MARKET SHARE Worldwide Problem Management Software Market Shares, 2014: 3rd Platform Technologies and Delivery Models Drive Growth Robert Young IDC MARKET SHARE FIGURE FIGURE 1 Worldwide Problem Management Software 2014 Share Snapshot Note: 2014 Share (%), Growth (%), and Revenue ($M) Source: IDC's Worldwide Semiannual Software Tracker, April 2015 May 2015, IDC #256301
EXECUTIVE SUMMARY In 2014, the worldwide problem management software market reached $1.8 billion, representing growth of 5.8% over 2013. Service desk software delivered through SaaS continued to be a market growth driver as customers continue to seek solutions that reduce up-front capital expenditures as well as ongoing maintenance costs. SaaS-based problem management solutions can often offer faster procurement and delivery time frames than on-premise implementations. In addition, customers also showed increasing interest in decreasing the TCO of problem management software by expanding the solutions out of IT and into line-of business (LOB) units such as HR, facilities, and finance. As LOB units increasingly drive the procurement of cloud resources, the need for cloud governance, cost control, optimization, and automated compliance checks will dramatically increase. Thus problem management solutions will be expected to extend into IT operations management (ITOM) (to include functionality to support cloud services) and LOB domains. Vendors such as ServiceNow and Cherwell, which have strengths in these growth areas, experienced strong increases in demand and share, with ServiceNow gaining 22.7% share. By comparison, traditional IT service management (ITSM) software market leaders that have not been able to rapidly evolve their portfolios to address these emerging needs saw revenue growth lag behind and shares shrink. In addition, geopolitical and currency headwinds also slowed some vendors, particularly those with strength in Eastern Europe, Russia, and Western Europe. This IDC study provides a competitive analysis of the worldwide problem management software market in calendar year 2014. The study includes worldwide market revenue and growth rate for the total market in 2014 as well as vendor revenue, market shares, and growth rates of the leading vendors. A three-year history showing vendor revenue data and trends for 2012 2014 is also provided. "The problem management software market continues to be impacted by growing acceptance of cloud and mobility initiatives in the enterprise," comments Robert Young, research manager, End Point Device and IT Service Management Software. "As many IT service and support organizations seek to transition themselves from reactive call centers to proactive business enablers, IT buyers are placing increased importance on problem management solutions that offer advanced self-service and collaboration capabilities, delivered across multiple device types, as well as provide capabilities for expanding product usage into LOB units. ADVICE FOR TECHNOLOGY SUPPLIERS The problem management software market is evolving rapidly. In 2014, vendors such as ServiceNow, Cherwell, and Zoho that deliver modern mobile and social functionalities via SaaS-based offerings as well as support product expansion into line-of-business and PaaS-like capabilities saw strong market growth, whereas legacy vendors such as HP, BMC, CA Technologies, and others, which historically provided problem management point products delivered on-premises, lost share. Thus incumbent problem management software vendors must aggressively evolve their offerings in regard to delivery models as well as packaging and pricing, integrating product lines into solutionbased offerings and establishing price points and packaging that are attractive up and down the market to compete with newer entrants. In addition, these vendors will also need to implement strong 2015 IDC #256301 2
go-to-market campaigns in order to address perception issues (often based on legacy products) in the market. Customers and prospects of problem management solutions expect a number of key usability features. These include products designed for use by IT administrators and increasingly by line-of-business users who wish to leverage self-service functionalities in order to request services and/or support as well as track requests. Furthermore, comprehensive IT service management solutions designed for dynamic environments will become evermore important as organizations increasingly adopt private and hybrid cloud deployments. As a result, it would behoove problem management software vendors to look for opportunities to consolidate and/or integrate existing ITSM, ITOM, and cloud management tools. MARKET SHARE The worldwide problem management software market totaled $1.8 billion in 2014, which represented an increase of 5.8% over 2013 (see Table 1). ServiceNow was the market share leader in 2014, with $410 million in revenue and 22.7% market share. 2015 IDC #256301 3
