Rapid change in the mobile software market driving opportunity

2007 marked a strong year of growth for the mobile software market. In VDCs newly published report on mobile computing software for enterprise mobility applications, the global opportunity exceeded $5.4 billion in 2007 and is expected to grow 13.7% annually through 2012.

As a result of the markets high growth and increasing importance, large changes are occurring in how software is developed and delivered. For example, end users are increasingly shifting away from legacy internally developed solutions to third-party offerings. In addition, changes such as increased comfort with SaaS for mobile solutions (especially among SMB organizations) and sourcing of solutions through carriers are beginning to impact the market makeup.

Key markets of growth currently revolve around installations outside the four walls due to the increasing popularity of real-time wireless data services. Field service, currently the largest market for mobile software, is predicted to grow a rapid 16.1% annually through 2012. Reasons for the high adoption include the improvement in speed and reliability of wireless networks, rising gas costs, and the high number of first-time mobility adopters. Other verticals that comprise of outside-the-four-walls applications have also benefited such as professional services, transportation, and field sales.
 

2008 Estimated Enterprise Mobility Application Software Shipments by Source (Percent of Shipments): 

• InternallyDeveloped: 47%
• Third-Party Custom Developed: 28%
• Third-Party/Off-The-ShelfSoftware: 25% 

Across all these verticals, the market is experiencing several major changes.

These include:

• Rising demand for third-party solutions: Long supported by internally developed legacy applications, end users are increasingly turning to third-party mobile application software. Primary factors driving this shift include demand for standards-based solutions and increased focus by users on software development costs and deployment timeframes.
• Carriers become involved: Demand for real-time data services is causing ISVs and carriers to form partnerships. Relationships range from formalized activation fee agreements to opportunistic, one-time deals. However, as carriers continue to invest in expanding their enterprise mobility professional service capabilities, the importance of partnerships with ISVs is only expected to increase.
• Shifting distribution model: Although enterprise mobility applications cannot be compared to some of the less complex consumer applications sold through Apples storefront, its success is expected to challenge the traditional approach to mobile application software development and deployment. For instance, SAP partnered with RIM to offer a mobile CRM solution on the BlackBerry. VDC expects these new distribution portals will also encourage increased R&D investment in mobile software development and subsequently the total population of mobile software developers.

The mobile software market is expected to grow at 13.7% annually over the next five years. Even though there are many areas of opportunity in this market, ISVs will be challenged to keep up. According to analyst Casey Holmes, The ISVs looking to take full advantage of the new market are acting aggressively forming partnerships with carriers, expanding their product portfolio into high-growth verticals, and evaluating potential M&A targets. Over the next several years, we expect not only an increased level of consolidation within the mobile software market, but also a shakeup as business models and best practices are rationalized and larger enterprise SW vendors refine their positions.

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