According to a new International Data Corporation (IDC) forecast, worldwide revenue for enterprise applications will grow from $279.6 billion in 2022 to $385.2 billion in 2026 with a five-year compound annual growth rate (CAGR) of 8.0%. Nearly all this growth will come from investments in public cloud software, which is expected to represent nearly two thirds of all enterprise applications revenue in 2026.
While the process of migrating from on-premises applications to the cloud can take years, enterprise software vendors and their customers will continue the transition to the cloud as this is an essential part of business operations in the digital world. Companies that do not pursue this technology will sustain losses due to profound opportunity costs as their competitors adopt cloud technologies and the use of application programming interfaces (APIs), moving beyond the reach of technological holdouts with on-premises or homemade solutions.
“It’s no longer enough for businesses to sit back and rely on their technological debt of software and hardware assets to keep the company running. In the digital world, enterprise software needs to constantly innovate to keep up with demand for speed, scale, and a resilient business,” said Heather Hershey, research director, Worldwide Digital Commerce at IDC. “Organizations must invest in new tools to keep their application portfolio up to date as they move into the digital era, automating all processes while also leveraging innovation and a wealth of data to become a more creative and resilient company in the digital realm.”
In addition to the ongoing cloud migration, IDC has identified a number of other significant market developments that are driving growth in the enterprise applications market.
- SaaS and cloud-based, modular, and intelligent applications are no longer “nice to have” but are instead essential for business. Organizations that want to stay in business need AI-driven software that is cloud enabled, modular, and intelligent.
- Application programmable interface technology will continue to be the backbone of the enterprise applications market. APIs will always resonate as a sound investment to companies that understand the pivotal role they play in connecting all the disparate code bases that make up the modern world.
- Phasic migration to cloud with TaskApps augmentation will continue, particularly in B2B enterprises. TaskApps and low-code/no-code development tools are being used to close gaps, extend processes, or change up the business at a faster pace throughout the transition to digital first.
- New global regulations around data privacy and ethics have changed the way organizations collect and use data, pushing governance to the forefront of the conversation. Compliance has become a differentiating factor for enterprises that prioritize trustworthiness.
“The digital world is completely altering the way software is utilized and incorporated into the organization from modularity to APIs to low code/no code to business process automation to TaskApps and even with innovation,” said Mickey North Rizza, group vice president, Enterprise Software at IDC. “Organizations are stretching their visions from filling technology gaps to optimizing processes globally to going the last mile with complete differentiators for their clients. The business world is finally starting to leverage the opportunity technology brings to it.”
The enterprise applications market is a competitive market that includes software specific to certain industries as well as software that can handle requirements for multiple industries. Enterprise applications can be delivered as a pre-integrated suite of applications (featuring common data and process models across functional areas) or as standalone applications that automate specific functional business processes, such as accounting, human capital management, or supply chain execution. The enterprise applications market consists of the following secondary markets: enterprise resource management, customer relationship management, engineering applications, supply chain management applications, and production applications.