a response to breaches in security via separate security products. Event management tools also collect statistics about events and usage, and may perform historical trend analysis. System administrators can view this analyzed data in near real time and use the data to respond to conditions displayed and to guide their reassigning of resources using separate configuration management tools. Event management (fault management) tools are used to collect, report and diagnose problems (faults) identified in the environment. Rootcause analysis tools for networked systems are in this segment. This segment also includes IT operations and administration "policy" software, which creates and manage lists of users (in cooperation with security and human resources management system [HRMS] products) and lists of the environment's elements, determines appropriate access policies to those elements on a per user or "role" basis, and audits adherence to those policies. Tools for internal chargeback and capacity planning, as well as tools that design an internetwork, are in this segment. Performance monitoring and analysis products are included here. This year, the service management category was merged with availability and performance because performance products and service management products were becoming indistinguishable. Performance (and service management) products provide a service-level view and analysis of end-to-end performance (and often of availability as well). These products are evolving toward a business activity view of the IT and Web infrastructure (business activity monitoring [BAM]). This logical, higher-level management layer will focus on the quality-of-service and service-guarantee issues linked with underlying more granular network, system, Web and application management. Performance (service) software is sometimes used in-house or is outsourced from a thirdparty provider, such as a telecommunications carrier or Web hoster. Performance tools focus on comparing the expected quality of resource availability for a resource or "service" with actual results. The tools use historical data and include features such as baselining, trend analysis, historical usage analysis, service-level reporting and, in some cases, interfaces to chargeback and billing systems. Included here are service-level agreement tools and customer response time measurement tools.

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Network Management
Applications designed to isolate and resolve faults on the network, measure and optimize performance, manage the network topology, track resource use over time, initially provision and reconfigure elements, and account for network elements. Suites that include fault monitoring and diagnosis, provisioning/configuration, accounting, performance management, and TCP/IP application management — but only for networks — are also included here. This network management segment is intended for products that are mainly or entirely network-oriented and used primarily by enterprises.

Configuration Management
Configuration management (CM) software includes stand-alone products as well as suites of products that can initially provision/configure desktops, servers or mobile devices, and then manage the change of configuration settings, software and increasingly the files and data on those elements on an ongoing basis. Included in this category are stand-alone products for software distribution, remote control, software packaging, personality migration, software usage metering, and mobile device management. Also included here are product suites that lead with provisioning and CM but may include features such as asset discovery, automated backup, bare metal boot, self-healing functionality, change management, data synchronization or even help desk features. When those features — asset discovery, automated backup, bare metal boot, selfhealing functionality, change management, data synchronization and help desk — are sold as stand-alone products, that revenue is in other categories, not CM. This category replaces the desktop management (DTM) category. CM is for production systems only and is distinct from software configuration management (SWCM). SWCM manages the change and configuration of development systems and is used primarily by the programming staff rather than the systems administration staff. Some SWCM and CM vendors are partnering to provide a linkage between systems. Also, the CM category does not include vendors that position their products primarily as electronic software distribution (ESD) or as content distribution (CD). However, some vendors are partnering across category lines, pointing to a potential market convergence in the future.

IT Service Desk
IT service desk (ITSD) products can range from simple call tracking/trouble ticketing products to sophisticated solutions for the complete business management of an IT department's or an outsourcer's people, processes and tangible assets. Most products take advantage of automated escalation policies, and regularly integrate with NSM systems for links to inventory repositories, configuration information and remote control. The most-sophisticated products also may link to dominant brands of corporate portals, workflow engines, procurement modules and HR systems, or include these as proprietary features. Only products that are positioned as ITSDs are included in the ITSD category. For example, portals that include self-service desks are considered portals products, which are tracked in AIM. Products positioned as workflow platforms are also tracked in AIM as integration brokers. Some service desk/call center vendors have technology that is marketed to the internal IT department and to the external customer support department. The fraction of vendor revenue from customer support software is tracked in Gartner Dataquest's application software Cluster as CRM software. Basic functions of an ITSD include call management, problem notification and resolution tracking. Virtually all products support add-on knowledge modules as part of end-user and systems administrator problem resolution activity. Self-help involving a knowledge search is included here when it pertains to IT. (Standalone automated restore, also called self-healing — where the end user or help desk personnel are not involved — is part of the CM category.)
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ITSD tools are often routinely used to orchestrate personnel to manually execute IT change projects, such as card swaps, hard drive swaps and others. However, change management also means automated or scriptable configuration change management, which is part of the CM category. Project management software is also often used for coordinating people-intensive change projects. It is a subcategory of AD tools and is not covered in NSM. Change management is also practiced by programming teams during the development process using software configuration management tools. Thus, change management is an activity that may be addressed by ITSD, CM, SWCM or project management software, as well as other tools. Stand-alone change and configuration management products that were in consolidated service desk (CSD) are now in the CM category.

Asset Management
This category includes products that provide one or all of the following: asset discovery, asset management, an asset database/repository, asset portfolio management, tracking of purchases, leases, contracts and disposal pertaining to IT assets including hardware and software. Links to general ledger accounting systems modules, such as the capital asset ledger, are common. Integration with capacity products, user administration products and order entry and e-procurement is desirable. When paired with an ITSD, asset management can become part of a complete solution for the business management of an IT department or IT outsourcer.

Job Scheduling
Job scheduling tools supervise a logical process (several jobs or programs) as they execute in a mainframe or distributed environment, providing scheduling and dependency management of the process as it runs, mainly in sequence, across disparate systems, geographies and applications. The tools in this category are used for "batch integration" of heterogeneous applications and data stores. (Workload management products — used to divide and distribute the workload of a single job, in parallel, over multiple systems or processing units so it can complete faster — have been moved from NSM to the OS category.)

Output Management
Output management products include those that support document, report and file output to printers, faxes and other viewing media, such as the Web. Typical products can translate between different output formats, including popular billing formats. Many have repositories to store output files for Web viewing or other on-demand delivery. Some also deposit and retrieve output from long-term archives. Print management is a subset of output management that focuses only on print management.

Security Software
Security software is the sum of all the segments below and represents all software needed to control and monitor access to internal and external resources. This includes products for security management, such as access control and administration, as well as operational security products, such as antivirus, encryption and intrusion detection products.

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Antivirus
Antivirus software products scan, detect and correct viruses and malicious mobile code at the desktop, at the server level and, increasingly, when embedded in other devices in the network. There are two key categories: server-based antivirus software and desktop-based antivirus software.
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Consumer antivirus — Desktop and subscription antivirus sold to SOHO and consumers Enterprise antivirus — Desktop, server, gateway and subscription antivirus sold to small-tomidsize businesses (SMBs) and enterprises

Content Filtering
These include acceptable use control products, such as uniform resource locator (URL) blocking products and e-mail filtering and spam blocking products.
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Web-acceptable use E-mail outbound control Anti-spam

Network Security
Firewalls are software that receives http and other network and port connection requests and verifies basic privileges before permitting the connection. Two types include perimeter firewall software and PC-based (personal) firewall software. Application-aware firewalls are software that can examine the payload of packets and detect malicious code and messages at the application layer. Virtual private network (VPN) is software that creates a secure virtual private network tunnel, or session, over the public Internet infrastructure. It is used by telecommuters and branch offices. Secure Sockets Layer VPN is a new emerging "thin" approach to VPN included here.
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Multifunction security software (suite) Firewall/VPN Firewall/VPN/antivirus/intrusion detection system (IDS)/content filtering

Intrusion Detection
IDS products monitor network traffic through observation of actions, security logs or audit data to detect, identify and isolate attempts to make inappropriate or unauthorized access to system resources. This includes two categories: hostbased IDS software and network-based IDS software (that is, it runs on a device to be connected to the network).
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Network IDS Host IDS

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Encryption
Encryption software products provide a mechanism to systematically encode and decode data so that an unauthorized party cannot decipher it, and includes e-mail encryption applications, mobile encryption and developer encryption software kits.
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Mobile encryption Other encryption Public key insfrastructure (PKI) encryption and protocol toolkits

Security Event and Performance Management
This is software that provides a single console or integration point for collecting and displaying event alarms as well as challenge/threat history trends from heterogeneous security devices, such as antivirus devices, IDS devices, VPN devices and other devices subject to threats, as well as from server and client PC logs.

