In a bid to tap into a new sweet spot, software vendors are eyeing the mid-market to replace dwindling revenues in the enterprise space.
This means creating less complex, largely point solutions that are not only easier to install and manage, but far less costly.
Companies can no longer afford to pay $8 in consulting costs for every $2 they spend on the software licence.
Big Blue is an example of this with plans in the third quarter to introduce PLM Express, a product life-cycle management application targeted at the mid-market. PLM Express is indicative of stage one in the evolutionary process. With a lower price tag and smaller footprint, it's not the same animal as the monolithic PLM application that IBM sells with its partner Dassault Systemes to GM and Boeing.
The current climate is also fostering boutique software vendors that solve specific problems.
However, Sydney-based e-business consultant James Tsolakis - a former head of procurement for office supplies group WC Penfold Australia - believes any evolution in mid-market software will be a "slow and difficult" process because most organisations are spend-weary.
"There is a fundamental lack of trust in the business community in buying off the shelf solutions, also with the knowledge that an unknown bucket of money will need to be spent to get the work for the business," Tsolakis said.
Mid-market software vendors that prosper in a shrinking industry may gain the attention of the greater enterprise. IT executives see the relevance of applications that can be used to solve a short list of pressing problems. And with the advent of XML and other integration technologies, point solutions will no longer be an anathema to Fortune 1000 companies.
Cap Gemini Ernst & Young's CTO John Parkinson believes there are the habitual early adopters such as FedEx and Wal-Mart who have a cultural belief in technology as a competitive weapon.
"What's happening with them is it's a continuing series of big bets because they can," Parkinson said.
But early adopters represent about 5 per cent of the Fortune 1000, about 50 companies internationally; far too small a target market for most vendors.
At the other end of the spectrum are the "pain avoiders", companies that have had it with technology and may be looking to outsource. That's about 25 per cent.
That leaves a large segment of the enterprise that will make point-solution software vendors the dominant species.