TABLE 1 Worldwide Problem Management Software Revenue by Vendor, 2012 2014 ($M) Vendor 2012 2013 2014 2014 Share (%) 2013 2014 Growth (%) ServiceNow 204.5 329.0 410.3 22.7 24.7 BMC 378.4 368.0 367.1 20.3-0.2 HP 213.6 138.6 117.3 6.5-15.3 CA Technologies 101.9 99.5 86.7 4.8-12.9 Zoho 44.0 55.1 69.8 3.9 26.6 Axios Systems 43.5 43.7 52.3 2.9 19.7 Cherwell 18.5 30.1 45.0 2.5 49.6 Alcatel-Lucent 38.5 42.2 41.5 2.3-1.6 IBM 36.3 38.1 39.4 2.2 3.4 Fujitsu 32.3 26.0 25.9 1.4-0.3 Microsoft 19.0 21.4 23.2 1.3 8.4 Hornbill Systems 17.9 18.7 20.9 1.2 11.7 NEC 25.9 21.9 20.5 1.1-6.5 Matrix42 16.5 16.2 17.5 1.0 7.9 USU Software AG 12.1 14.7 17.1 0.9 16.5 LANDESK Software 24.5 23.3 17.0 0.9-27.0 Nomura Research Institute 14.3 13.4 13.8 0.8 2.7 Hitachi 13.9 11.7 10.8 0.6-7.2 Other 375.3 400.5 415.0 22.9 3.6 Total 1,631.1 1,711.9 1,811.0 100.0 5.8 Source: IDC's Worldwide Semiannual Software Tracker, April 2015 2015 IDC #256301 4
WHO SHAPED THE YEAR Market growth in 2014 was shaped by the need to deliver IT services and support across varying device types and hybrid infrastructure architectures, with a focus on optimizing both IT and business user experience. Representative vendors include the following: ServiceNow was the overall problem management software market share leader in 2014. Based on IDC's market share reports, ServiceNow has been experiencing significant growth over the past few years with its SaaS-based service automation platform. ServiceNow also supports a broad range of IT Infrastructure Library (ITIL) compliant functions, including discovery, CMDB population, incident management, change management, problem management, asset management, and release management. Likewise, the ServiceNow platform's application creation, task automation, and single system of record capabilities are increasingly driving usage of the product to expand outside of the IT department and into lineof-business units such as HR and facilities. In addition, ServiceNow has maintained strong marketing and branding, which has helped contribute to the company's significant growth in the highly competitive and crowded service management software space. Cherwell experienced significant market growth of 49.6% from 2013. IDC believes that this growth can be attributed to the Cherwell Service Management (CSM) platform's flexible licensing and deployment options and pricing options that can be delivered in an on-premise, hosted, and SaaS-based model and made available through perpetual, subscription, and concurrent-based licensing. In addition, in 2014, Cherwell launched its CMS 5.0, featuring mergeable applications and mapp functionality, which enables customers to design, build, and implement customized IT and/or line of business focused applications in a codeless environment, which can be delivered on-premise or via SaaS. While BMC showed a decline in market growth of 0.2% from 2013, it is important to note that since BMC became a private company in 2013, the company reorganized the business structure; hired a number of executives; gained increased operational funding to accelerate sales, marketing, and R&D; and focused on innovation and delivering a vastly improved enduser experience. As a result, in 2014, BMC announced several enhancements to its problem management portfolio as well as advanced integrations across related product lines, which aim to address the onslaught of disruptive technologies including mobile, social, big data and analytics, and cloud 3rd Platform technologies that make up the core of IT market growth and business growth according to IDC. For example, new products such as BMC's Remedy with Smart IT and MyIT contain social and mobile features and functions that stand to reduce the use of lengthy forms and manual processes commonly associated with traditional IT service desk software. Likewise, IT organizations can integrate Smart IT with the self-service platform of MyIT to enable optimized service desk experiences for business users and IT staff alike. HP showed a decline in market growth of 15.3% from 2013. Although HP announced several key enhancements to its HP Service Manager and SaaS-based Service Anywhere products in 2014, such improvements to the products' design and user interface, providing more icondriven dashboards and intuitive drop-down menus as well as continued leveraging of the Haven platform, offer customers an advanced analytics approach to IT service management. HP has struggled with effectively marketing and branding both its Service Manager and its Service Anywhere products. As a result, HP continued to face concerns in regard to the company's ongoing commitment in the service desk management software space. 2015 IDC #256301 5
