Stamford: Worldwide spending on enterprise application software will total $120.4 billion in 2012, a 4.5 percent increase from 2011 spending of $115.2 billion, according to Gartner. With only limited signs of improvement in the near term, the growth projection for 2012 has been adjusted downward from 5 percent in the previous forecast in 1Q12.

"The global marketplace is still experiencing a series of conflicting and contrasting economic news reports, and the full impact of the economic uncertainty on the enterprise software markets may not be readily assessable until the end of the first half of 2012," said Tom Eid, research vice president at Gartner. "Spending in 2012 is anticipated to focus on industry-specific applications; upgrades to established, mission-critical software; integrating and securing established systems and infrastructure; and software as a service (SaaS) deployments representing extensions to, or replacement of, existing applications and new solutions."

The key enterprise application software market segments in 2012 include business intelligence (BI); content, communications and collaboration; customer relationship management (CRM); digital content creation (DCC); enterprise resource planning (ERP); office suites and personal productivity; project and portfolio management (PPM); and supply chain management (SCM).

ERP is the largest enterprise application software market with revenue projected to reach $24.9 billion in 2012, followed by office suites at $16.5 billion. BI revenue is forecast to reach $13.0 billion, and CRM is on pace to exceed $13.0 billion this year.

Gartner analysts said that cost optimization and shifts in spending from "megasuites" to the automation of processes, will continue to benefit alternative software acquisition models as organizations look for ways to shift spending from capital expenditure to operating expenditure. Because of this, vendors offering SaaS, IT asset management and virtualization capabilities will continue to benefit from organizations looking to shift upfront capital expenses to operational expenses.