Mr. Zorovic: I cover the software sector. The software sector divides into two categories, application software and systems software. We are more focused on application software. The most prevalent trend within software and application software specifically is the trend towards on-demand software, software as a service, or SaaS. We cover eight names within software as a service specifically; we also cover several application software names that are not SaaS related. Representative names would be Adobe, CDC Software, Autodesk, Parametric and others.
TWST: What do you expect demand to look like this year? Which subsectors look most promising to you?
Mr. Zorovic: We look at 2010 with more optimism. This is relative, of course, coming off of 2009, which was a fairly difficult year across the sector. CIOs we speak with indicate IT spending may be up somewhere in the low single digits - 2%, 3%, 4% on a global basis. This is likely to differ on a regional basis. It is likely to grow a lot faster in the emerging part of Asia, so Asia outside of Japan. But then those markets tend to be smaller for most of the software companies. So even though they are going to be growing fast, for the overall global growth rate, they are not going to matter as much. That's going to be followed by North America, and then finally we expect Europe to be showing the slowest growth. Within these, I would say the reason why application software is likely to grow more robustly this year than it did last year is because application software was the part of software that most of the CIOs through the downturn have basically slammed their brakes on. When you have lower budgets and you have to prioritize them, application software is one of the first things that you would cut out. And you would stick with the software that you would need to keep on running your infrastructure, and you would be buying stuff that you absolutely need to have - such as more databases, for instance, because the amount of data you are processing keeps on generating in a downturn as well as in an up economy - or that you would be complying with a number of regulatory issues and with heavy undue logging, how people are using certain applications and stuff like that. So application software specifically, and that would be something like customer relationship management or human resources software, things like that obviously were taking the back seat. I think at this point, there is a bit of pent-up demand, so purchases that have been somewhat delayed are going to be implemented back again in an improving economy. That's why those things are coming back.
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