Security Administration Software
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Vulnerability assessment and configuration management — This is software that takes an inventory of security devices, network devices and hosts, including host ports, and compares found configurations of hardware and software elements against best practices, recommending changes in the configurations and sometimes automating deployment of changes. It includes patch management.
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Host vulnerability assessment and inventory scanning Security configuration management — In addition to simple inventory scanning, this generally includes a repository of configuration parameters and version control, distribution of parameters and security patch updates and reports. It may also feature security device patch management. CM has a higher level of automation features and scheduling features not found in vulnerability assessment and scanning tools. It often provides roll-back capability.

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Identity and Access Management — Identity and access management software products are used to create and manage user identities, provide authentication and to permit users access to system resources based on predefined criteria. This segment includes Web-based management products, PKI, and single sign-on (SSO) and other secure provisioning products and authentication software. Directories and metadirectories are not included in this study, but are often associated with this category.
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Identity management, user provisioning, password management and other user administration tools Authentication (software and imputed software value of certain hardware products that are mainly for authentication; includes SSO products) Authorization and access (includes enterprise asset management [EAM]) PKI suites (omits certain encryption toolkits which are tracked as encryption)

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Other security administration software — This segment contains the rest of administration and business-oriented security software. The category also includes miscellaneous security software for forensics, case management, spyware removal, policy authoring, risk assessment tools, business continuity planning tools and others.
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Risk analysis tools Business continuity planning and critical infrastructure protection planning tools Regulatory compliance tools Others

Storage Management
This software is researched in Gartner Dataquest's Storage Worldwide cluster. Please see the "2002 Storage Management Software Market Share," HWST-WW-MS-0137, for full descriptions. Sub-segments include storage infrastructure products, data management products and enterprise storage resource management.

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16 January 2004

Chapter 5 Enterprise Application Software Definitions
The focus for application software is to increase the performance of business or personal resources. It enables users to leverage the power of computers toward achievement of their business, professional or personal objectives or goals. These definitions are how Gartner Dataquest views the market as of August 2003.

Customer Relationship Management
Gartner Dataquest believes that CRM technologies should enable greater customer insight, increased customer access, more effective customer interactions and integration throughout all customer channels and back-office enterprise functions. CRM is a business strategy whose outcome optimizes profitability, revenue and customer satisfaction by organizing around customer segments, fostering customer-satisfying behaviors and implementing customer-centric processes. Most enterprises have a CRM strategy, and the majority use some form of CRM software to achieve this strategy. The CRM software sector, part of the enterprise software market, provides functionality to enterprises in three segments: sales, marketing, and customer service and support. The subsegments listed below are defined as components or functions within a CRM application and are not reflective of a separate market or in its entirety.

Sales
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Direct sales (field sales/inside sales) — Direct sales builds on the attributes of technology, functionality and value of order management systems (OMSs) and extends the definition to include functionality for sales execution and sales operations. The direct, B2B sales organization is the traditional sales channel composed of internal sales resources focused on the selling of products or services directly into the client, customer and prospect base as employees of the provider company. Direct sales resources may be fieldbased, calling on customers face-to-face at their locations, or inside sales, selling from a desk environment over the phone. Sell-side commerce — E-commerce sell-side — B2B and business-toconsumer (B2C) enterprise software applications offer manufacturers and retailers the ability to sell, service and market their products to customers through the Web and channel partners. Sell-side software solutions also enable enterprises to automate the Web sales process and customer experience, gain insight into customer behavior and preferences, improve visibility into channel activities and performance, and improve customer satisfaction and loyalty. Partner sales — The sales-focused partner relationship management (PRM) applications designed to improve an enterprise's ability to market, sell and service end customers through channel partners. Includes many of the traditional elements contained in a direct sales solution (opportunity management), but configured for supporting a partner-driven environment. These applications consolidate data and transactions, set business rules and track activity, typically used to manage channels partners, distributors, alliance or strategic partnerships, and often a portal to allow bidirectional information flow and communications between partners. Retail sales — The additional collection of sales applications required for a retail environment. It includes point-of-sales (POS) applications for recording sales transaction, usually a cash register and merchandising software.

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Other/specialized — This is the disparate selection of specialist vendors and technologies associated with sales force automation. It includes aspects such as proposal generation, content management, sales portals and guided selling. Although the associated applications are included as part of a direct sales or partner sales solution, the niche vendors associated with technologies only offer a specific segment.

Marketing
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Customer management — These are applications that allow prospecting and lead generation, lead management, segmentation, campaign management, multi-channel interaction, event driven management, e-marketing, loyalty management, privacy management and dialogue management. Resource management — These are applications that allow strategic planning and budgeting, program management, creative development and distribution, content management, media planning and execution, events coordination and resource measurement. Data and analytics — This is an application providing data preparation, data quality management, measurement and reporting, predictive modeling, profitability and optimization. Demand network management (including partner marketing) — These are applications providing content distribution, trade promotion and partner lead management. This is a component of PRM. Brand and product management — These are applications that provide for trade promotion, product development management and market research.

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Customer Service and Support
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Contact center customer service software — Applications or functions, which are designed to allow employees or agents of a company to support the clients directly, usually within a call or contact center, typically nonproduct support focused on service that is business related (such as dissatisfaction, problems with shipment and billing). Contact center technical support software — Applications or functions designed to allow employees or agents of a company to support the clients directly, usually within a call or contact center, typically focused on clients' product usage, implementation and problem resolution. Customer self service and support — A blend of customer-initiated interaction technologies that are designed to allow customer to service themselves. It includes electronic records management systems (ERMS), chat and knowledge bases. Field service management software — Applications that are designed within a CRM environment that enable agents to diagnose problems categorically, identify resource and dispatch it to client with proper tools or materials required for the specific problem. It includes field service workforce management and intelligent device management (IDM). Contact center performance management — It includes workforce management software, e-learning and quality assurance (QA). This is a call and contact center application enabling the management of communication queues, agent schedules, monitoring call flow and traffic. It is designed to automate the workforce management, and increase efficiencies by reducing waste and streamlining work paths to the workforce. Partner customer support software — Service-focused PRM applications designed to improve an enterprise's ability to market, sell and service end customers through channel partners. Key components include entitlement management, order management, service-level management and material reverse logistics.
©2004 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 16 January 2004

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Contact center infrastructure — Software and hardware designed to run a contact/call center. This includes automatic call distributors (ACDs), integrated voice response unit (IVRU), computer telephony integration (CTI), universal communications or universal queue management, integrating multiple channels for a call/contact center (integrating ACD/IVRU/CTI/ chat/ERMS). Please note, this subsegment is not tracked or sized by the Gartner Dataquest software team.

Enterprise Resource Planning
ERP is application strategy focused on a several distinct enterprise application suite (EAS) markets. In general, ERP involves software packages that automate and support the processes of the administrative, production, inventory and product development aspects of an enterprise. ERP is considered the backoffice application set and is defined as manufacturing, HRMS and financial management systems (FMS).

Manufacturing
In the pursuit of simplifying and accurately defining and sizing software markets, Gartner Dataquest has consolidated and renamed the sub-categories of last year's traditional ERP segment. The segment is being renamed manufacturing and includes, but is not limited to, stand-alone and application software suites that help automate the manufacturing process. The functionality that comprises this segment includes, but is not limited to, manufacturing execution, master production scheduling, material requirements planning (including regenerative manufacturing resource planning [MRP]), inventory control, bills of material/routing (including engineering change control), capacity requirements planning (including input/output control, finite scheduling and infinite scheduling), and quality tracking/control. The components, from those enterprises surveyed, that comprise integrated plant systems (IPS) are also included within the manufacturing segment. Procurement has been removed from this segment and positioned under supply chain sourcing (SCS), reflecting the transition of functionality within this segment.

