Application Modernization Services Market

[300 Pages Report] The application modernization services market is projected to grow from USD 19.82 billion in 2024 to USD 39.62 billion by 2029 at a compound annual growth rate (CAGR) of 14.8% from 2024 to 2029. Application modernization services aim to significantly update and transform the legacy software systems to meet the current business needs. Application modernization is a complex process which involves, moving applications to the cloud, restructuring codes to increase their effectiveness and speed, and transforming cloud architecture to modern ones such as microservices, containers and serverless. After a detailed analysis of the current systems in place, the process continues with the formulations of a plan that focuses on the implementation of the technologies such as AI and ML and their needs into the organization and its business processes. These services are focused towards saving costs of operation, enhancing scalability and flexibility, and boosting creativity to help the organizations compete effectively in the digital space that is constantly changing.

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IMPACT OF AI/GEN AI ON APPLICATION MODERNIZATION SERVICES MARKET

Generative AI is transforming application modernization services by facilitating the completion of certain tasks. For instance, OpenAI Codex and GitHub Copilot tools assist in fast coding of modern applications, hence speeding their development. Due to machine learning, older systems can also benefit from tools like AWS Code Guru, which helps ‘rehabilitate’  the legacy code. Furthermore, Generative AI allows better efficiency even in the design of test automation tools such as Testim allow doing this in a fully automated mode. For crafting creative designs such as user interfaces, Adobe Firefly helps in making appealing and responsive designs. Tools such as MuleSoft’s Any point Platform also contain AI that helps in Integrating Systems and migrating data easily. In conclusion, generative AI expedites the enhancement process, minimizes the amount of manual work involved and improves the service offered by the applications.

Application modernization services market Dynamics

Driver:  Rising digital transformation initiatives

The worldwide integration of digitalization is creating an upsurge in the demand for application modernization services. Enabling mobility has become a norm for most organizations which have chosen to abandon the old and overused legacy systems. Organizations are therefore embracing a modern architectural framework comprising of microservices, containerization, cloud-native and others. These systems operate on high efficiency reducing the order fulfillment time, ensuring real time processing of information and actively managing the market demand fluctuations. For instance, Ford has partnered with Google Cloud to completely digitize its operations and processes by automating the IT infrastructure. This progression is necessary for businesses that wish to stay competitive in the market and boost the number of modernization projects executed. In addition, other factors contribute to the increasing requirement for application modernization such as the need to improve business operations, cut down on legacy systems, and implement technologies like Artificial intelligence and the Internet of Things. As more and more organizations begin to understand the importance of such transformations, the need for application modernization services will be on the rise.

Restraint: High costs and complexity

An application modernization services business must contend with the high cost and complexity of replacing obsolete systems as ‘the major challenge’. The process of modernization often requires huge amounts of money and rich technical know-how to redesign or overhaul existing applications. For example, for a SME, hundreds of millions of dollars would be considered as upfront cost incurred to upgrade its old legacy e-commerce systems. Shifting from one core enterprise systems to other new systems may not only take a long time but can be most discouraging due to the already existing systems in place, this becomes even more challenging in the context of big corporations that have carried out large scale system implementations. Smaller firms which do not have funds for additional IT infrastructure development may decide to postpone modernization in favor of the existing management information systems even if this prolongation leads to its operational inefficiencies in the future. These high expenditures may serve as significant barriers to growth, restricting the growth potential of the application modernization services industry.

Opportunity: Proliferation of Kubernetes and containerization

The growing embrace of Kubernetes entails the use of effective management and operations at scale. With increasing numbers of stateful applications, so does the challenge in managing such applications along with the resources that are needed to support them. Considering this, it becomes imperative for organizations to put in place some management tools to tackle the challenges associated with Kubernetes workloads while providing for growth. Numerous organizations are embracing this technology to package applications in containers to enhance movement of applications and manage information throughout different systems. At the operating system level, containers allow for the virtualization of storage and other computing resources which helps in arranging applications in a way that they exist alone. The major players in application modernization services such as IBM, Schneider, AWS, Alibaba Cloud, Microsoft, HPE, Dell and Google have incorporated the use of containers in their architecture by utilizing cloud storage and cloud-native storage revolving around persistent storage, where applications read and write data on the storage as needed. The convergence of containers, DevOps and cloud storage services will have a positive impact on the growth of application modernization services market in the future.

Challenge: Vendor Lock-in and Platform Dependencies

Organizations that have committed their IT infrastructure around certain vendors or platforms struggle with vendor lock-in issues when it comes to upgrading their applications. There is loss of flexibility in application modernization, which increases the cost since the modernization process is dependent upon a single vendor technology’s stack. This only makes the challenge of modernization more pronounced, making it less attractive for organizations to modernization initiatives, especially for core solutions that require a total replacement.

Application modernization services market Ecosystem

The application modernization ecosystem comprises various technology solutions and service providers along with various regulatory bodies. These companies have been operating in the market for several years and possess a diversified product portfolio and state-of-the-art technologies. Prominent companies in this market include Oracle (US), IBM (US), Microsoft (US), HCL Technologies (India), Accenture (Ireland), ATOS SE (France), Capgemini (France), Cognizant (US), Tata Consultancy Services (India), Aspire Systems (India), NTT Data Group Corporation (Japan), Infosys (India), Dell Technologies (US), Innova Solutions (US), EPAM Systems  (US), DXC Technology (US), MongoDB (US), LTIMindtree (India), and Wipro (India).

By service type, the Cloud Application Migration segment is expected to have the largest market size during the forecast period. 

