No more a Pancake, But a Waffle 

Meet the New-and-Improved Enterprise Software –with more pockets like customer insight, clear segmentation, and sharper verticalisation. Many new syrups that matter are also pouring in here. Let’s take a whiff.... 

Enterprise software saw a chocolate swan in the black swan of the pandemic. Who could have thought that while initial shockwaves halted IT spends, the pandemic actually proved to be a strong inflection point for digitization and big enterprise transformation projects. Now that the storm is past us, the momentum continues, albeit a little subdued. What’s also interesting is how BFSI, healthcare, large enterprises, SMEs, and Cloud have become the front-running wagons of this gravy train. Despite inflation, controlled spending, geo-political tensions, and SVB aftermath –enterprise software is a hot treat. But a treat that has put traditional Application and outsourcing work on the far shelf now. Companies are neither asking for nor giving, plain pancakes that can be easily - and with no differentiation - stacked upon each other year after year. Gone are the days when an enterprise deal looked the same as the other one. Differentiation, edgy flavors like AI, and made-to-order sizes are now selling like hotcakes. Well, like waffles, to be precise. 

New Grids, Same Iron 

The days of traditional IT work, undifferentiated software, and good-old outsourcing spadework are getting thin and thin. New forces like Cloud, AI, analytics, and edgy work are eggs that are entering the batter mix of enterprise software. 

There are no stale areas as such, however, there is a lot less focus on traditional outsourcing (although it continues in areas like custom development), weighs in Biswajeet Mahapatra, Principal Analyst at Forrester. “Outcome-based contracts are finding more acceptance, but they come with their own set of challenges. Application maintenance will remain in focus for a few more years and as more and more workloads move to the cloud – it will wane away. Data analytics is showing a lot of insourcing as companies find projects in-house easier to manage.” 

Biswajeet Mahapatra, Principal Analyst at Forrester,

“Outcome-based contracts are finding more acceptance, but they come with their own set of challenges. Application maintenance will remain in focus for few more years and as more and more workloads move to the cloud – it will wane away. Data analytics is showing a lot of insourcing as companies find projects in-house easier to manage.” 

If we look at what happened in the Indian landscape in the last year, we can see clear traces of trends like investment in digital technologies and streamlining mobile experience, Cloud replacing on-prem solutions, insights’ –driven approach leading to investments in data analytics, application consolidation and investments in collaboration software – as encapsulated by Mahapatra. The future is taking a new shape for sure –with Application portfolio rationalization and application modernization. As Mahapatra augurs, “Cloud adoption will see a major increase. Data analytics will see double-digit growth. There will be a focus on improving customer and employee experience. And there could be higher investments in AI and ML.” 

Gartner augurs that innovation, intelligence, and an improved experience are the themes underpinning enterprise software investments over the next three-year horizon. Enterprise software providers should use emerging technologies that are aligned with these themes to gain a competitive advantage. Increasing returns on existing software investments by improving usage and adoption is going to be a high priority for business and IT leaders due to the increasing cost of working capital. That could be a reason why enterprise leaders are rationalizing software investments by prioritizing software capabilities that improve business agility, operational resilience, and cybersecurity. Gartner has also reckoned that software providers are challenged with supporting emerging business models and delivering innovative new capabilities that enable their enterprise customers to revolutionize work. 

New Steam, New Smell 

The enterprise is increasingly a kind of programmable real-time system, a fabric of data and processing from sensor to supercomputer, 5G to exascale, and IoT to quantum, Shahin Khan, Technology Analyst and Founding Partner at OrionX paints a picture of the new creature that an enterprise has become. “Such a fabric is the infrastructure that houses the digital twin of the enterprise, managing the data supply chain that matches the physical supply chain. It all is, or needs, software. It points to a new era in systems and software.” 

A lot of new areas have become hot – and as Khan points out, “While AI is getting all the attention, areas like cybersecurity, gaming, data quality, customization, and integration seem durable.” 

Mahapatra picks areas like Cloud specially SaaS-based solutions, Data analytics/management/science, and AI – especially Generative AI in this peek into the thermometer. 