Human Capital Management
Human capital management (HCM) is a set of practices related to people resource management. These practices are focused on the organizational need to provide specific competencies and are implemented in three categories: workforce acquisition, workforce management and workforce optimization. The applications that help to enable HCM include recruitment, benefits, education and training, personnel administration, contingent workforce management, time and attendance, organizational development, performance management, compensation planning and strategy, workforce analytics, and payroll. Employee relationship management (ERM) systems are also included in these segments.
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Recruitment — Applications used for the process of finding and attracting capable individuals to apply for employment. Functionality includes, but is not limited to, needs analysis, job description, labor market analysis, contingent staffing, internal staffing, advertising, online recruiting, resume tracking, screening and job matching, background checking, drug screening, and testing and assessment. Benefits — Applications which are used for the distribution of healthcare and retirement plan information, managing eligibility questions regarding coverage, maintaining retirement earning histories, enrollments, new hire processing, retirement or vested rights estimates, and benefits termination administration.

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Education and training — Applications used in the selection, acquisition, development, delivery and maintenance of resources that enhance employee knowledge and skills Personnel administration — Applications used for employee relations, employee life cycle, employee communication, on boarding, relocation and expatriate administration, labor management, and local compliance issues (for example, working time directive) Contingent workforce management — Applications utilized for planning and managing the contingent workforce (temporary and contract staff). These solutions assist in activities associated with contract management, billing, performance tracking, scheduling, skills and competency tracking, and tracking job experience. Time and attendance — Applications used for planning, collecting and analyzing labor Organizational development — Applications used for developing/updating of competency models, creation/update of job profiles as well as competency assessment, gap analysis, developing/implementing improvement plans, and management of improvement efforts Performance management — Applications used for assessing an enterprise's performance, using analytical metrics, strategic planning, and a data warehouse approach to accessing and analyzing information Compensation planning and strategy — Applications used for creating and administrating job descriptions/updates, salaries and employee surveys, setting and maintaining salaries, setting and maintaining short- and long-term incentives, and development and implementation of overall compensation packages Workforce analytics — Applications used to measure and monitor workforce metrics, including comparison against external benchmarks. These solutions for analyzing workforce metrics (such as turnover and time to hire) require ad hoc analysis and query capabilities with multidimensional capability. Payroll — Applications used to process payroll data, reporting and payment of payroll taxes, issuing payments (via check or electronic payment) and reports to employees, issuing payments to third parties (for example, employee IRAs) and reporting of data to the end user

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Financial Management Systems
FMS is an application software suite focused on the automation and process support required by the corporate finance function and related departments of an enterprise (such as accounting). The financials package stores relevant data, provides the IT foundation for running the organization's finances and prepares reports for management and external authorities. FMS consists of accounting, budgeting, activity-based management, consolidation and indirect purchasing/procurement "white collar."
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Accounting — Applications that enable accounting and control, and can be focused in manufacturing and production environments related to product, labor, parts, time and other inventory, and production expenses Budgeting — Applications used to allocate funds for specific business activities Activity-based management/financial analytics — Applications driven by the general ledger system as costs and associated personnel are reconstituted or allocated to specific activities. This functionality enables organizations to manage costs in more detail than general ledger or budget applications allow.

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Enterprise Application Software Definitions

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Consolidation — Applications that amalgamate an enterprise's general ledger data from internal divisions. These applications can consolidate data by country, geographic region, currencies and internal charge-backs, enabling further consolidation into a corporate view.

Computer(ized) Maintenance Management System
EAM functionality evolved from computer(ized) maintenance management system (CMMS) applications that encompass work and materials management for fault repair, regular preventative maintenance and service activities. CMMS is not limited to manufacturing; it is also applicable to utilities, facilities, transportation and other activities where equipment subject to wear, failure or repair is utilized. A CMMS solution usually includes purchasing and procurement, inventory management, as well as equipment, component and asset tracking. CMMS applications do not have financial (beyond cost recording) or HR management capabilities (beyond basic staffing identifications [IDs]) and are typically purchased to integrate with the applications that support financial and HR more fully. These applications are also typically smaller scale in that they are designed to run at and for a single site of operations.

Enterprise Asset Management
Developed from the more basic CMMS functionality, EAM systems have been a key tool in asset care and maintenance, repair and overhaul (MRO) procurement. The CMMS functionality is extended by the addition of financial management modules, or more advanced cost recording in ledgers at least, and more advanced HR management to cater for rostering and skills recording. Technically, the EAM applications are also designed to scale to larger numbers of users and to run on multiple sites from a single central database, thereby catering for enterprise, rather than departmental or site requirements. EAM is a part of a strategy to increase plant capacity, using information technology in lieu of new construction in large, asset-intensive enterprises. It integrates key plant control systems (PCS) and ERP with maintenance activities and functions to reduce downtime and minimize maintenance spending. In its most complete form, it equates to an ERP II solution for a non-manufacturing environment, such as a utility, mining operation, defense or transportation operation. EAM consists of asset management, materials management, HRMS and financials.
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Asset management — Application with functionality that assists in identifying assets and activities, and manages requests for service and work schedules. In addition, these applications manage job costing, work orders, asset registration, fixed assets, and predictive and preventive maintenance. Materials management — Application with functionality that assists in planning parts and material requirements for maintenance. This is the true origin of maintenance, repair and overhaul (MRO) procurement. The applications in this segment have capabilities to integrate with procurement management, enable automatic assignment of activity-based cost (ABC) classes to stock, multiple alternate parts codes, manufacturers and supplies for a single stock code, calculate optimal inventory based on forecast usage and prior usage, as well as support cycle counting. Modules in this segment include parts, inventory, orders management and bill of materials (BOM)-oriented toward jobs, rather than BOM for manufacturing. HRMS — See HCM definition above. Financials — See FMS definition above.

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Software Market Research Methodology and Definitions, 2003-2004

Supply Chain Management
This is a business strategy to improve shareholder and customer value by optimizing the flow of products, services and related information from source to customer. SCM encompasses the processes of creating and fulfilling the market's demand for goods and services. It is a set of business processes that encompasses a trading partner community engaged in a common goal of satisfying the end customer. Thus, a supply chain process can stretch from a supplier's supplier to a customer's customer. At a high level, SCM software is segmented into planning, execution and sourcing and procurement components. Planning typically deals with activities such as developing demand forecasts, establishing relations with suppliers, planning and scheduling manufacturing operations, and developing metrics to ensure efficient and cost-effective operations. Execution functions manage the processes and activities to ensure completion of the plans, including creating purchase orders, taking customer orders, updating inventory, managing movement of products in the warehouse, and delivering goods to the customer. Sourcing and procurement functions manage the automation and of corporate sourcing and purchasing.

Supply Chain Planning
A subset of SCM, supply chain planning (SCP) applications are designed to provide forward-looking options for future time horizons. SCM applications coordinate assets to optimize the delivery of goods and services, and information from supplier to customer, balancing supply and demand. A SCP application suite sits on top of a transactional system to provide planning, what-if scenario analysis capabilities and real-time demand commitments. Typical modules include network planning, capacity planning, demand planning, manufacturing planning and scheduling, and distribution and deployment planning.

Supply Chain Execution
A subset of SCM, supply chain execution (SCE) is a framework of executionoriented applications that enable the efficient procurement and supply of goods, services and information across enterprise boundaries to meet customer-specific demand. SCE suites have evolved consolidating supply chain execution components — such as warehouse management systems (WMSs), transportation management systems (TMSs), order management systems and supply chain inventory visibility (SCIV) — to provide a single solution to manage the outbound logistics process.

Warehouse Management Systems
WMS are applications that manage the operation of a warehouse or distribution center. Functionality includes receiving, put-away, inventory management, cycle counting, task interleaving, wave planning, order allocation, order picking, replenishment, packing, shipping, labor management and automated material-handling equipment interfaces. Using radio frequency (RF) technology in conjunction with bar codes provides the foundation of WMS, delivering accurate information in real time.

Transportation Management Systems
TMS are systems used to manage all freight activities across the enterprise. Functions include planning and procuring freight movements, freight rating and shipping across all modes, route and carrier selection, management of freight, visibility, and freight payment and audit.

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International Trade Systems/Global Trade Management
These execution systems are designed to automate the import/export business process. The basic functional components are trade documentation generation and transmission, and regulatory compliance validation.