Cloud application migration is expected to hold the largest market size within the application modernization services market during the forecast period because of increasing demand from organizations to shift their legacy applications to cloud environments. Migration enables companies to make a scalable, efficient operations model, which reduces the cost of maintaining the outdated on- premises infrastructure. Meanwhile, hybrid cloud environments are coming to the fore as cloud adoption accelerates even faster, increasing the demand for greater business agility. All these drivers will push organizations toward focusing on cloud application migration as a modernization imperative. Tailored cloud migration solutions offered by cloud service providers are also on the rise as each cloud provider seeks a bigger share in this growing market by addressing the needs of specific industries.

“By vertical, Telecom segment is expected to hold a higher market share during the forecast period.”

The telecom segment is expected to account for a large portion of the application modernization services market owing to the sector’s ongoing digitalization. Application modernization services help telecom operators to extend life of current applications, adopt new technologies and raise the efficiency of operations. This is because it is important to adopt IT infrastructure that is flexible to enhance and support the technological advancements such as 5G, cloud computing and the IoT among other things. In addition, telecom service providers are also focusing on these services as a means of enhancing customer satisfaction, improving the network and competing effectively in the market, thus consolidating their position within the industry.

“Asia Pacific's highest growth rate during the forecast period.”

The application modernization services market in the forecast period is anticipated to grow at a higher pace in the Asia-Pacific region owing to digital transformation in the region, which is facilitated by the growing use of cloud computing and other emerging technologies as well as the quest for efficiency by business operations. There is an increase in IT spending and digital activities in the likes of China and India, and this creates a need for such services to modernize the aging management systems and incorporate new technologies. The growth of the sector is also enhanced by the efforts of global technology providers and the inflow of local enterprises which enhancing competition. The trend towards a population that is more technologically inclined is another major factor that is increasing the need for sophisticated and high-capacity application modernization services within the region.

Market Players:

The major players in the application modernization services market are Oracle (US), IBM (US), Microsoft (US), HCL Technologies (India), Accenture (Ireland),ATOS SE (France), Capgemini (France), Cognizant (US), Tata Consultancy Services (India), Aspire Systems (India), NTT Data Group Corporation (Japan), Infosys (India), Dell Technologies (US), Innova Solutions (US), Epam Systems (US), DXC Technology (US), MongoDB (US), LTIMindtree (India), Wipro (India), Rocket Software (US), Fujitsu (Japan), Hexaware Technologies (India), Virtusa (US), Softura (US), CloudHedge (US), D3V Technology (US), Bayshore Intelligence (US), Opinov8 (UK), Icreon (US), Symphony Solutions (Netherlands), Cleveroad (Ukraine), Soft Suave (India), TechAhead (US), and Geomotiv (US). These players have adopted various growth strategies, such as partnerships, agreements and collaborations, new product launches and enhancements, and acquisitions to expand their application modernization services market footprint.

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Scope of the Report

This research report categorizes the application modernization services market to forecast revenues and analyze trends in each of the following submarkets:

Based on Service Type:

• Application Portfolio Assessment
• Cloud Application Migration
• Application Re-Platforming
• Application Integration
• UI/UX Modernization
• Post Modernization

Based on Application Type

• Legacy Applications
• Cloud-hosted Applications
• Cloud-native Applications

Based on Verticals

• BFSI
• Healthcare & Life Sciences
• Telecom
• IT & ITeS
• Retail & Ecommerce
• Government
• Energy & Utilities
• Transportation & Logistics
• Media & Entertainment
• Manufacturing 
• Other Verticals (Education and Travel & Hospitality)

By Region:

• North America
  • United States (US)
  • Canada
• Europe
  • United Kingdom (UK)
  • Germany
  • France
  • Italy
  • Spain
  • Nordic Countries
  • Rest of Europe
• Asia Pacific
  • China
  • Japan
  • India
  • South Korea
  • Australia & New Zealand
  • Southeast Asia
  • Rest of Asia Pacific
• Middle East & Africa
  • Middle East
    • Kingdom of Saudi Arabia (KSA)
    • United Arab Emirates (UAE)
    • Kuwait
    • Bahrain
    • Rest of Middle East
    • Africa
• Latin America
  • Brazil
  • Mexico
  • Rest of Latin America

Recent Developments

• In August 2024, Capgemini signed an agreement to acquire Syniti, one of the leading companies in the enterprise data management software and services including platform and migration services. This acquisition will strengthen Capgemini’s data-driven solutions, especially for large-scale SAP transformations like the shift to SAP S/4HANA.
• In June 2024, Oracle and Google Cloud announced a partnership in which Google Cloud will offer Oracle Cloud Infrastructure (OCI) database services and high-speed network interconnect with Oracle. This partnership will enable users to accelerate their application migrations and modernization.
• In June 2024, Cognizant expanded its partnership with Cengage Group. This move highlights the trend of modernizing educational platforms by integrating advanced technologies to enhance digital learning experiences, reflecting the broader push towards modernizing application infrastructures across sectors.
• In April 2024, Cloud Software Group Inc. and Microsoft Corp. deepened their collaboration with a focus on Citrix virtual applications and cloud AI solutions. This partnership underscores the importance of cloud migration and AI integration in application modernization, emphasizing the need for businesses to update their legacy systems to leverage these technologies.
• In January 2024, Accenture acquired Work & Co, enhancing its capabilities in creating innovative digital products. This acquisition reflects the increasing importance of blending design and technology to modernize applications, helping clients improve user experiences and stay competitive in the digital age.

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