In its Asia Pacific Tech Market Forecast, 2022 to 2027, Forrester has observed that despite economic flux, technology spend in Asia Pacific (APAC) will still grow 5.8 percent to reach US$732 billion in 2023. Note that tech spending growth in India is expected to be the highest in the region and is expected to reach `3.9 trillion in 2023. Ongoing digitalization efforts have been explained as an impact that will influence investments in building a national digital infrastructure. Here, software can turn out to be the highest growth area, accounting for the largest share of the technology spend, with 74 percent of APAC tech spending coming from software and services by 2023, due to the growth of cloud adoption. 

Gartner has predicted that by 2026, the market is expected to reach US$633 billion, growing at a compound annual growth rate (CAGR) of 12.3 percent between 2021 and 2026. Also, with worldwide IT spending projected to total US$4.6 trillion in 2023 the software segment will see double-digit growth this year as enterprises prioritize spending to capture competitive advantages through increased productivity, automation, and other software-driven transformation initiatives. Note that new spending has shifted to cloud options, as reflected in the growth in IT services. Spending on consulting could hit US$264.9 billion in 2023, a 6.7 percent increase from 2022, as per Gartner. Enterprise IT spending is relatively inflation-proof and locked in as multi-year deals and recurrent spending in many areas –its analysts have surmised. 

In terms of where these bucks would go –well, the IT services segment will continue its growth trajectory through 2024. This could be mainly driven by the infrastructure-as-a-service market, which is projected to reach over 30 percent growth this year. Gartner analysts have also dissected the ripple effects of massive tech lay-offs. Looks like while IT spending on internal services is slowing in all industries, enterprises are not keeping up with wage rate increases. Consequentially, enterprises may spend more money in their efforts to retain fewer staff. This is where they will turn to IT services firms to fill in the gaps. 

As per estimates from Precedence Research, the global enterprise software market stood at US$201.05 billion in 2022 and can touch US$610.09 billion by 2032. According to Grandview Research, the global enterprise software market size was valued at US$216.69 billion in 2022 (with a revenue forecast of US$517.26 billion by 2030). The Asia Pacific regional market here could be US$125.59 billion by 2030 – thanks to a jump in end-user enterprises’ investments in digitalizing their operations. Other drivers are –the expansion of technology-driven projects and the improvement of I.T. budgets in organizations worldwide. 

Enterprise software deployment requires significant money, time, and expertise, as indicated by Precedence Research. It also points out how enterprise software adds a high cost due to the lengthy implementation processes that include project planning, organization, installation, training, and system configuration. ERP software can also necessitate the need for new hardware, updated network equipment, and security software installations – leading to additional costs (besides areas like employee training, skilled employee recruitment, and maintenance). These could potentially stifle market growth during the forecast period till 2032 (Precedence Research noted). 

Shahin Khan, Technology Analyst, and Founding Partner,  OrionX paints 

“Such a fabric is the infrastructure that houses the digital twin of the enterprise, managing the data supply chain that matches the physical supply chain. It all is, or needs, software. It points to a new era in systems and software.” 

But what’s also interesting to note is that key players are investing in research and development of software and testing. All this can increase enterprise software development activities to achieve greater operational efficiency and cost savings, driving revenue growth for end users. 

As to who is heating this iron right – is it TCS, HP, LTIMindtree, Cognizant, or AWS; Khan offers an honest shrug. “Opportunities are plenty, across the board, but progress is generally linear, with few leaps. The result is a surprising amount of competition even in emerging disciplines.” 

As a policy, we do not comment on any specific company until and unless the data is publicly available, clarifies Mahapatra. “However, all the above-mentioned companies have focused on AI, digital technologies, and data analytics and have built-in frameworks to help companies optimize their existing investments and focus on newer technologies. For example, from the public data available Cognizant claims to have helped a US utilities company in reducing its customer calls by implementing a robust data analytics platform along with SAP master data governance module. Similarly, TCS claims to have an AI studio that enables the democratization of data to facilitate data-driven business decisions. HP claims to have worked with Snowflake to democratize access to AI-driven business insights.” 

As enterprise software becomes less boring and more exciting as well as challenging, it will make more and more space for new models, new technology drivers, and (who knows) new players too. 

Let’s see how much sweeter, fatter, and juicier these waffles turn out to be. Would they have deeper pockets and get more fluffy on the inside? A Belgian waffle calls.  

By Pratima H