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AI and cloud driving growth in software market

By DigiconAsia Editors | Wednesday, July 30, 2025, 4:58 PM Asia/Singapore

AI and cloud driving growth in software market

AI and cloud driving growth in software market

According to Forrester’s newly released Global Commercial Software Forecast, 2025 To 2029, cloud and AI will drive infrastructure software growth of 13.3% from 2025 to 2029, and application software will see slower growth of 9.5%.

The research predicts key software growth trends from 2025 to 2029 and explores how challenging economic conditions in 2025 will compel software firms to adapt strategies, optimize headcount, and focus investments on cloud and generative AI solutions to maintain competitive advantages. 

The report forecasts that infrastructure categories in security, databases, and AI platforms will see the fastest growth. These key growth drivers reflect rising enterprise demand for resilience, intelligence, and scalability. For application software, the fastest growth comes from tech operations management, vertical software, enterprise resource planning, and supply chain management.

2025 performance

Despite the geopolitical tensions linked to tariffs, software continues to see double-digit growth rates, with the average software vendor revenue growth in Q1 2025 at 11%. According to Forrester, over the next five years, security, databases, and AI platforms are set to dominate software infrastructure growth, while application software areas like tech operations management, ERP, vertical software, and supply chain management will lead in their category.

2025’s challenging economic environment will force software firms to optimize headcount and help enterprises better manage their returns from software spend, notably from cloud, genAI, and agentic AI.

Linda Ivy-Rosser, VP Research Director, Forrester, who contributed to the report, said: “Software firms are being reshaped by economic pressures and advancements in AI. While infrastructure growth is accelerating, businesses must rethink strategies to optimize resources, adopt agentic AI solutions, and better manage software spend. Companies that align their priorities with evolving market trends will secure competitive advantages well into the next decade.”

Key highlights

Some findings that stand out from the report include:

  • Cybersecurity: Spending on cloud security, identity and access management, and security operations will see the fastest growth, leading to a 14.3% CAGR in cybersecurity software.  
  • Databases: The boom in this category is driven by investments in AI and data management, with companies like MongoDB (+50% revenue in 2 years) and Snowflake (+75% revenue from 2022-2024) demonstrating high growth.  
  • Application software: While the forecast has changed with a downward trend from the higher growth expectations in the the 2023 iteration of the report, this is a clear indication that application software is evolving. Tech operations management leads with growth at 12.3%, fueled by advancements in AI agent orchestration tools. 
  • Headcount: Strategic shifts in 2025 will force software firms to rationalize headcount while intensifying AI innovation to boost productivity, reduce costs, and create new growth opportunities in customer service, marketing, and workflow automation amid economic challenges.  

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