Worldwide spending on enterprise software will grow by 12% in 2022, according to a Forrester Research Inc. report released this week.

The report is based on data that the research firm collected by surveying 657 publicly traded software companies.

Forrester expects that enterprise spending on applications will increase at a compound annual  growth rate, or CAGR, of 11.4% this year and the next. By the end of 2023, Forrester estimates that the worldwide enterprise application market will be worth more than $400 billion annually.

This year, companies are expected to spend 11.9% more on customer relationship management applications than in 2021. Demand for content and collaboration tools such as Microsoft Teams is expected to grow by 11.9% as well in 2022, while the  enterprise resource planning segment is projected to experience 10.4% growth. Companies use enterprise resource planning, or ERP, software to manage key business processes such as sales, regulatory compliance and procurement.

“Investment in cloud to modernize legacy applications will drive strong software sales momentum in front- and back-office applications,” Forrester stated in the report. The ERP market is one of the areas where organizations are modernizing legacy software. ERP giant SAP SE last year launched an initiative dubbed Rise with SAP that seeks to help companies switch from on-premises versions of its software to the cloud editions.   

Forrester is also projecting continued double-digit growth for the infrastructure software market. This market, which includes product categories such as databases and cybersecurity tools, is expected to grow at a rate of 12.6% in 2022 and 2023. By the end of next year, Forester expects infrastructure software providers to generate more than $400 billion in combined annual revenue.

The market’s momentum is driven partly by the rapid growth of organizations’ cybersecurity budgets. Forrester estimates that cybersecurity software spending will increase 15.4% this year, or 2.8% faster than the overall growth rate of the infrastructure software market.

According to the research firm, the database segment will grow by 12.8% this  year. Forrester pointed to increased adoption of real-time analytics as one of the major contributors to the segment’s growth. Real-time analytics applications enable companies to extract insights from data immediately after it’s collected.

“Software solutions are mission-critical in nature and vital to the day-to-day operations of a modern enterprise,” Forested noted in the report. “Leading software vendors can raise prices consistently without losing demand, resulting in high and stable margins.”

Forrester researchers also evaluated leading software providers’ revenue. According to the research firm, more than half of the 657 publicly traded software companies that it surveyed for the report expect to achieve revenue growth of between 10% and 20% this year.

Image: Unsplash

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