Reports 2016 – 2021 CTRM Market Outlook | Página 4

2016 - 2021 CTRM Market Outlook
SUMMARY OF RESULTS – 2016
Although many commodity prices did begin to improve in late 2016, most of the year was marked by the con-
tinuation of falling prices that first took hold in mid-year 2014. And, unfortunately, many of 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, 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 sig-
nificant 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 certain-
ly “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 other-
wise been priced out of the market) to acquire vendor-supplied
software, contributing additional market growth in the coming
years.
ComTech estimates the value of the global market for ven-
dor-supplied CTRM applications in 2016 was approximately
$900 million, comprised of $137 million in license sales, $444
million in services, $226 million in support and maintenance,
and $93 million in revenues associated with cloud deployed or
hosted software. Based upon these 2016 results, year-to-da-
ta information from a select number of the larger vendors, and
our forecast of near-term market conditions, we believe that the
market in 2017 will generate $942 million in vendor revenue -
a modest increase over 2016.
Total Market Value by Revenue Component
Vendor Revenue 2015
2016
2017
$ 1,015 $ 900 $ 942
3rd Party Implementation 308 286 314
Unaddressed Market 268 293 296
Total CTRM Market
$ 1,591 $ 1,479 $ 1,552
While vendor supplied software makes up the majority
(in terms of available technology revenues) of the market for
CTRM applications, there still exists a number of companies
that continue utilizing third-party consultants or internal IT staff
to develop and support their own custom solutions. ComTech
estimates that these bespoke solutions accounted for approx-
imately $293 million spent on the services of third party con-
sultants in 2016, with a majority of those dollars being spent
on continuing support and maintenance and the remaining
amounts being expended on development of new capabilities
or applications. These estimates do not include costs associ-
ated with customer resources assigned to the development or
support of these bespoke applications (internal costs).
Though adoption rates for vendor supported solutions
will vary by industry segment and geography, ComTech does
© Commodity Technology Advisory LLC, 2016, All Rights Reserved.
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