The latest data from the industry analyst International Data Corp. (IDC) illustrates the rapid pace of digital transformation among organizations amid the COVID-19 pandemic. According to the new report, the enterprise applications market grew 4.1% year over year (YoY) in 2020 with worldwide revenues reaching $241 billion.
The enterprise applications market is comprised of the following secondary markets: enterprise resource management (ERM), customer relationship management (CRM), engineering applications, supply chain management (SCM), and production applications. Each of these secondary markets consists of multiple functional markets.
Based on IDC’s data, the top 5 enterprise application vendors in 2020 were SAP, Salesforce, Oracle, Intuit, and Microsoft, which together accounted for 22.8% of worldwide revenues.
IDC attributed the growth to digital resiliency, which it said helped organizations to immediately respond to unexpected disruptions. And for consumer digital products and services that need to be served, the back end (enterprise applications) has to be reliable and robust.
Digital transformation strategy
IDC forecasts worldwide revenues for the enterprise applications market will be nearly $334 billion in 2025 as organizations revamp their applications portfolios to deliver the digital resiliency and flexibility needed to thrive in the digital economy. This will be a gradual process as organizations evaluate their current portfolios, and the many customizations across these applications, and map out a transformation strategy. Demand for public cloud-based enterprise applications is expected to produce a five-year compound annual growth rate (CAGR) of 13.6%, surpassing the 6.7% CAGR for the overall market and overtaking on-premises software in the next several years.
IDC’s software market sizing and forecasts are presented in terms of commercial software revenue. The term commercial software is used to distinguish commercially available software from custom software. Commercial software revenue typically includes fees for initial and continued right-to-use commercial software licenses. These fees may include, as part of the license contract, access to product support and/or other services that are inseparable from the right-to-use license fee structure, or this support may be priced separately.
Upgrades may be included in the continuing right of use or may be priced separately. Commercial software revenue excludes service revenue derived from training, consulting, and systems integration that is separate (or unbundled) from the right-to-use license but does include the implicit value of software included in a service that offers software functionality by a different pricing scheme.