Over the last few years, the impact of digital transformation (DX) has been significant – not only on the organizations that implemented strategies early, but also on the industry at large, shifting commercial software needs and evolution in the process. Organizations that chose to be on the leading edge of the DX wave are seeing dividends while those that didn’t have found themselves at a disadvantage. From a commercial software perspective, DX has driven businesses of all sizes to reevaluate their operations and processes, leading to more agile and innovative approaches. As a result, DX has helped to accelerate commercial software sales and will continue to help fuel sales in the future. According Circana’s U.S. Reseller Tracking data, commercial software sales totaled $22.4 billion in 2022, an increase of 14% year over year, and growth of nearly 30% compared to 2019.
Adoption of DX inspired software solutions has varied by organization size. Small businesses are often challenged by limited resources, making it difficult to implement and support on-premises solutions. As a result, cloud-based solutions have become popular among small businesses as they offer cost-effective and scalable solutions that can be quickly deployed without the need for extensive IT support. Midsize companies have more complex needs but may not have the resources to invest in on-premises solutions. Cloud-based solutions are also popular in these instances but tend to be more focused on platform-as-a-service (PaaS) type solutions to build, deploy and manage their applications. Enterprise companies have the most complex needs and requirements and tend to use a mix of on-premises, cloud-based, and hybrid solutions. The highest level of data control comes with on-premises solutions, but significant upfront investment and ongoing maintenance costs are typically required. Cloud-based solutions offer greater flexibility and scalability, but there can be added risk concerning security, data privacy and compliance.
Of the 13 commercial software subcategories Circana tracks, nine of them generated nearly 83% of total commercial software revenue in 2022. Content and collaboration software had the largest revenue share, making up 23% of sales and growing 15%, year over year. Virtualization infrastructure software and security information and event management software (SIEM)were also growth leaders.
While overall 2023 business conditions are expected to remain challenging, Circana’s Future of B2B Technology forecast does reflect modest gains in commercial software this year, even though business investment is anticipated to slow during the first half of the year. As conditions improve in 2024, growth is expected to return, with sales revenue forecasted to increase 9%, year over year, and accelerating to 10% in 2025 with inflationary pressures and lingering supply chain issues behind us. The byproduct of DX has been increased speed and agility, helping to create a sustainable competitive advantage that will likely remain a key driver in future commercial software development.