Sourcing and Procurement
We have renamed and expanded the coverage of last year's e-commerce buyside segment to better align the essence of the market's evolution. We have married the procurement sub-segments, from ERP, with last year's e-commerce buy-side market to more accurately reflect the shifting conditions within these markets. Sourcing and procurement applications are used to support the automation and management of corporate sourcing and purchasing (or procurement) of direct and indirect goods, suppliers, and content (for example, product catalogs, parts databases and supplier directories).
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Sourcing software is used to help companies understand and improve the terms and conditions of trade to understand enterprise spending. It aids in creating an optimal set of suppliers, establishing the terms of trade to balance cost, quality and risk. Strategic sourcing applications include requests for proposal (RFPs)/requests for quotation (RFQs) bid management, and supplier analysis and optimization. Strategic sourcing applications are also evolving into the practice of managing longer-term purchasing activity and supplier relationships. Sourcing applications will have the capability to interface with procurement systems — for example, in spot buying/spot sourcing environments Procurement applications automate purchasing for direct and indirect goods and services. These applications are designed to help companies reduce costs by automating and streamlining the purchasing process, connecting buyers and sellers and controlling corporate spending. Functionality includes, but is not limited to, purchase order processing, master blanket release, receipt and advance-ship notice, settlements and rebates, invoice payment, catalogs, requisition management, project costing, encumbrance (public sector), and invoicing. Procurement is tremendously complicated and there continues to be a lack of specificity in its subcategories. Depending on the categories or goods and business processes, there are broad sets of activities common to procurement. Such activities include supplier connectivity, needs specification (such as those expressed by a production plan, materials forecast, work order material plan or catalog items in a shopping cart) and invoice and payment processing. Often procurement relies on sourcing and in some categories (for example, capital goods, spot-buys and certain types of services), diminishing the validity of distinctions between sourcing and procurement. Procurement and sourcing are in many ways co-dependent. Marketplaces (e-marketplace) are Web-enabled trading communities that aggregate buyers and sellers to enable transactions, collaboration and content. Marketplace software can also include strategic sourcing, contract negotiation, legacy integration and Web-based order management functionality. Marketplaces offer market intelligence to buyers and sellers. Buyers are in a better position to understand their buying behaviors and, thus, gain control over their procurement processes. Suppliers are able to collaborate more effectively with other partners in the supply chain to reduce inventory, obtain greater visibility of supply chain constraints and lower processing costs.

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Content management addresses the problem of how to take unstructured product content and create and manage structured data. This segment includes solutions in data cleansing, parts databases and supplier directories. It also provides functionality that includes catalog conversion, parametric matching engines, dynamic content aggregation, automated integration to back-end databases, online content updating and multiple language translation.

Project Portfolio Management
PPM applications provide a set of integrated functions designed to streamline outward functions and inward processes of project-intensive departments, industries and organizations. They address a majority of the nine processes defined by the Project Management Institute's Project Management Book of Knowledge (PMBoK): project scope management, time management (including scheduling), cost management, resource management, quality management, project communications management, project risk management and project procurement management. The ninth area provides for integration of these processes. PPM applications optimize project delivery by providing, at a minimum, integrated functionality to support project planning, tracking, resource assignment and portfolio reporting. Features often address the following functional areas:
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Scope management — Preliminary scope planning, including project definitions, timelines, size and deliverables Time management — Manages deliverable activity timelines, schedules and deadlines for projects, tasks, assignments, scope and goals Resource management — Allocates resources using a repository of resource profiles (of skills and other attributes), identifies skill shortages and includes resource loading and leveling capability (direct or via third-party tool integration) Cost management — Estimates and tracks resource and material costs and obtains approval for actual project expenses associated with billing, chargebacks, travel, project materials, or purchase of necessary equipment Procurement management — Supports procuring of external resources and project related goods Communication management — Data distribution (discussions, e-mail and chat) and project intelligence gathering so participants can collaborate, maintain, manage, and share current or previous project knowledge Risk management — Tracks individual projects' problems, issues and schedule risks, and provides a macro view of multiple projects' risks to weigh with cost and value in portfolio analysis Quality management — Uses corporate or industry standards (for example, project models, templates, project knowledge, workflows and process metrics) to ensure quality, consistency and efficiency of executed projects and their deliverables Integration management — Gathers project data from above segments to store, report and forecast project progress, manage pipelines and conduct portfolio analysis

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Design and Engineering
This software is researched in Gartner Dataquest's Design and Engineering Worldwide Cluster. See the Gartner Dataquest Guide "2003 Technical Applications Software Guide," SEMC-WW-GU-0010. Its sub-sectors include:
■ ■ ■ ■

Architectural, engineering and construction (AEC) Electronic design automation (EDA) Embedded software tools Mechanical computer-aided design/manufacturing/engineering (computeraided design [CAD]/computer-aided manufacturing [CAM]/computeraided engineering [CAE]) Product data management (PDM)

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16 January 2004

Chapter 6 Emerging and Merging Markets
The previous two chapters defined baseline mutually exclusive product markets, that together provide insight into how the money flows through the software industry. However, many of the most interesting and challenging opportunities for vendors have other dimensions. Some are a composite mix of baseline sectors, others are virtual concepts or new technology standards, not real markets. Still others take less conventional forms, such as the application service provider (ASP) and business service provider (BSP) markets. All of them overlap in some way with other markets defined in this or other segmentation documents.

Composite Markets
A composite market is one not necessarily tracked and measured on an ongoing basis, but that offers an alternative view or cut of our baseline market data (identified in Chapter 4 and Chapter 5). A composite market definition can be useful for tracking a temporary phenomenon. Occasionally, a composite market definition foretells the emergence of a long-lasting baseline Gartner Dataquest market definition at a later date. New composite markets are always emerging. Rather than continually reorganize the component segmentation, we will address new markets as exceptional or fringe until they are clearly an established and well-defined market segment in their own right.

Business Activity Monitoring
BAM is neither a market nor a product. It is a concept, such as quality or knowledge management, and it is not new. BAM solutions focus on crossbusiness processes rather than divisional-, departmental- or technologyspecific processes. The scope of integration in BAM solutions expands far beyond the four walls of a plant or a division, and real time is not necessarily nanoseconds but rather is determined by the requirements of the business process. It brings the near real-time world of the BI operational data store together with NSM monitoring and BPM through integration brokers and shared messaging.

Collaborative Commerce
Collaborative commerce (c-commerce) involves the collaborative, electronically enabled business interactions among an enterprise's internal personnel, business partners and customers throughout a trading community. The trading community can be an industry, industry segment, supply chain or supply chain segment. For some enterprises, c-commerce is already a fact of business life, but how can they measure it? It is not yet quantifiable with any consistency. It is not a class of software and it is difficult even to define.

Corporate Performance Management
Corporate performance management (CPM) is an umbrella term that describes the methodologies, metrics, processes and systems used to monitor and manage the business performance of an enterprise. Applications that enable CPM translate strategically focused information to operational plans and send aggregated results. These applications are also integrated into many elements of the planning and control cycle, or address BAM or customer relationship optimization (CRO) needs. CPM applications enable sharing of information across and even beyond the borders of the enterprise, to all employees, business partners shareholders and most importantly, customers.
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Contract Management
Contract management is the identification and efficient management of all contracts with suppliers. Applications that manage companies' contracts weave themselves through sourcing and procurement applications. Although contract management is an integral part of sourcing (creation) and procurement (enforcement), we have separated it out as a segment but acknowledge the interdependencies. Contract management aides sourcing and procurement through negotiation, generation and non-repudiation, abstraction, versioning and archiving, compliance management and exception alert generation, and dispute resolution.

DBA Software Tools
Database administration (DBA) tools encompass software products including systems management extensions for monitoring the health of databases, DBA tools for SQL tuning, space optimization, schema change management, back up and recovery products for files as well as database-aware recovery products, data warehouse administration tools, and certain database development tools often used by database administrators. This market could also be called the DBMS aftermarket.

ERP II and Enterprise Application Suite
The emerging next generation of ERP strategy is called ERP II by Gartner Dataquest. ERP II is an application and deployment strategy that expands out from ERP functions to achieve integration of an enterprise's key domainspecific, internal and external collaborative, operational and financial processes.

Mobile and Wireless Packaged Applications Software
The terms mobile application and wireless application are bandied about in the trade press, often used interchangeably, and can refer to simple stand-alone software or to internetworked processes of great complexity. Mobile and wireless applications can mean anything from a menuing system on a smartphone, a calendar or a tic-tac-toe game on a PDA to Internet/corporate e-mail connectivity up to a sales force automation order-entry system that updates back-end databases over a wireless link.

