Artificial intelligence, cloud innovations boost enterprise applications market
The enterprise applications market experienced significant revenue growth in 2023 as artificial intelligence (AI), particularly generative AI (GenAI), began to transform the employee and customer experience of business software.
According to a report from the International Data Corporation (IDC), the enterprise applications market grew by 12.0 per cent year over year in 2023, with worldwide revenues reaching $356 billion.
The integration of AI and GenAI into enterprise applications has introduced greater intelligence, faster insights, and enhanced decision-making capabilities for users.
This shift enables employees to increasingly rely on enterprise software as a collaborative tool to solve business problems and navigate change.
This transformation is underpinned by cloud technology, which facilitates rapid innovation and enhances employee, customer, and partner experiences, ultimately leading to faster time to value and competitive differentiation.
“SaaS and cloud-enabled applications continue their growth across the enterprise applications market. With new innovations such as generative AI and its plethora of use cases, the opportunity to reshape businesses with intelligent technology using cloud applications brings greater competitive advantage,” said Mickey North Rizza, group vice president, Enterprise Software at IDC.
“Experience-orchestrated (X-O) businesses are leveraging more modern, innovative, and intelligent enterprise applications, improving their decision velocity with smarter business decisions and ultimately bringing greater differentiation for organisations globally.”
The top five enterprise application vendors in 2023 were SAP, Salesforce, Oracle, Microsoft, and Intuit, collectively accounting for 21.2 per cent of worldwide revenues.
With just 0.2 per cent of market share separating SAP and Salesforce, IDC regards these two companies as statistically tied for the number one position in the worldwide enterprise applications market for 2023.
IDC considers a statistical tie in software competitive markets when there is a difference of 0.5 per cent or less between the market share of two or more companies.
Looking ahead, IDC forecasts that worldwide revenues for the enterprise applications market will exceed $600 billion by 2028, as organisations further integrate traditional AI, machine learning, and GenAI into their workflows.
This integration is expected to create faster and more intelligent insights and decisions.
Organisations will also invest in new tools to modernise their application portfolios as they advance further into the digital era.
Public cloud is projected to become the foundational deployment model for enterprise applications software, accounting for more than 70 per cent of new enterprise applications spending by 2028.
Demand for public cloud-based enterprise applications is forecast to achieve a five-year compound annual growth rate (CAGR) of 16.5 per cent, surpassing the 11.1 per cent CAGR for the overall market.
The enterprise applications market is composed of several secondary markets, including enterprise resource management (ERM), customer relationship management (CRM), engineering applications, supply chain management (SCM), and production applications. Each of these secondary markets encompasses multiple functional markets.
IDC’s software market sizing and forecasts are presented in terms of commercial software revenue, which distinguishes commercially available software from custom software.
Commercial software revenue typically includes fees for initial and continued right-to-use licenses, which may also cover access to product support and other services.
Moreover, upgrades may be included in the continuing right of use or may be priced separately.
Finally, commercial software revenue excludes service revenue derived from training, consulting, and systems integration that is separate from the right-to-use license, but includes the implicit value of software provided through alternative pricing schemes.