Firms To Spend Most On Digital Transformation
Worldwide spending on enterprise application software will grow 7.5 percent to reach $149.9 billion in 2015, increasing to more than $201 billion in 2019, according to the latest forecast from Gartner, Inc. Analysts said that long-term growth in spending will be driven primarily by modernization, 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.
Modernization of Core Enterprise Applications
In a recent Gartner survey, 45 percent of respondents with knowledge of their organization’s software strategy indicated that one of the current top five IT project priorities is “application modernization 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 by organizations, 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, rationalization and re-engineering of supply chains, leading companies to modernize their supply chain system or adopt the latest supply chain management applications.
Replace Human Capital Management Systems with SaaS
Gartner predicts that by 2019, approximately 28 percent of installed human capital management systems globally will be SaaS-based, up from 13 percent in 2014. The inflection point globally will occur over the next five years as organizations replace their current systems or extend their current systems with SaaS-based solutions. However, there are wide variations beneath the global average penetration rates, with early adopting regions such as North America already at 19 percent in 2014 (projected to be 34 percent in 2019) while the Middle East and North Africa are still at the very early stages of SaaS penetration with only 4 percent of the installed base using SaaS as the deployment model.
Application Purchases To Be “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 organizations already favor 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 customization and integration requirements), or solutions that are increasingly sourced from startups, disrupters or specialized 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 percentage 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.
Advanced Analytics Adoption to Grow
Gartner predicts that by 2020, more than 75 percent of organizations will deploy advanced analytics as part of a platform or analytics application to improve business decision-making. Companies are accelerating the shift in focus of their investments from measurement to analysis, forecasting and optimization. Deployment of advanced analytics technologies will become critical to achieving those aims.
CRM Shifting to the Cloud
In North America, adoption of CRM via the cloud has become commonplace with organizations increasingly utilizing a hybrid model of on-premises and cloud products. However, SaaS adoption in some emerging regions is heavily constrained by network and data center infrastructure, government regulations on customer data moving across borders, and the lack of local-language SaaS/cloud offerings. Build-out of data centers by vendors and investment in local-language offerings are now on the rise and will begin to bear fruit.
Gartner predicts that by 2020, about a quarter of organizations in emerging regions will run their core CRM systems in the cloud, up from around 10 percent in 2012.
- Study Shows Digital Trust Gap Between Companies And Consumers
- Oracle To Showcase Its Innovation With Cloud, AI In India
- Research Reveals AI Is Creating More 'Human Friendly' Workplaces
- Travel, E-Com, Utility Lead To India's Digital Commerce Boom: Study
- Is There A Weak Link In Your Encryption Strategy?
- Cisco Announces A Slew Of Initiatives To Accelerate Digitization In India
- Sanjay Brahmawar Joins Software AG As New CEO
- Using Digital Transformation To Secure Your Bank Locker
- Organizations Must Prepare for Data Security Risks To Survive
- Cultural Transformation: An Upheaval Or Metamorphosis?