Healthy Outlook for Education Software Spending In 2006

Is the Education market facing several years of flat growth, or are things looking up? A widely reported forecast from INPUT recently predicted flat IT spending in US Education until a sharp upturn after 2008. Reading deeper, the renewed spending is predicated on the wildly optimistic hope of reigning in healthcare spending beginning in 2008. So, without the rose-colored glasses, the outlook is pretty discouraging with little relief in sight.
Our outlook on the Education market, at least for software, is much more upbeat. Big software companies selling mature products tell us their US Education revenue for 2005 is up 12-14% for North America and slightly higher internationally. [Full disclosure: Rubicon helped a couple of these companies raise Education prices in recent years, so unit volume growth might be less.]
Overall IT spending priorities in Education center around networking and security, mirroring the results of CRN and Gartner surveys of small and mid-sized businesses. While funds are tight at all levels of Education, especially Higher Education, software applications tied to K-12 mandates or workforce readiness in Higher Education (think Photoshop or AutoCAD) are doing well.
As the US economy enters 2006 on the strength of 2-1/2 years of steady growth at nearly 4%, funding for Education, which typically lags the overall economy, should improve as well. Of course, if healthcare spending really can be reigned in and the funds reallocated, Education IT spending might really take off once again.

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