Organizations are increasingly investing in enterprise application software, with most of the spending going toward cloud-based programs, according to a new report by Gartner.
The Stamford, Conn. research firm forecast worldwide spending on enterprise application software will grow 7.5% to $149.9 billion in 2015 and increase to more than $201 billion in 2019.
“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,” Gartner’s research director Bianca Granetto said in a news release. “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.”
In a recent Gartner survey, 45% of respondents said one of their organization’s current top five IT project priorities was “application modernization of installed on-premises core enterprise applications” and a further 41% said “extending capabilities of core enterprise applications” was a top five priority.
Another recent Gartner survey shows that alternative consumption models such as SaaS, hosted license, on-premises subscriptions and open source are now accounting for more than 50% of new software implementations, ahead of traditional on-premises licenses.
The market subsegments expected to show the highest growth between 2014 and 2019 are marketing, e-commerce and advanced analytics software.
Gartner predicts that by 2020, more than 75% of organizations will deploy advanced analytics as part of a platform or analytics application to improve business decision-making. About a quarter of organizations in emerging regions will run their core customer relationship management systems in the cloud by 2020, up from around 10% in 2012, Gartner says.
Organizations are implementing such solutions to compete more effectively on an increasingly global scale, in large part by modernizing their supply chain systems or adopting the latest supply chain management applications.
For “human capital management systems,” Gartner predicts that by 2019, roughly 28% of those installed will be SaaS-based, up from 13% in 2014. Early adopters are in regions such as North America — already at 19% in 2014 and projected to be 34% in 2019 — while the Middle East and North Africa are still at the very early stages of SaaS penetration, with only 4% of the installed base using it as the deployment model.
Gartner also predicts that by 2020, 75% of application purchases supporting digital business will be “build,” not “buy.”