Mobile and Wireless Infrastructure Software Platforms
Here are development tools and deployment servers for creating brand new customer mobile applications or for "mobilizing" established conventional enterprise applications, e-mail and enterprise data stores.

Order Management
Order management is a business process and not a specific market. Much of the functionality attributed to order management is embedded within and touches components within the CRM, ERP and SCM markets as it guides products and services through order entry, processing and tracking.

Product Life Cycle Management
At its highest definitional level, product life cycle management (PLM) is a process for guiding products from idea through retirement to deliver the most business value to an enterprise and its trading partners. PLM employs product information and business analysis to support product portfolio strategy, product life cycle planning, management of activities, and execution of those activities through each phase in a product's life. The applications that support
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the business activities enabled through PLM includes product ideation, design, engineering, manufacturing process management, product data management, and product portfolio management.

Smart Enterprise Suites
Smart enterprise suites include a significant combination of technologies, such as content management, team support, a portal framework and information retrieval. They may also include expertise location and management, community technology, process management, and multichannel access.

Supplier Relationship Management
There has been much ado for nearly two years about the user benefits of supplier relationship management (SRM). With much fanfare and accolades from the software industry, there is a still confusion and varying opinion on what exactly SRM is and what it should encompass. So, is there an SRM software market? No, not yet. There are a plethora of software applications that support SRM initiatives but, to date, no true SRM applications. SRM is a logical extension of SCM. SRM is the latest of a series of innovations within SCM and represents an incremental development. As such, SRM is a subset of SCM. SRM represents an evolutionary extension of SCM, driven by the need for enterprises to create a more comprehensive life cycle view of suppliers' operational contribution to the top and bottom lines. Consequently, SRM is an extension of, and builds on, SCM technologies and practices.

Web Services Software
Deploying Web services-enabled software will be an evolutionary process, not a revolutionary one. While the majority of software vendors have committed to supporting Web services software standards within their established product lines, it will take more than four years to evolve these immature standards, build up skills, and plan, build and test for new versions of software that gradually incorporate these standards. Web services standards will be deployed through multiple markets, such as integration suites, AD tools and some enterprise application segments.

Other Markets ASPs and Application Hosting
This is a service addressing the life cycle needs of the application from the initial IT infrastructure development to maintenance of a complete set of IT business applications. The provider offers software maintenance, conversion, enhancement and support in a hosted environment. This is considered an indirect channel for software delivery. This sector is also researched within Gartner Dataquest's IT services practices.

Open Source Software
Our focus is to measure the direct value of software markets. However, free software can and does have a significant influence on the dynamics of demand and supply, and it influences our research agendas.

Software Solutions Markets
Software products are often bought and sold as part of a larger package containing some mix of hardware, software, services, expertise, information content and financing service. To implement, operate and use the solutions requires investment in internal resources. The methodology behind our market
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data analysis allows us to unbundle these elements so that we are counting or comparing similar things. Most of our solutions market research is clustered into analyst teams for global industry vertical market analysis and enterprise solutions.

New Categories
New markets are always emerging, which are either the result of the bundling of several component markets or the arrival of a new layer of tools on top of established technology. Rather than continually reorganize the component segmentation, we will address new markets as exceptional or fringe until they are clearly an established and well-defined market segment in their own right.

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16 January 2004

Chapter 7 Operating System Definitions
Gartner Dataquest defines an operating system platform as the software deployment environment required for higher layer software to run. That is, business applications code and infrastructure applications code leverage the underlying OS platform (and hardware platform) to function. Software vendors normally target the OS environments with the largest installed base, highest growth or highest margin, as the environments their product will "support." (Though in actuality, it is the OS that supports the product.) OS platforms are tracked to allow analysis of the changing popularity of different platforms with software vendors. What is measured is the ISV revenue attributable to particular deployment OS environments. (Not all software application or software infrastructure segments have OS platform revenue breakouts estimated or forecast.) Gartner Dataquest tracks software as it breaks out across the following OSs:
■ ■ ■ ■ ■ ■ ■

Unix Linux iSeries OS/400 zSeries OS/390 Windows desktop Windows server Other operating systems

With the recent emergence of application servers, J2EE and .NET have almost become operating environments or deployment environments themselves. (Actually, .NET has already captured as the NT/Windows 2000 OSs; .NET is part and parcel of these products. These are almost synonyms.). At this time, however, J2EE products are classified by Gartner Dataquest as infrastructure applications, which themselves run on particular underlying OS deployment environments, such as Solaris, AIX, HP-UX, Linux and others. Client OSs run on stand-alone devices, such as desktops, laptops, PDAs and cell phones, and are designed to be used by an single individual at a time. Server OSs run on more powerful hardware, often with multiple CPUs and are designed to be accessed by many users in a shared fashion simultaneously.

Unix
Originally developed at AT&T Bell Laboratories, Unix is a 32-bit, multitasking, multiuser OS, which is portable to multiple brands of hardware systems. Originally, it was developed as an open alternative to proprietary minicomputer OSs. Today, Unix can be found on most complex instruction set computer (CISC) and reduced instruction set computer (RISC) CPUs, including Intel Pentium and 80xxx, Motorola 68xxx and Sun SPARC. Gartner Dataquest subsegments software running on the Unix OS into the following categories of Unix:
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Sun Solaris IBM AIX HP-UX Other Proprietary Unix

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Linux
Linux is an open source version of Unix. Linus Torvalds developed the original OS kernel at the University of Helsinki. There are several windowing interface shells that run on top of Linux, including K Desktop Environment (KDE) and GNU Network Object Model Environment (GNOME). There are many distributions of Linux. The most popular ones include those of Red Hat, SuSe and Mandrake. Linux and the MacOS are the only two types/brands of Unix platforms that the Gartner Dataquest software group reports separately for the business applications, PC applications and infrastructure applications we track.

iSeries (OS/400)
This is IBM's operating system for its AS/400-series, now called the e-server iSeries computers. This is often called a legacy OS and is sometimes considered a mainframe OS, although it is really a minicomputer OS.

zSeries (OS/390)
These are IBM's OS for System 390 mainframe and e server zSeries computers. Older versions and product names included here are MVS, virtual memory (VM) and OS/390. These are server OSs; these are often called mainframe or legacy OSs.
■

Plug-compatible manufacturer (PCM) — A PCM is a peripheral equipment manufacturer that makes compatible plug-in devices that can be used interchangeably among different computers. PCMs, such as Amdahl or Hitachi Data Systems, ship computers with an OS that is compatible with IBM's VM or MVS. Today, this is trivial on a worldwide basis. But it is included here.

Windows Desktop
Microsoft's Windows desktop operating environment are targeted and priced for the consumer and enterprise buyers. These are all considered client OSs even though products such as Windows NT Workstation can run in clientserver mode. This category includes all Windows desktop products including 16-bit products, such as Windows 1.x, 2.x, 3.x and Windows for Workgroups, as well as 32-bit products, such as Windows 95, 98, ME, XP Home, Windows NT Workstation, Windows 2000 Professional and XP Professional. These are all considered client OSs even though products, such as Windows NT Workstation, can run in client-server mode.

Windows Server
These are Microsoft's 32-bit server operating environments for more powerful hardware platforms, including multiprocessor platforms and include networking and sharing features not found in Windows client OSs. Products here include NT Server and the Windows 2000 Server family.

Other OS
Any operating environment software platform not included in other categories, such as NetWare, OS/2, DOS, Mac OS, VMS, Embedded OS and Other OS

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16 January 2004

Chapter 8 Platforms
Market share data are collected by the following platforms as appropriate:
■ ■

Java .NET

Java
The term "Java" can be applied to Sun's Java platform or to its Java programming language. The Java platform is made up of a set of technologies that provide cross-platform, network-centric computing solutions. The programming language is simply one aspect of the Java platform. The elements of the Java platform include: the Java Virtual Machine (JVM), which provides a uniform Java byte code emulator for Java's cross-platform run time environment; the Java programming language, which provides a robust, object-oriented language for constructing Java components and applications; and the standard Java class library packages, which provide sets of reusable services that promote consistency among components and applications. The Java programming language is based on C and extends and complements the basic capabilities of HTML. Java permits the creation of applications and application modules (called "applets") that run in the JVM on the browser. Browsers from Netscape and Microsoft have a JVM. Java's platform independence and security are designed in, rather than added on, so applications can run on a wide variety of desktop platforms as long as they can run a Javaenabled browser.

