Spending is up! A SoftServe study found that 60 percent of IT professionals are already increasing their software development budget this year, especially in business-critical initiatives.

Despite the economy, the cash register sound of making money - ka-ching - is happening for innovators investing in solutions in particular segments of the industry - open source, project-based solutions, analytics, security, and the cloud. The value of the various pie slices is worth billions. Even more significant, according to SugarCRM's CEO, it's all coming together to change the software industry's business models and relationships between vendors and customers. Open source, he says, is especially responsible for fueling moves to the cloud.

Based on changes occurring during the past 12 months, IDC revised its earlier growth prediction for open-source software, now forecasting it will achieve worldwide revenue of $8.1 billion by 2013.

Forrester is keeping a close eye on the project portfolio management (PPM) software market and says demand is growing explosively and revenue will jump to $6.5 billion by 2010. Oracle is well positioned to grab a big slice of this pie, thanks to its acquisition of PPM firm Primavera last year. Look for showcasing of PPM apps and Oracle's product road map in this arena at the upcoming OpenWorld conference.

Another huge growth area according to Forrester Research is analytics, and the firm predicts a lot of investing - through acquisitions - to beef up capabilities in this area. Forrester also says that IBM's recent SPSS acquisition is a tipping point that's causing competitors such as Oracle and SAP to ante up.

The tough economy is credited as the reason for much of the current adoption of cloud computing, due to the cloud's ability to reduce costs. The CEO at Indian outsourcing provider Infosys says not paying attention to the cloud now will likely cause outsourcing companies to get left out.

Though the cloud is still widely predicted to be the game-changing growth area in the software industry, it still has naysayers and doubters. APM Experts' CEO points out that no one has yet figured out how to manage applications in which parts of the app run in the cloud and other parts run in a private data center.

Taking a different look at the cloud, the head of IBM's cloud computing efforts says people are confusing the cloud with virtualization. He recently explained Big Blue's definition of the cloud and says the cloud, or centralized computing, is not only right up IBM's alley but also has the potential to change the economics of enterprise computing.

Earnings reports this week put Salesforce.com out in front with surging 2Q profit, and NetApp with 1st-quarter profit. And Perceptive Software reports record FY profits.

In contrast, Intuit's 4Q and fiscal-year profit fell, and HP's software sales tumbled in each of the last three quarters.

Several start-ups grabbed some attention in the last few days. Oracle is investing in Israeli start-up CornAbility, which develops technology for managing telecom and Internet subscriber services. Emerging from stealth this week, start-up Wanova, developing desktop virtualization software to compete against Citrix and VMWare, just raised $13 million in funding. Also emerging out of stealth this week is Immunet, an antivirus software start-up. Recognizing the difference in push vs. pull strategies, it positioned its solutions in the cloud, thus eliminating the time-consuming activity of having to push virus blocks out to clients around the world.

Kaspersky Labs is also focusing on new security software solutions, primarily fighting malicious attacks through third-party and social networking sites. Just launched, its "walled garden" keeps an application segregated from the system and PC.

Capping the good news in this week's software headlines, Oracle's acquisition of Sun Microsystems passed a major milestone - approval by the U.S. Department of Justice. The European Commission still needs to decide its stance on the purchase. CEO Ellison says the $7.4 billion deal is Oracle's most important acquisition to date. It will undoubtedly produce untold competitive advantages from Java and the Solaris operating system.

Noted & Quoted

• Outsourcing meccas, India and the Philippines, are developing strategies to battle the emerging U.S. and UK protectionist legislation that threatens the revenue of offshore BPO destinations
• In a recent report, Accenture says software manufacturing and capital are clearly shifting to the growth markets of Asia and Eastern Europe; it adds that the availability of software developers in developed nations is declining
• Microsoft sponsored XCon, a hacker conference in Beijing, China; forum speakers shared tactics for exploiting software vulnerabilities
• With the lines of code added to the Linux kernel development nearly tripling every day, its rate of change is larger than any other public software project; Red Hat, IBM and Novell rank among the top contributors
• This year's InfoWorld Bossie Awards will include open-source projects among the winners, along with 10 Open-Source Hall of Famers
• Plug and Play is a Silicon Valley firm that provides start-ups with all the resources and services they need without having to commit large amounts of capital while they grow

"Independent of specific plans for any specific product, you should just assume over time that that's going to become part of the products that we produce. And, you know, specific timing and all those things, I'll leave aside, but it is a huge trend. And once you have something like touch or voice to interact with, you wonder why you did it the old way."
- Robbie Bach, Microsoft Entertainment unit president, discussing the importance of new user interfaces such as touch and voice