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Gartner: Cloud service spending to grow 5% in 2010-2015

Worldwide spending on enterprise application software will total US$120.4 billion in 2012, a 4.5% increase from 2011 spending of US$115.2 billion, with an increased focus on cloud-based services, said research firm Gartner.

The spending in 2012, according to Gartner's research vice president Tom Eid, will be focused on industry-specific applications; upgrades to established, mission-critical software; integrating and securing established systems and infrastructure; and software-as-a-service (SaaS) deployments representing extensions to, or replacement of, existing applications and new solutions.

In 2012, the key enterprise application software market segments are enterprise resource planning (ERP); office suites and personal productivity; business intelligence (BI); customer relationship management (CRM); content, communications and collaboration; digital content creation (DCC); project and portfolio management (PPM); and supply chain management (SCM).

Functionality-as-a-service

As organizations look to shift capex to opex, cost optimization and the shifts in spending from "megasuites" to the automation of processes will continue to benefit alternative software acquisition models. Hence vendors offering SaaS, IT asset management and virtualization capabilities will continue to benefit from organizations looking to shift upfront capex to opex.

An increasing number of organizations are demanding software functionality-as-a-service (infrastructure-as-a-service [IaaS], platform-as-a-service [PaaS] and SaaS) or via cloud-based services rather than on-premises. As a result, vendors are offering more technology as subscription-based solutions and "pay-as-you-go" offerings, positioning them as more cost-effective and as a way to counter the effects of economic belt tightening. SaaS and cloud-based services help vendors to expand revenue growth by making it easier for end users to test and evaluate new types of software, provision new users to current technologies, and migrate users off older versions to newer versions of software.

"After more than a decade of SaaS and cloud service use, adoption continues to grow and evolve within the enterprise application markets. This is occurring as tighter capital budgets demand leaner alternatives, popularity and familiarity with the model increase, and interest in SaaS and cloud computing grows," said Eid.

"Adoption varies between and within markets. Although use is expanding to a wider range of applications and solutions, the most widespread use is still characterized by horizontal applications with common processes, among distributed virtual workforce teams and within Web 2.0 initiatives," Eid added.

Eid said that the increase reflects overall market demand, with more buyers evaluating their options during the current technology refresh cycle, and returning buyer confidence for enterprise software as the market slowly recovers and organizations resume investing in technology. SaaS and cloud-based services are forecast to grow in usage, expanding from 11% of enterprise application spending in 2010 to 16% in 2015.

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