In today’s digital era, commercial software has become an integral part of business operations across industries. As organizations strive for digital transformation and improved efficiency, the global commercial software market is poised for significant growth. According to a recent report by Forrester, commercial software spending is projected to grow by more than 12% annually, reaching a staggering $1.4 trillion in 2027.
Growth in commercial software spending
After experiencing a two-year slowdown in revenue increases, software vendors can expect incremental upticks in the coming years. This upward trajectory can largely be attributed to an industry-wide shift towards cloud-based Software-as-a-Service (SaaS) solutions in databases and Enterprise Resource Planning (ERP). Furthermore, the increasing demand for Artificial Intelligence (AI) tools is also a major driving force behind the growth of the market.
Shift to cloud-based SaaS solutions and AI tools
The adoption of cloud-based SaaS solutions and AI tools is revolutionizing the commercial software landscape. Organizations are recognizing the benefits of these technologies, such as scalability, flexibility, and cost-effectiveness. As a result, the market for cloud-based solutions and AI tools in database and ERP is experiencing rapid expansion. This trend is expected to continue in the coming years, further propelling market growth.
Cloud and software integration
Cloud and software are becoming increasingly intertwined as vendors shift towards as-a-Service delivery models and usage-based pricing. This integration is driven by the need for agile and scalable software solutions that can be easily accessed and deployed through the cloud. As organizations embrace the cloud as their preferred software delivery model, the boundaries between cloud and software are blurring, creating a symbiotic relationship that fosters market growth.
Shrinking the enterprise footprint of on-premises software
The traditional on-premises software model is witnessing a decline in enterprise adoption as legacy vendors transition to cloud-based delivery and usage-based pricing. Organizations are recognizing the advantages of cloud-based solutions, such as reduced infrastructure costs, simplified maintenance, and enhanced accessibility. As a result, the enterprise footprint of on-premises software is shrinking, making way for cloud-based alternatives.
SAP’s Enterprise Cloud Conversion Program
Leading ERP provider, SAP, has embraced the cloud revolution with the launch of its premium tier in the Enterprise Cloud Conversion Program. This addition introduces low-code tooling, automation, and data integration capabilities to the platform. With this enhanced functionality, SAP aims to empower organizations with the tools they need to accelerate their cloud adoption and digital transformation journeys.
Growth of cloud-based database offerings
Cloud-based “as-a-Service” database offerings have made it easier for organizations to establish new infrastructure without incurring upfront licensing fees. This accessibility has boosted the growth of data cloud companies, such as Snowflake and Databricks. With their cloud-based solutions, organizations can securely and efficiently manage and analyze vast amounts of data, driving innovation and business growth.
Increasing spending on generative AI tools
As software companies continue to integrate generative AI tools into their products, there is a projected 22% annual increase in spending on these capabilities through 2030. Generative AI enables software to autonomously create new content, designs, or solutions based on patterns and user feedback. With the rapid advancements in AI technology, organizations are recognizing the potential of generative AI to improve productivity, enhance user experiences, and drive innovation.
Oracle’s growth strategy with cloud database infrastructure
Technology giant Oracle is leveraging its robust cloud database infrastructure to drive growth. Cloud services and license support account for nearly three-quarters of Oracle’s revenue, indicating the company’s focus on cloud-based solutions. Oracle is actively expanding its presence in the cloud market by deploying databases in Microsoft Azure and building cloud data centers. This strategic move is expected to fuel growth rates that exceed 50% for the next few years.
The global commercial software market is experiencing a period of unprecedented growth, fueled by the shift to cloud-based solutions and the increasing demand for AI tools. As organizations recognize the advantages of cloud-based delivery models, the enterprise footprint of on-premises software is shrinking. Additionally, the integration of generative AI tools and the investment in cloud database infrastructure further contribute to the market’s expansion. To thrive in this evolving landscape, software vendors must continue to innovate, adapt their offerings to as-a-Service models, and prioritize the integration of AI capabilities into their products.