Published on the 31/08/2015 | Written by Newsdesk

Worldwide spending on enterprise application software will grow 7.5 percent to reach US$149.9 billion in 2015…

In the latest forecast from Gartner, Inc. analysts said that long-term growth in spending will be driven primarily by modernisation, functional expansion and digital transformation projects.

“The majority of spending is going towards modernizing, functionally expanding or substituting long-standing business and office applications with cloud-based software-as-a-service,” said Bianca Granetto, research director at Gartner. “Projects have been approved and budgeted for, often over a multiyear period, meaning the pace of spending and adoption isn’t subject to any impending urgency.”

The market subsegments showing the highest growth during the forecast period of 2014 through 2019 will be marketing, e-commerce and advanced analytics software.

Gartner has identified a number of key trends in the application software market that affect the spending forecast.

Modernisation of core enterprise applications
In a recent Gartner survey, 45 percent of respondents with knowledge of their organisation’s software strategy indicated that one of the current top five IT project priorities is “application modernisation of installed on-premises core enterprise applications” and a further 41 percent indicated that “extending capabilities of core enterprise applications” is a top five priority.

Transitioning to new consumption models
As subscription-based alternatives and particularly software as a service (SaaS) are being adopted, a more predictable revenue pattern will emerge. A recent Gartner survey shows that alternative consumption models to traditional on-premises licenses are accounting for more than 50 percent of new software implementations; these include SaaS, hosted license, on-premises subscriptions and open source.

The rise of digital-business-related market dynamics
Competing successfully in the digital industrial economy is rapidly becoming a leading strategic imperative for businesses all around the world. This shift in business priority and focus brings a new perspective regarding applications. For example, the need to compete on an increasingly global scale stimulates enhancement, rationalisation and re-engineering of supply chains, leading to supply chain system modernisation or adoption of the latest supply chain management applications.

“Build,” not “buy”
Gartner predicts that by 2020, 75 percent of application purchases supporting digital business will be “build,” not “buy.” Gartner’s research shows that many organisations already favour a new kind of “build” that does not include out-of-the-box solutions, but instead is a combination of application components that are differentiated, innovative and not standard software or software with professional services (for customisation and integration requirements), or solutions that are increasingly sourced from startups, disrupters or specialised local providers.

Reaching the cloud office tipping point
Gartner estimates that during 2015, 15 percent of business users are provisioned, in whole or in part, with office system capabilities from the cloud. Gartner expects this to grow to around 60 percent by 2020. Since mid-2014, Gartner has seen a sharp acceleration in client inquiries regarding cloud office adoption. From a revenue growth perspective, the widespread move from on-premises to cloud office will disrupt the traditional revenue flow as more organizations pay smaller increments over a longer period of time.