The long-term growth in spending will be driven primarily by modernisation, functional expansion and digital transformation projects, says the analyst firm.
"The majority of spending is going towards modernising, functionally expanding or substituting long-standing business and office applications with cloud-based software-as-a-service," says Bianca Granetto, research director at Gartner, in a statement.
"Projects have been approved and budgeted for, often over a multi-year period, meaning the pace of spending and adoption isn't subject to any impending urgency."
The market subsegments showing the highest growth in 2014 to 2019 will be marketing, e-commerce and advanced analytics software, says Gartner.
Gartner lists some of the key trends that will impact this spending forecast:
Modernisation of core enterprise applications: In a recent Gartner survey, 45 per cent of respondents with knowledge of their organisation's software strategy indicated that one of the current top five IT project priorities is "application modernisation of installed on-premises core enterprise applications" and a further 41 percent indicated that "extending capabilities of core enterprise applications" is a top five priority.Read more: We’re very much naked online, it’s working well for us:Green Acres CEO
The shift to new consumption models:As organisationsadopt subscription-based alternatives and particularly software as a service (SaaS) a more predictable revenue pattern will emerge. A recent Gartner survey shows that alternative consumption models to traditional on-premises licenses are accounting for more than 50 percent of new software implementations; these include SaaS, hosted license, on-premises subscriptions and open source.
Growing adoption of advanced analytics:Gartner predicts that by 2020, more than 75 percent of organisations will deploy advanced analytics as part of a platform or analytics application to improve business decision-making. Companies are accelerating the shift in focus of their investments from measurement to analysis, forecasting and optimisation. Deployment of advanced analytics technologies will become critical to achieving those aims.
The rise of digital-business-related market dynamics: Competing successfully in the digital industrial economy is rapidly becoming a leading strategic imperative for businesses all around the world. This shift in business priority and focus brings a new perspective regarding applications. For example, the need to compete on an increasingly global scale stimulates enhancement, rationalisation and re-engineering of supply chains, leading companies to modernise their supply chain system or adopt the latest supply chain management applications.Read more: Privileged knowledge can make directors a high value target for cybercriminals
By 2020, more than 75 percent of organisations will deploy advanced analytics as part of a platform or analytics application to improve business decision-making.
Organisations extending or replacing human capital management systems with SaaS: Gartner predicts that by 2019, approximately 28 per cent of installed human capital management systems globally will be SaaS-based, up from 13 per cent in 2014. The inflection point globally will occur over the next five years as organisations replace their current systems or extend their current systems with SaaS-based solutions.
Application purchases will Increasingly be "build”, not “buy”: Gartner predicts that by 2020, 75 percent of application purchases supporting digital business will be "build," not "buy”. Gartner's research shows t many organisations already favour a new kind of "build" that does not include out-of-the-box solutions, but instead is a combination of application components that are differentiated, innovative and not standard software or software with professional services (for customization and integration requirements), or systems that are increasingly sourced from startups, disrupters or specialised local providers.
Reaching the cloud office tipping point: Gartner estimates that this year, 15 per cent of business users are provisioned, in whole or in part, with office system capabilities from the cloud. Gartner expects this percentage to grow to around 60 per cent by 2020. Since mid-2014, Gartner has seen a sharp acceleration in client inquiries regarding cloud office adoption. From a revenue growth perspective, the widespread move from on-premises to cloud office will disrupt the traditional revenue flow as more organisations pay smaller increments over a longer period of time.Read more: The IT function no longer holds a monopoly on IT: Every employee is a digital employee
Customer relationship management continues move to the cloud: In North America, Gartner says adoption of CRM via the cloud has become common with organisations increasingly utilising a hybrid model of on-premises and cloud products. However, SaaS adoption in some emerging regions is heavily constrained by network and data centre infrastructure, government regulations on customer data moving across borders, and the lack of local-language SaaS/cloud offerings. Build-out of data centres by vendors and investment in local-language offerings are now on the rise and will begin to bear fruit. Gartner predicts that by 2020, about a quarter of organisations in emerging regions will run their core CRM systems in the cloud, up from around 10 per cent in 2012.
Send news tips and comments to email@example.com
Follow Divina Paredes on Twitter: @divinap
Follow CIO New Zealand on Twitter:@cio_nzRead more: Fonterra works with startup Job Done to bring tech innovation to dairy farms
Send news tips and comments to firstname.lastname@example.org
Follow Divina Paredes on Twitter: @divinapRead more: Staying relevant through digital disruption: Gartner
Follow CIO New Zealand on Twitter:@cio_nz
Join the CIO New Zealand group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.