.NET
At its core, .NET represents Microsoft's implementation of the Web services concept, which treats software as a set of services accessible over ubiquitous networks using Web-based standards and protocols, although Microsoft has broadly applied the .NET moniker to several independent technologies and initiatives that have little to do with Web services (for example, .NET Enterprise Servers). As a software infrastructure, .NET consists of two programming models:
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A Web services programming model, which exposes programming interfaces through Internet standards. This loosely coupled model uses HTTP and other Internet protocols as the main underlying transport mechanisms, and also uses Extensible Markup Language (XML), Simple Object Access Protocol (SOAP), Web Services Description Language (WSDL) and Universal Description, Discovery and Integration (UDDI). Initially, most of this model will use a request/reply communications style. A system programming model designed to supersede Microsoft's COM and the Windows application programming interfaces over the long term. This model introduces a new set of fundamental classes and a new run time environment — the Common Language Runtime (CLR) — providing an object-oriented class hierarchy structure as part of the application runtime environment. It also provides classes and mechanisms that enable programs to be "wrapped" as Web services, so it can ease — but is not required for — Web services development.

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16 January 2004

Chapter 9 Worldwide Geographic Regional Definitions
Market Share data are collected by the following regions and countries identified as "Countries of Specific Interest." Note that Software Vendor Revenue research does not yet cover all these countries. "Rest of…." indicates the balance of data for that region.

Asia/Pacific Region Countries of Specific Interest
Australia, China, Hong Kong, India, Indonesia, South Korea, Malaysia, New Zealand, Philippines, Singapore, Taiwan, Thailand and Vietnam

Rest of Asia/Pacific
American Samoa, Ashmore and Cartier Islands, Baker Island, Bangladesh, Bhutan, Bouvet Island, Brunei, Cambodia, Christmas Island, Cocos (Keeling) Islands, Cook Islands, Coral Sea Islands, Federated States of Micronesia, Fiji, French Polynesia, Guam, Howland Island, Jarvis Island, Johnston Atoll, Kingman Reef, Kiribati, Laos, Macau, Maldives, Marshall Islands, Midway Islands, Mongolia, Myanmar (Burma), Nauru, Nepal, New Caledonia, Niue, Norfolk Island, Northern Mariana Islands, North Korea, Pakistan, Palau, Palmyra Atoll, Papua New Guinea, Paracel Islands, Pitcairn Islands, Solomon Islands, Spratly Islands, Sri Lanka, Tokelau, Tonga, Tuvalu, Vanuatu, Wake Island, Wallis and Futuna, and Western Samoa

Western Europe Region Countries of Specific Interest
Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and United Kingdom

Rest of Western Europe
Andorra, Cyprus, Faroe Islands, Gibraltar, Greenland, Guernsey, Iceland, Isle of Man, Jersey, Liechtenstein, Luxembourg, Malta, Monaco, San Marino, and Svalbard

Central/Eastern Europe Region Countries of Specific Interest
Baltics (Estonia, Latvia, Lithuania), Belarus, Bulgaria, Czech Republic, Hungary, Poland, Romania, Russia, Slovakia, and Ukraine

Rest of Eastern Europe
Albania, Armenia, Azerbaijan, Bosnia and Herzegovina, Croatia, Georgia, Kazakhstan, Kyrgyzstan, Macedonia, Moldova, Slovenia, Tajikistan, Turkmenistan, Uzbekistan, and Yugoslavia (Serbia and Montenegro)

Japan Region Countries of Specific Interest
Japan

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Latin America Region Countries of Specific Interest
Argentina, Brazil, Chile, Colombia, Mexico, Peru, Puerto Rico, and Venezuela

Rest of Latin America
Anguilla, Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Bermuda, Bolivia, Cayman Islands, Clipperton Island, Costa Rica, Cuba, Dominica, Dominican Republic, Ecuador, El Salvador, Falkland Islands (Islas Malvinas), French Guiana, Grenada, Guadeloupe, Guatemala, Guyana, Haiti, Honduras, Jamaica, Martinique, Montserrat, Navassa Island, Netherlands Antilles, Nicaragua, Panama, Paraguay, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, Tortola (British Virgin Islands), Trinidad and Tobago, Turks and Caicos Islands, Uruguay, Virgin Islands (St. John, St. Croix and St. Thomas)

Middle East and Africa Region Countries of Specific Interest
Israel, Turkey and South Africa

Rest of Middle East and Africa
Afghanistan, Algeria, Angola, Bahrain, Bassas da India, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Congo, Cote d'Ivoire, Djibouti, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Europa Island, Gabon, Gambia, Ghana, Glorioso Islands, Guinea, Guinea-Bissau, Iran, Iraq, Jordan, Juan de Nova Island, Kenya, Kuwait, Lebanon, Lesotho, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mayotte, Morocco, Mozambique, Namibia, Niger, Nigeria, Oman, Qatar, Reunion, Rwanda, Saint Helena, Sao Tome and Principe, Saudi Arabia, Senegal, Seychelles, Sierra Leone, Somalia, Sudan, Swaziland, Syria, Tanzania, Togo, Tromelin Island, Tunisia, Uganda, United Arab Emirates, Western Sahara, Yemen, Zaire, Zambia, and Zimbabwe.

North America Region Countries of Specific Interest
Canada and United States

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16 January 2004

Chapter 10 Research Metrics
The following describes the research metrics Gartner Dataquest uses for reporting market revenue, market size and market share. Not all of these metrics are used by every software program or by every software segment tracked within a program. Some may have more of these metrics and some may have fewer. Compound annual growth rate (CAGR) —The annualized average rate of revenue growth between two given years, assuming growth takes place at an exponentially compounded rate. The CAGR between given years X and Z, where Z - X = N is the number of years between the two given years, is calculated as follows: CAGR, year X to year Z = [(value in year Z/value in year X) ^ (1/N)-1] For example, the CAGR for 2002 to 2007 is calculated as follows: CAGR, 2002 to 2007 (X = 2002, Z = 2007, N = 5) = [(value in 2007/value in 2002) ^ (1/5)-1] Revenue — The gross sales generated by a vendor, measured in unit currency Vendor — A vendor is the last entity in the chain that brands a product and sells it either directly to end-users or through a channel. A vendor may design and manufacture its own products, assemble complete systems from components produced by others, or procure products from an OEM or contract manufacturer. A vendor may also provide services, maintenance or non-maintenance for its own products or for other vendors' products and may also provide services for IT technologies. Vendor license revenue — That revenue of a manufacturer or vendor that is generated by sales of new software licenses. It excludes revenue from software maintenance, support and professional services. It also excludes the sale of products manufactured by other vendors.

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16 January 2004

Chapter 11 Exchange Rates
Gartner Dataquest also gives due consideration to the impact of exchange rates on its forecasts. Gartner Dataquest generally compiles its worldwide forecasts from individual region-level forecasts. These regional level forecasts are, in turn, frequently compiled from country-level forecasts, each of which are subject to the vagaries of the local exchange rate. For the sake of consistency and uniformity, Gartner Dataquest uses the U.S. dollar as a common currency for all comparisons and aggregations. As a rule, Gartner Dataquest analysts reckon their forecasts in local currency and then converts them to U.S. dollars using projected exchange rates. Gartner Dataquest does not forecast exchange rates. Instead we project rates into the future based on the latest available monthly exchange rate at the time our quarterly market sizing study begins. Table 11-1 presents the exchange rates assumed in this forecast. These rates are based on monthly exchange rates observed through January 2004. Additional information about historical exchange rates and Gartner Dataquest's method for projecting future rates may be requested through Gartner Dataquest's client inquiry service.

