The Market for CTRM Products and Services declined by more than 7% in 2016
ComTech is currently finalizing our 2017 CTRM Market Trends and Outlook Report, our annual review of market developments, including a detailed look at the size of the global CTRM markets. While the final report should be available within the next two weeks, we thought we would provide an early preview related to the results of 2016.
Though many commodity prices did improve in late 2016, most of the year experienced the continuation of falling prices that first took hold in mid-year 2014. And, unfortunately, many the underlying market conditions that led to that price collapse (over-built and over-supplied markets, low global economic growth, changing supply and demand patterns) continued throughout the year as well, resulting in a spending slump across almost all categories of technologies in the global commodities markets. Though pockets of slightly improved activity were seen in 2016 (driven largely by regional market developments), overall the market for CTRM products and related services in 2016 totaled $1.47B, a decline of about 7% versus 2015 ($1.59B). These results are a continuation of the downward trend first noted in 2015 when total market value that year declined by about 2% from the previous year.
There is, however, somewhat of a silver lining in that a significant portion of the decline in market value in 2016 is the result of the transition we’re seeing from “traditional” software licenses to cloud solutions…
While “traditional” perpetual software licenses provide for a large upfront license fee, cloud licenses essentially spread that fee over the first 3 – 5 years of deployment, significantly reducing the revenue associated with a cloud license sale in the first year versus the value that would be recognized if it had been sold as a “traditional” license. Given that we are seeing a growing number of cloud deals consummated vs traditional license deals, the impact of the ongoing transition to the cloud has been fairly substantial and will continue to impact market value for the next several years. While this transition is certainly “painful” from the perspective of near-term vendor revenues and market growth, the ultimate value of single cloud deal will be greater than that of an equivalent “traditional” license after that initial 3-5 year period…leading to a net market expansion and growth in overall value. Additionally, the increasing number of vendors offering cloud CTRM solutions and the lower cost of acquisition of these products versus on-premises solutions should allow smaller companies (those that may have otherwise been priced out of the market) to acquire vendor-supplied software, contributing additional market growth in the coming years.
We’ll provide details regarding the 2016 results and roll-out our 5 year CTRM market forecast in the new, soon-to-be-released report. Keep watching this space for additional updates and information…
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