Software spend resilient to COVID headwind as market ramps up digital drive  

Worldwide Semiannual Software Tracker, total 2020 ANZ software spending for Australia and New Zealand (A/NZ) reached US$13 billion, up 7% from 2019. In the second half of 2020, the A/NZ software market had a strong rebound, growing by 12% YoY, compared to 3% growth in the first half of the year.

Anastasia Antonova, Senior Market Analyst at IDC Australia and New Zealand says, “This is a strong indicator that A/NZ organisations are going ahead with their digital transformation initiatives to address weak spots uncovered by the COVID-19 pandemic, building business resiliency and investing in the next normal.”

2020 also saw public cloud deployments for software accelerate, with the market portion of revenue from public cloud deployment rising from 35% in 2019 to 41% in 2020. Scalability and the fast deployment of cloud-based solutions has been crucial for A/NZ businesses to pivot their operations in the face of the pandemic disruptions and restrictions.

According to IDC’s Future Enterprise Resiliency and Spending Survey 2021, customers and customer experience is a major driver for digital transformation initiatives and software investments in Australia and New Zealand. The COVID-19 pandemic has made customer experience programs even more important for businesses across A/NZ. This reflects the market development in A/NZ Customer Relationship Management (CRM) applications, which grew by 13% in the second half of 2H2020, compared to only 4% growth at the beginning of 2020. Antonova says, “During 2020, we saw increased online customer activities and interactions via digital channels. Current, clean, constant, and compliant customer data paired with AI-enabled technology is key for future-looking organisations to transform customer relationships and enable customer loyalty and trust.”

In terms of growth, the collaborative applications market stands out within the software market, as it recorded YoY growth of 32% in 2020. This is mainly due to businesses and schools adopting a new “working/studying from anywhere” model, which led to a large-scale shift in operational arrangement. AI platforms grew 27% as companies invest to beef up business agility and build a more adaptive operational model to cope with fast-changing market conditions. Integration and orchestration middleware also grew 15% over 2019, outpacing the broader software market. “Businesses are building towards the agile, adaptive operating model. Companies need data-driven, AI-enhanced decision-making, and reliable, integrated, cross-department data sources for a solid foundation to then build subsequent processes. Processes also need to be integrated and streamlined to deliver the operational improvement”, says John Feng, Senior Market Analyst at IDC Australia and New Zealand.

IT is increasingly forming the backbone of business operations and digital becoming the primary mode of engaging with customers and ecosystem partners. This means enterprises are refreshing their emphasis on software quality and deployment efficiency. This has led to software quality and life cycle tools growing 14% over 2019. As the market invests in optimising the delivery and management of IT, system and service management software grew 14% in 2020. Security software also grew 12% in 2020 as companies spend on securing the more spread and diverse IT environment as a result of adjusting to pandemic restrictions.

In the coming 18-24 months, IDC expects businesses to continue to build towards their intelligent future enterprise vision, where a company functions as an integrated whole, and processes are tightly knit with data flowing across the organisation. IDC sees the A/NZ market starting a refreshed effort to work on unlocking the power of data in running their businesses. Business decision-making is increasingly guided by fact-based data, with the aid of advanced analytics and artificial intelligence. “The support to businesses that IT provided in the outbreak of pandemic has given companies more confidence in IT investment. The expectation on that return of investment is high”, Feng says.
CT Bureau