Table 11-1 Prevailing Annual Exchange Rates, 2000-2002 (Foreign Currency per U.S. Dollar)
Foreign Currency Appreciation 2001-2002 (%) -1.37 -68.28 -19.51 -7.84 -8.25 -3.35 -0.29 -37.63 N/A N/A 5.56 5.30 N/A N/A N/A N/A 6.76 N/A N/A N/A 12.62 N/A N/A

Country North America Canada (Dollar) Latin America Argentina (Peso) Brazil (Real) Chile (Peso) Colombia (Peso) Mexico (Peso) Peru (New Sole) Venezuela (Bolivar) Western Europe Austria (Schilling) Belgium (Franc) Denmark (Krone) Economic and Monetary Union (ECU/Euro) Finland (Markka) France (Franc) Germany (Mark) Greece (Drachma) Iceland (Krona) Ireland (Punt) Italy (Lira) Netherlands (Guilder) Norway (Krone) Portugal (Escudo) Spain (Peseta)

2000 1.49 1.00 1.83 539.56 2,090.06 9.46 3.49 680.47 14.94 43.81 8.09 1.09 6.46 7.12 2.12 365.86 78.88 0.86 2,102.77 2.39 8.81 217.72 180.69

2001 1.55 1.00 2.35 635.41 2,300.68 9.34 3.51 724.34 15.38 45.08 8.33 1.12 6.64 7.33 2.19 380.77 97.74 0.88 2,163.67 2.46 8.99 224.03 185.93

2002 1.57 3.15 2.92 689.45 2,507.63 9.67 3.52 1,161.31 N/A N/A 7.89 1.06 N/A N/A N/A N/A 91.55 N/A N/A N/A 7.99 N/A N/A

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Table 11-1 (Continued) Prevailing Annual Exchange Rates, 2000-2002 (Foreign Currency per U.S. Dollar)
Foreign Currency Appreciation 2001-2002 (%) 6.38 8.41 4.18 5.21 16.25 11.18 0.31 -12.19 -7.32 6.83 -2.14 -2.99 5.15 -0.05 0.00 -2.87 9.31 0.00 11.02 -1.19 0.09 3.29 -6.41 -2.07 3.43 -12.61 -11.17 -18.00 -20.47

Country Sweden (Krona) Switzerland (Franc) United Kingdom (Pound) Central and Eastern Europe Bulgaria (Lev) Czech Republic (Koruna) Hungary (Forint) Poland (Zloty) Romania (Lev) Russia (Ruble) Slovakia (Koruna) Ukraine (Hryvna) Japan Japan (Yen) Asia/Pacific Australia (Dollar) China (Yuan) Hong Kong (Dollar) India (Rupee) Indonesia (Rupiah) Malaysia (Ringgit) New Zealand (Dollar) Philippines (Peso) Singapore (Dollar) South Korea (Won) Sri Lanka (Rupee) Taiwan (Dollar) Thailand (Baht) Rest of World Egypt (Pound) Israel (New Shekel) South Africa (Rand) Turkey (Lira)

2000 9.18 1.69 0.66 2.10 38.63 282.16 4.34 21,422.64 27.97 46.21 5.48 107.82 1.73 8.28 7.79 45.00 8,373.70 3.80 2.20 44.26 1.72 1,131.38 76.98 31.27 40.22 3.53 4.08 6.95 624,177.48

2001 10.34 1.69 0.69 2.18 38.02 286.46 4.09 28,900.57 29.09 48.33 5.38 121.52 1.94 8.28 7.80 47.23 10,189.44 3.80 2.38 51.01 1.79 1,291.67 89.62 33.83 44.51 4.04 4.21 8.63 1,204,238.09

2002 9.72 1.56 0.67 2.07 32.70 257.65 4.08 32,912.90 31.39 45.24 5.50 125.27 1.84 8.28 7.80 48.62 9,321.51 3.80 2.15 51.62 1.79 1,250.49 95.76 34.54 43.03 4.62 4.74 10.52 1,514,163.64

Notes: Effective 1 January 2002, euro became common currency of Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Portugal, and Spain. Effective May 2003, Ukranian Hrynva exchange rate no longer available. Source: Gartner Dataquest (July 2003)

©2004 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

16 January 2004

Chapter 12 Vertical Market and Company Size Segments
Sources of software revenue, where analyzed, will be segmented into the primary vertical markets in Table 12-1. ISIC is the International Standard Industry Code. Standard Industrial Code (SIC) is the SIC code in wide use in the United States. NAICS are the emerging North American standards. Company size segmentation is shown in Table 12-2. In our demand-side research, we will be seeking to segment by organization/ company size using the criteria shown in Table 12-1.

Table 12-1 Vertical Market Segmentation
Primary Segment Agriculture, Mining and Construction Secondary Segment Agriculture Mining Construction Process Manufacturing Pharmaceutical and medicine Chemical, plastics and rubber Additional Description Agriculture, forestry and fishing Mining of coal, petroleum, gas, metal, minerals Construction and contractors Pharmaceuticals, medicinal chemicals and botanical products Chemicals, plastics, rubber, minerals ISIC 1-9 10-14 45 2423 2421, 2422, 2424, 2429, 25 23 Textiles, apparel, leather Newspaper, book, periodical publishers, paper and printing, wood, minerals, stone, clay, glass, primary metals Food, beverages and tobacco Transportation equipment (motor vehicles, aerospace, rail, ship) Computers, office, electronic and communication equipment, semiconductors Industrial and commercial machinery Medical, optical, industrial measuring and controlling, and scientific equipment and instruments, photographic, watches and clocks Fabricated metal, furniture, recycling, miscellaneous manufacturing Electric, gas, steam Water and sewer systems 17, 18, 19 20, 23, 22, 26, 27 U.S. SIC 1-9 10-14 15-17 2833-2835 NAICS 11 12 23 3254

30: 28123251, 3252, 2824, 2836- 3253, 3255, 2899 3256, 3259, 326, 327 29 22, 23, 31 24, 25, 27, 32, 33 324 313,314, 315,316 51111-3, 51119 322, 323 331, 332 311, 312 336 334

Petroleum, coal Textiles and apparel Metal, wood, minerals, paper, printing, publishing Consumables Discrete Manufacturing Transportation equipment Computer and electronic products Industrial and electrical equipment Medical equipment and supplies

15-16 34, 37 30, 31, 32.

20-21 37 36

29 33

35 38

333 335 3391

Other discrete manufacturing Utilities Electric and gas Water Wholesale Wholesale durable and nondurable goods

28, 36, 37

25, 34, 39

332 337 2211 *2213 42

40 41 51

4911-4939, 4961 4941-4959 50-51

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Table 12-1 (Continued) Vertical Market Segmentation
Primary Segment Retail Secondary Segment General retailers Specialty retailers Additional Description Non-specialized stores Specialty stores include building materials, hardware, automotive, fuel, apparel, furniture, miscellaneous and nonstore Food, beverage and tobacco stores ISIC 521 50, 523, 524, 525: U.S. SIC 53 52, 55, 56, 57, 59 NAICS 452 441-444 446-451, 453, 454 445 72 482,483 484,485,48 7 481 486 488, 491, 492, 493 51332 51331 51333 5131,5132 521-522 523, 525 *524 *524 621-623

Grocery Restaurants and hotels Transportation Rail and water Motor freight Air transport Pipelines Warehousing, couriers and support services Communications Wireless Wireline Satellite and other communications Broadcasting and cable Financial Services Banking Securities Insurance (other than health) Health insurance (payer) Healthcare Healthcare provider

522 551, 552 601, 61

54 58, 70 40, 44 41, 42 45 46 47, 42214226, 43, 4513, 4215 4812 4813, 4822 4988 4832, 4833, 4842 60, 61, 67 62 *63, 64 Insurance *63, 64 80

Truck, transit, sightseeing

602 62

Pipelines, except natural gas Transportation support activities, postal, couriers, warehousing

603 63, 641

*642 *642 *642 Radio, TV, cable broadcasting and distribution Monetary authorities — central banks, credit intermediation Security and commodity brokers Insurance carriers and agents Insurance carriers and agents Doctor, nursing, dental and clinical offices; medical and dental laboratories; hospitals and other health and allied services Supplier in ISIC software consultancy and supply segment IT service providers except software publishers Legal, accounting, design, engineering, management, scientific, advertising, and technical services except IT Real estate, rental, leasing Motion picture, video, audio recording; Information services and data processing; holding companies; business and building support; employment, travel, security; arts, entertainment, recreation (performances, sports, museums); personal and repair services; religious, civic and membership organizations Primary and secondary schools Colleges, professional, other *642 65 67 *66 *66 851, 852