MARKET CONTEXT In 2014, the problem management software market faced geopolitical and economic headwinds in Western Europe, Russia, Eastern Europe, and Canada where currency fluctuations undercut local market growth when expressed in current U.S. dollars. Figure 2 illustrates the allocation of revenue on a regional basis. The Americas region represents 55.2% of total market revenue, a slight decrease from last year. Figure 3 illustrates the allocation revenue based on operating environment. Windows continues to dominate the market with 61.8% share. Linux increased share to 6.5% in 2014 compared with 6.3% in 2013. FIGURE 2 Worldwide Problem Management Software Revenue Share by Region, 2014 Source: IDC's Worldwide Semiannual Software Tracker, April 2015 2015 IDC #256301 6
FIGURE 3 Worldwide Problem Management Software Revenue Share by Operating Environment, 2014 Source: IDC's Worldwide Semiannual Software Tracker, April 2015 Significant Market Developments Overall, the worldwide problem management software market saw a strong shift in favor of vendors that offer SaaS-based solutions. Key vendors that experienced strong positive growth derived strength from providing modern user interfaces made up of initiative self-service and social media modules, advanced integrations with IT operations and infrastructure management software (to include cloud), and automated task workflow and self-remediation capabilities. In addition, these vendors have also delivered PaaS-like capabilities and/or unique offerings that enable their solutions to be expanded across LOB units. Several longtime market vendors in the problem management space including HP, BMC, and CA Technologies lost revenue and share in a market that grew by approximately $100 million, representing an increase of 5.8% worldwide. Currency headwinds reduced current U.S. dollar revenue across Europe, including Russia. METHODOLOGY The IDC software market sizing and forecasts are presented in terms of commercial software revenue. IDC uses the term commercial software to distinguish commercially available software from custom software. Commercial software is programs or code sets of any type commercially available through sale, lease, rental, or as a service. Commercial software revenue typically includes fees for initial and continued right-to-use commercial software licenses. These fees may include, as part of the license contract, access to product support and/or other services that are inseparable from the right-to-use license fee structure, or this support may be priced separately. Upgrades may be included in the continuing right of use or may be priced separately. All of these are counted by IDC as commercial software revenue. 2015 IDC #256301 7
Commercial software revenue excludes service revenue derived from training, consulting, and systems integration that is separate (or unbundled) from the right-to-use license but does include the implicit value of software included in a service that offers software functionality by a different pricing scheme. It is the total commercial software revenue that is further allocated to markets, geographic areas, and operating environments. The worldwide software market includes all commercial software revenue across all functional markets or market aggregations. For further details, see IDC's Software Taxonomy, 2014 (IDC #249238, June 2014). Bottom-up/company-level data collection for calendar year 2014 began in January 2015, with in-depth vendor surveys and analysis to develop detailed 2014 company models by market, geographic region, and operating environment. Note: All numbers in this document may not be exact due to rounding. MARKET DEFINITION Problem management software includes IT help desk applications and related problem determination and resolution applications, including knowledge bases. This category is separate from externally focused problem resolution solutions within customer relationship management (CRM). To the extent that IT Infrastructure Library (ITIL) and IT service management based solutions help in the resolution of problems, those functions are included here as well. Note that revenue related to runbook automation is no longer tracked in this market. RELATED RESEARCH IDC's Forecast Scenario Assumptions for the ICT Markets and Historical Market Values and Exchange Rates, Version 1, 2015 (IDC #255833, April 2015) Worldwide Problem Management Software 2015 2019 Forecast (IDC #254777, March 2015) IDC's Software Taxonomy, 2014 (IDC #249238, June 2014) Worldwide Problem Management Software 2013 Vendor Shares (IDC #248781, May 2014) 2015 IDC #256301 8
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