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Nov 13, 2024

2025: A Year Of Reckoning For Enterprise Application Vendors

2025: A Year Of Reckoning For Enterprise Application Vendors Enterprise application giants facing macroeconomic pressures, heightened customer expectations, and concerns about trust in the wake of the

2025: A Year Of Reckoning For Enterprise Application Vendors

Enterprise application giants facing macroeconomic pressures, heightened customer expectations, and concerns about trust in the wake of the CrowdStrike disruption and CDK outage are leaning into their data assets and AI strategies to drive greater security and value for the enterprise. Yet they are continually challenged from all directions. Best-in-class point solutions are eroding wallet share of the big players, as they have always done; small and midsize vendors are moving upmarket and into their competitive space; service providers experiencing an erosion of their traditional revenue streams are moving up the stack with business services and industry apps that infringe on the remit of software giants; and of course, hyperscalers with best-in-class AI are now offering business capabilities that pose new threats.

With all of these pressures impacting the enterprise application market, we predict that in 2025 the two dominant themes will be trust and value, especially as AI becomes more firmly embedded within more applications. According to a recent Forrester survey, 79% of technology decision-makers in US organizations reported an increase in their software costs over the past year. One strategy that we see emerging as a result of this is application vendors leaning into strategies like small language models, as they are less expensive and at the same time generate more accurate and trustworthy responses.

With these market trends as a backdrop, here are three of our enterprise software predictions for 2025:

Given ongoing concerns about outages and security, vendors will face more pressure to clearly state software and ecosystem interdependencies, including details about outages and performance degradation, to increase customer trust. In 2025, we predict that several major enterprise application vendors will go further and disclose the details about their software supply chain in contractual agreements and publish details on their websites, especially their trust sites, as well as the admin dashboards.

In 2025, we expect a sharp rise in true consumption-based pricing models, especially to account for AI usage. While this will map closer to real product usage than seat-based pricing, this model doesn’t necessarily map to realized value. While a lot of today’s pricing models are bundles or proxies for consumption, we expect more true pay-as-you-go because of the uncertainties in consumption for the new models. Even though software vendors rush to embrace consumption pricing, we expect further experimentation with pricing, especially when rationalizing — and simplifying pricing for products that are a mix of seat- and consumption-based pricing.

By 2025, Forrester predicts that at least three large vendors will reevaluate how they value their applications’ data assets. While historically, enterprise software vendors have focused on applications metrics such as seats or usage, the shift to AI and the rise of data will cause them to rethink the role of data as a monetization engine and as a barometer of value. Vendors will likely adopt a hybrid approach, bridging financial reporting standards and historical ways of measuring with the evolving role of data as an asset to be monetized.

Download our complimentary Predictions guide for technology and security leaders, which covers more of our top predictions for 2025. Get additional complimentary resources, including webinars, on the Predictions 2025 hub.

This post was written by VP, Principal Analyst Kate Leggett and it originally appeared here.

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