A new research note by Gartner states that software licensing costs are sets to fall over the next decade as businesses realize that emerging IT trends are giving buyers more bargaining power.

In his research note, Gartner VP William Snyder says: “Up until now the unique nature of the software market has meant that buyers had very little negotiating power after the initial purchase of a software license. We expect those dynamics to change considerably over the next five to 10 years giving CIOs and software procurement officers more bargaining power while potentially reducing software vendor profit margins.”

Synder identified seven majors trends that are converging to alter software delivery models, and reducing dependence on the application and infrastructure vendors. These include “business process outsourcing (BPO); software-as-a-service (SaaS); low-cost development environments, such as China and India; combined with modular architectures and SOA; the emergence of third-party software maintenance and support; growing interest in open source; the rise of Chinese software companies; and the expansion of the Brazilian, Chinese and Indian markets.”

Although Synder says open source won’t lead to the collapse of application vendors like Microsoft or infrastructure players like IBM, he does believe it will put pressure on traditional software margin structures, like servers, operating systems, development tools, and databases. He also predicts that a quarter of all new business software will be delivered by SaaS by 2011. “We would advise IT organizations to use BPO and open source alternatives to improve their negotiating power with software suppliers as well as employing the emergence of third-party vendors as a means to reduce higher maintenance fees on older versions of software,” Synder says. However he also warns that vendors will try even harder in the future to compete by “locking customers in a technology and architecture and a pricing contract with a longer term agreement. When a customer is locked in, especially on the architecture side of the equation, it is harder to extricate itself.

In concluding, Synder says that “IT needs to be cognizant of these factors in order to mitigate the problem.” I can think of at least one CRM vendor already addressing that very fact.