Dive Brief:
- Global commercial software spending will grow by more than 12% annually for the next several years, reaching $1.4 trillion in 2027, according to a Forrester analysis of vendor financial reports, secondary research sources and trade association data.
- After a two-year slowdown in revenue increases, Forrester expects software vendors to see incremental upticks going forward. Annual revenue growth fell below 12% last year and bottomed out at 11.2% in 2023. Next year, the report said, spending will approach $1 trillion as it once again nears 12% year-over-year growth.
- An industrywide shift to cloud-based SaaS solutions in database and ERP coupled with increased demand for AI tools will drive market growth, as enterprises increase their consumption of infrastructure and application software.
Dive Insight:
Cloud and software are becoming inextricable as vendors shift to as-a-Service delivery models and usage-based pricing.
On-prem software’s enterprise footprint is shrinking as legacy vendors transition to cloud-based delivery and usage-based pricing. The shift highlights a clear link between cloud and ERP, CRM, data management and other enterprise software products.
“We are definitely tracking the continued shift to the cloud,” Liz Herbert, Forrester VP and principal analyst, told CIO Dive in September. “Leading software companies are all moving to cloud and SaaS — that's almost without question.”
ERP provider SAP launched a premium tier in its enterprise cloud conversion program in October, adding low-code tooling, automation and data integration capabilities to the platform.
“This program offers further commercial incentives to support our customers on their transformation journeys and accelerate their move to SAP’s cloud ERP,” CEO Christian Klein said during an October Q3 2023 earnings call.
Cloud-based, as-a-Service database offerings have made it easier to stand up new infrastructure without incurring upfront licensing fees, boosting growth for data cloud companies Snowflake and Databricks.
Snowflake experienced a Q3 consumption boom, with usage of its processing solution Snowpark up 500% year over year, for the three-month period ending Oct. 31. Databricks, a privately held company that does not report earnings, saw revenue and workloads increase 60% in the last year, according to Forrester.
Oracle is leaning heavily on its cloud database infrastructure to drive growth, too. The enterprise software company and emerging hyperscaler reported cloud services and license support accounted for nearly three-quarters of its $12.9 billion in revenue in the three-month period ending Nov. 30.
As software companies continue to infuse products with generative AI tools, like SAP’s Joule and Salesforce’s Einstein GPT, and leading AI providers like Microsoft move to monetize the technology through subscription services, Forrester expects generative AI spending to increase at a rate of 22% annually through 2030.
Data migrations will come first, Oracle Chairman and CTO Larry Ellison said Monday, during a Q2 2024 earnings call.
As the company prepares to deploy databases in Azure and build dozens of cloud data centers, it's banking on data to drive cloud expansion.
“There’s huge, pent-up cloud database demand,” Ellison said, adding “I expect the OCI growth rate to be over 50% for a few years.”
