Application Modernization Services Market Size | Companies
The global application modernization services market size was surpassed at USD 17.83 billion in 2023 and is expected to hit around USD 83.75 billion by 2033, growing at a CAGR of 16.73% from 2024 to 2033.
Application modernization services have become increasingly vital in today's rapidly evolving technological landscape. As businesses strive to remain competitive and meet the demands of modern consumers, the need to upgrade and optimize legacy applications has never been more pressing.
The growth of the application modernization services market is propelled by an increasing obsolescence of legacy systems drives organizations to seek modernization solutions to stay competitive and meet evolving business needs. Secondly, the imperative for cost efficiency encourages businesses to invest in modernization efforts to streamline operations and reduce expenses. Additionally, the demand for enhanced agility in response to dynamic market conditions fuels the adoption of modernization services. Moreover, the ongoing digital transformation initiatives across industries emphasize the importance of modernizing applications to leverage emerging technologies and drive innovation. Lastly, the widespread adoption of cloud computing further accelerates the demand for application modernization services, enabling organizations to harness the scalability, flexibility, and cost-effectiveness of cloud platforms.
The U.S. application modernization services market size was estimated at around USD 4.99 billion in 2023 and it is projected to hit around USD 23.45 billion by 2033, growing at a CAGR of 16.73% from 2024 to 2033.
In 2023, North America emerged as the dominant force in the industry, commanding a share of 40%. The region's adoption of application modernization services is propelled by a growing emphasis on cybersecurity and data privacy. With the surge in cyber threats and the imposition of regulatory mandates like GDPR and CCPA, organizations are confronted with heightened risks such as data breaches, cyberattacks, and compliance infringements. Legacy applications, with their outdated security protocols and vulnerabilities, pose significant threats to sensitive data and intellectual property. Through application modernization and the deployment of robust security measures such as encryption, access controls, and threat detection mechanisms, organizations bolster their cyber resilience and mitigate risks effectively.
Meanwhile, the application modernization services market in Asia Pacific is poised for substantial growth in the forecast period. The region boasts an established digital infrastructure that facilitates rapid modernization of legacy systems, leading to swift profit increases for firms. Furthermore, increased government investments in technology-related services foster the adoption of application modernization solutions. The well-established BFSI and healthcare industries, coupled with the presence of numerous large IT firms, contribute to the growing demand for application modernization services. Additionally, rapid industrialization and a thriving startup ecosystem further drive the need for modernization solutions across various sectors in the region
Segmented by service type, the market encompasses cloud application migration, UI modernization, application re-platforming, application portfolio assessment, post-modernization, and application integration. The application re-platforming segment secured the largest revenue share of 23% in 2023 and is poised to maintain its dominance throughout the forecast period. This trend is fueled by the growing adoption of hybrid and multi-cloud environments. Organizations are increasingly embracing hybrid or multi-cloud strategies to capitalize on the unique strengths of various cloud providers, mitigate vendor lock-in risks, and optimize expenditure.
Cloud application migration is anticipated to experience the highest CAGR over the forecast period. The demand for DevOps and continuous delivery practices propels the growth of this segment. Cloud platforms empower organizations to embrace agile development methodologies, automate software delivery pipelines, and expedite the introduction of new features and services to the market. Application modernization services providers deliver expertise in implementing DevOps frameworks, CI/CD pipelines, and infrastructure as code (IaC) practices, enabling organizations to automate application deployment, provisioning, and scaling in cloud environments.
The market is divided based on deployment into public cloud, private cloud, and hybrid cloud. In 2023, the hybrid cloud segment held the largest revenue share. This is driven by the increasing adoption of multi-cloud strategies. Many organizations are opting for a multi-cloud approach to prevent vendor lock-in, optimize costs, and capitalize on the strengths of various cloud providers for different workloads and use cases. By modernizing applications for multi-cloud deployment, organizations can enhance agility, resilience, and innovation while reducing reliance on any single cloud provider and maximizing their investments in cloud services.
The private cloud segment is projected to witness the highest CAGR over the forecast period. The demand for application modernization services in the private cloud segment is driven by the need for business continuity and disaster recovery. Private clouds offer dedicated infrastructure and robust disaster recovery capabilities, enabling organizations to maintain high availability and resilience for critical applications and data. Application modernization services providers assist organizations in modernizing applications for private cloud deployment, leveraging features like data replication, failover clustering, and automated backup and recovery to minimize downtime and data loss in the event of hardware failures, natural disasters, or cyber-attacks.
The market is segmented by enterprise size into large enterprises and SMEs (small & medium enterprises). In 2023, the SMEs segment accounted for the largest revenue share. The increasing reliance on digital technologies and online presence is propelling SMEs to invest in application modernization. As consumers increasingly turn to digital channels for purchasing goods and services, SMEs must ensure their applications are current, user-friendly, and capable of delivering seamless digital experiences. Application modernization enables SMEs to bolster their digital presence, optimize e-commerce platforms, and offer customers intuitive and engaging user experiences. AMS providers assist SMEs in revamping user interfaces, enhancing application performance, and integrating with e-commerce platforms and other digital tools, thereby elevating customer satisfaction and loyalty.
The large enterprises segment is projected to experience the highest CAGR over the forecast period. The demand for AMS among large enterprises is driven by the imperative for compliance and risk management. Operating in highly regulated industries, large enterprises must adhere to various industry regulations, data protection laws, and security standards to safeguard sensitive data and mitigate legal and financial risks. Legacy applications may lack robust security features, encryption mechanisms, or audit trails, exposing large enterprises to potential security breaches or compliance violations. AMS providers offer modernization solutions that bolster security and compliance by implementing advanced encryption, access controls, and audit logging directly into applications.
The market is segmented by industry vertical into BFSI, retail & e-commerce, manufacturing, IT & telecommunication, energy, and utilities, healthcare & life sciences, and others (including education, media, and entertainment). In 2023, the BFSI segment held the largest revenue share. Security and compliance considerations are key drivers behind the adoption of application modernization services within the BFSI sector. With the proliferation of cybersecurity threats and stringent regulatory frameworks like GDPR and PSD2, financial institutions face immense pressure to fortify their IT infrastructures and ensure data protection. Through application modernization, BFSI firms implement robust security measures such as encryption and multi-factor authentication to safeguard sensitive customer information and meet regulatory standards.
The IT & telecommunication segment is poised to register the fastest CAGR over the forecast period. The proliferation of big data and analytics fuels the growth of this segment. Traditional applications require enhancements to manage the vast volumes of data generated by today's interconnected digital ecosystems. By modernizing applications and integrating advanced analytics capabilities, organizations can derive actionable insights from their data, drive informed decision-making, and gain a competitive edge through data-driven innovation. From predictive maintenance in telecommunications networks to personalized marketing campaigns in IT services, modernized applications empower organizations to optimize performance and stay ahead of the curve.
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