Services

Software publishers IT Service providers Professional, scientific and technical services except IT Real estate Business and consumer services

723 72 73, 741-743

7372

5112

7371, 7373- *541 7379, 8742 7311, 81, 83, 87 except 8742 65 7322-7363, 7381-7389, 75-79, 8386, 88, 89 *541

70 90-93, 71, 526, 749, 853

53 624, 512 514 55 56 71 81

Education

Primary and secondary Higher education

801, 802 803, 809

8211

6111

8221, 8222- 6113,6116 8299 16 January 2004

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Vertical Market and Company Size Segments

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Table 12-1 (Continued) Vertical Market Segmentation
Primary Segment National and International Government Local and Regional Government Secondary Segment Defense and intelligence Civil Local and regional government Additional Description National defense and intelligence National government excluding defense Local, provincial, state, regional government ISIC 7522 *75 *75 U.S. SIC *90 *90 *90 NAICS *92 *92 *92

*Partial match Source: Gartner Dataquest (December 2003)

In our demand-side research, we will be seeking to segment certain segments by organization/company size using the criteria shown in Table 12-2.

Table 12-2 Company Size Segments
Primary Cut SMB Very Small/SOHO Small Low-End MSB High-End MSB Large Business Large Very Large Mega 1,000-2,499 2,500-4,999 5,000 or More $250 million-$999 million $1 billion-$2.49 billion More than $2.5 billion Head Count 1-19 20-99 100-499 500-999 $50 million-249 million Less than $49.9 million Optional, Secondary Turnover

Source: Gartner Dataquest (December 2003)

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16 January 2004

Chapter 13 Channel Definitions
This section describes the channel definitions used by Gartner Dataquest. Our software distribution channel research is intended to cover at least the two top segments. Definitions are as follows:
■

Direct channel — This is a channel through which hardware, software and peripherals are sold by the manufacturer directly to the end user.
❑

Direct sales force — This is a channel through which products move directly from the manufacturer or vendor to the end user, usually by a professionally trained field sales force. Direct fax/phone/Web — This is a channel through which manufacturers sell their own products directly to end users through the use of the telephone, Web, fax, fax back and mail, including e-mail and catalog. Direct retail — These are storefront operations owned and managed by the vendor, typically a manufacturer of computer systems. Direct stores are more common in Europe and Japan than in other parts of the world. Sales through direct stores are not reported separately by Gartner Dataquest's worldwide services. They are grouped under direct sales force or one of the indirect channels.

❑

❑

■

Indirect channel — This is a channel through which independent third-party organizations resell products. In software markets, value-added resellers (VARs) and systems integrators (SIs) are two typical examples of the indirect channel.
❑

Dealer — This is a group of resellers including independent, regional and national organizations that normally sell products and services to the business, education and government sectors. Client meetings are typically scheduled ahead of time and are most often solicited by an outbound sales force. Dealers usually provide a low level of service, training and customer assistance, and other value-added services. Vendor-specific agent — This is a reseller dedicated to selling one vendor's products. The reseller store will carry the logo and products of that vendor but is not owned by the vendor (for example, some Xerox copier resellers in the United States). Indirect fax/phone/Web — This is a channel through which resellers sell a variety of products to end users through the use of the telephone, Web, fax, fax back and mail, including catalog sales. This is different from the direct fax/phone/Web channel in that the products are sold by resellers rather than direct from the vendor. VAR — This is a reseller that usually is not a storefront operation and typically acts as a consultant to clients. To qualify as a VAR, a reseller must have developed or configured some type of software package targeted at a particular market or offer significant integration expertise to the customer. VARs typically generate 40 percent or more of their revenue from custom products, service and support. VARs do not apply their label to the product and may, or may not own the hardware or software. Systems integrators — These are system vendors and independent service providers that supply professional services to apply, migrate and integrate technology into business processes. Hosting and ASPs — These offer access to software over a network and may, or may not, include customization services.

❑

❑

❑

❑

❑

❑

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Appendix A Glossary of Terms
Table A-1 lists the definitions of the acronyms and abbreviation used in this report.

Table A-1 Report Glossary
Acronym/Abbreviation 1:m 3GL 4GL ABC ACD AD ADK AEC AIM API APS ASP B2B B2C BAM BI BOM BPA BPM BPR BRE BSP CAD CAE CAGR CAM CD CISC CLR CM CMMS COM CORBA CPM CRM CRO CSD CTI DBA DBMS DTM EAI Definition one-to-many third-generation language fourth-generation language activity-based cost automatic call distributors application development adapter development kits architectural, engineering and construction application integration and middleware application programming interface application platform suite application service provider business-to-business business-to-consumer business activity monitoring business intelligence bill of materials business process analysis business process management business process re-engineering business rules engine business service provider computer-aided design computer-aided engineering compound annual growth rate computer-aided manufacturing content distribution complex instruction set computer Common Language Runtime configuration management computer(ized) maintenance management system Component Object Model Common Object Request Broker Architecture corporate performance management customer relationship management customer relationship optimization consolidated service desk computer telephony integration database administrator database management system desktop management enterprise application integration

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Table A-1 (Continued) Report Glossary
Acronym/Abbreviation EAM EAS EBIS EDA EDI EJB ENS ERM ERMS ERP ESD ETL FASB FMS GAAP GNOME GUI HCM HRMS ID IDE IDL IDM IDS IPS ISE ISIC ISV ITSD IVRU J2EE JMS JVM KDE m:1 m:mn MIPS MOM MQ MRO MRP MSB MVS N/A NAICS NSM ODBC OEM Definition enterprise asset management enterprise application suite enterprise business intelligence suites electronic design automation electronic data exchange Enterprise JavaBeans entrprise nervous system employee relationship management electronic records management system enterprise resource planning electronic software distribution extraction, transformation and loading Financial Accounting Standards Board financial management system generally accepted accounting principals GNU Network Object Model Environment graphical user interface human capital management human resources management system identification integrated development environment Interface Definition Language intelligent device management intrusion detection system integrated plant system integrated services environments International Standard Industry Code independent software vendor IT service desk integrated voice response unit Java 2 Enterprise Edition Java Message Service Java Virtual Machine K Desktop Environment many-to-one many-to-many million instructions per second message-oriented middleware message queuing maintenance, repair and overhaul manufacturing resource planning midsize business Multiple Virtual System not available North American Industry Code Standards network and systems management open database connectivity original equipment manufacturer 16 January 2004

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Channel Definitions

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Table A-1 (Continued) Report Glossary
Acronym/Abbreviation OLAP OLTP OMS OOA&D OODBMS ORB OS OTM PCM PCS PDM PKI PLM PMBOK POS PPM PRM QA RDBMS RF RFP RFQ RISC RPC SAP BW SCCM SCE SCIV SCM SCP SCS SEC SI SIC SMB SOA SOAP SODA SOHO SQL SRM SSO SWCM TMS TPM UDDI UML URL Definition online analytical processing online transaction processing order management system object-oriented analysis and design object-oriented DBMS object request broker operating system object transaction monitor plug-compatible manufacturer plant control system product data management public key infrastructure product life cycle management Project Management Book of Knowledge point of sale professional project management partner relationship management quality assurance relational DBMS radio frequency request for proposal request for quote reduced instruction set computer remote procedure call SAP's Business Warehouse software change and configuration management supply chain execution supply chain inventory visibility supply chain management supply chain planning supply chain sourcing Securities and Exchange Commission system integrator Standard Industrial Code small and midsize business service-oriented architecture Simple Object Access Protocol services-oriented development of applications small office/home office System Query Language supplier relationshp management single sign-on software configuratin management transportation management system transaction processing monitor Universal Description, Discovery and Integration Unified Modeling Language uniform resource locator 16 January 2004

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Table A-1 (Continued) Report Glossary
Acronym/Abbreviation US SIC VAR VM VPN WMS WSDL XML
Source: Gartner Dataquest (December 2003)

Definition United States' Standard Industry Code value-added reseller virtual memory virtual private network warehouse management system Web Services Description Language Extensible Markup Language

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16 January 2004