IDC: Pace of enterprise applications sales will increase next year

IDC forecasts the growth rate of enterprise applications software sales will pick up in 2024, and remain steady through 2027, despite a dip this year as a result of CIOs continuing to pull back on spending due to economic headwinds.

Software sales grew 9.8% last year to $306 million, according to a new IDC study, “Worldwide Enterprise Applications Software Forecast 2023-2027: Digital Era Brings Opportunity.” It expects that growth rate to dip to 8.5% this year, before picking up again in 2024 and averaging 9.6% through 2027.

The top risk factors influencing CIOs spending decisions are inflation, labor shortages, and recession, the study’s author, Mickey North Rizza, told CIO.com. “While enterprise applications are still investment areas, organizations have reduced some spending as they adjust to these macroeconomic headwinds,” she said.

Cloud is taking an ever-larger proportion of IT departments’ budgets, and the picture is no different here. Sales of public cloud enterprise applications software had already overtaken on-premises, hosted, and private-cloud sales by 2022, representing 51.4% of a market worth $306 billion, the study said. That swing will only accelerate in the years to come, with public cloud software sales accounting for 67.5% of a projected $483 billion enterprise applications software spend in 2027, according to the study.

That means public cloud software spending will soar, with a compound annual growth rate of 15.7% through 2027, while spending on software running on-premises and elsewhere will stagnate, growing only 1.1% annually, IDC predicts.

“On-premises is still there and hasn’t gone away, however cloud is being used by all sizes of business,” Rizza said. “This will continue as organizations start to recognize the benefits of public cloud in the digital world.”