The worldwide industrial software program market reached $146 billion in 2023, in accordance with IoT Analytics’ Industrial Software program Panorama Report 2024–2030, and is forecasted to achieve $355 billion by the top of the last decade, rising at a CAGR of 13.5%.
The market is experiencing notable progress throughout particular classes, with cloud infrastructure and companies rising because the fastest-growing section general. Microsoft has achieved the most important general market share positive factors in 2023, whereas Oracle, Synopsys, and Cadence Design Methods have demonstrated notable progress within the core industrial worth chain software program section.
Software program-as-a-Service (SaaS) is now a key focus space for distributors. Moreover, synthetic intelligence (AI) and generative AI are gaining traction as essential areas for innovation.
Key insights:
The worldwide industrial software program market reached $146 billion in 2023, in accordance with IoT Analytics’ Industrial Software program Panorama Report 2024–2030, and is forecasted to achieve $355 billion by the top of the last decade, rising at a CAGR of 13.5%.
Cloud infrastructure and companies is the fastest-growing general industrial software program class, whereas EDA is ready to be the quickest for the core industrial worth chain software program class.
Microsoft gained essentially the most general market share since 2021, whereas Oracle, Synopsys, and Cadence Design Methods gained essentially the most within the “core industrial value chain software” section.
SaaS is the highest vendor enterprise precedence, and AI and generative AI are the highest innovation priorities.
Choose quotes:
Knud Lasse Lueth, CEO at IoT Analytics, feedback that: “As manufacturers digitize their R&D, production, service operations, and supply chains, the industrial software market is projected to grow from $146 billion in 2023 to $355 billion by the end of the decade. At the same time, competitive dynamics are evolving. Categories such as Product Lifecycle Management (PLM) and Electronic Design Automation (EDA) are gaining importance. Market leaders are those enabling thoughtful transitions to cloud and SaaS solutions and delivering compelling end-to-end industrial value chain offerings. With 88% of industrial software vendors already integrating AI and generative AI features, the race is on to develop value-adding capabilities that will shape customer decisions in the years ahead.”
Industrial software program market and outlook
2024 has been a difficult yr for manufacturing know-how distributors. All through 2023 and 2024, financial issues have remained essentially the most mentioned subjects in CEO earnings calls. Consequently, enterprise spending on IT and OT grew slower than in earlier years throughout the board, with industrial automation {hardware} even seeing market declines throughout the board (e.g., industrial connectivity {hardware}, which is forecasted to say no greater than 5% in 2024). In Might 2024, the CEO of Siemens–one of many high 5 industrial software program corporations, reported muted industrial calls for, and in November, Siemens reported a 26% year-over-year income decline for his or her industrial automation enterprise and introduced a minimize of as much as 5,000 jobs worldwide. The intense spot in Siemens’ portfolio is its industrial software program section (Siemens PLM), which grew 7% in the identical timeframe.
International industrial software program market anticipated to surpass $160 billion in 2024 amid turbulence. Regardless of current weak point out there, IoT Analytics forecasts 12% progress in 2024—surpassing $160 billion—and 13.5% CAGR till 2030, pushed by continued spending progress of producers on cloud infrastructure and associated companies (extra on this under).
The economic software program market: The 14 principal classes
When contemplating what includes the commercial software program market, IoT Analytics breaks the market into two segments: 1) core industrial worth chain software program and a pair of) normal & overarching software program. Collectively, these segments have 5 software program teams and 14 software program classes.
Section 1: Core industrial worth chain
Design and engineering
Laptop-aided design (CAD)
Digital design automation (EDA)
Product lifecycle administration (PLM)
Manufacturing
Machine management
Manufacturing operations administration (MOM)
Enterprise asset administration (EAM)
Provide chain
Provide chain planning and design
Provide chain execution
Service
Section 2: Basic & overarching software program (its personal group)
Cloud infrastructure and companies (I&S)
Cybersecurity
Virtualization
Distant entry
Knowledge & analytics
Notice: The market sizing solely considers the spending of business corporations for the respective software program classes (i.e., all producers, together with oil & gasoline, mining, and logistics).
Overarching manufacturing software program is outgrowing core industrial worth chain software program. In 2023, the core industrial worth chain software program section comprised 54% of the worldwide industrial software program market. IoT Analytics forecasts each segments to be close to equal by the top of 2024, and beginning in 2025, the overall & overarching software program is predicted to take a bigger share of the general industrial software program market.
7 key industrial market stats
Listed below are 7 key stats on the present state of the Industrial Software program Panorama:
Stat 1: Quickest rising software program class general: Cloud infrastructure and companies
The economic cloud infrastructure and companies software program class reached $32.7 billion in 2023 (i.e., cloud infrastructure and companies for producers and different industrial corporations). Cloud companies proceed to be the most important market driver as producers shift key software program workloads into the cloud and undertake SaaS options. The cloud can be beginning to emerge because the go-to place for working manufacturing knowledge analytics and AI, as famous by a number of CEOs of main cloud distributors:
“Where do we expect Oracle Cloud Infrastructure to go from here? Frankly, the only limiting factor is our ability to get the data centers handed over and filled up fast enough. So, again, the demand is extraordinary, and we can build the data centers relatively fast. I expect the OCI growth rate to be over 50% in a few years.” – Safra Ada Catz, CEO of Oracle, Q2 2024
“Azure again took share as customers use our platforms and tools to build their own AI solutions. Overall, we are seeing an acceleration in the number of large Azure deals from leaders across industries, including billion-dollar-plus, multiyear commitments announced this month from Cloud Software Group and the Coca-Cola Company.” – Satya Nadella, CEO of Microsoft, Q2 2024
Stat 2: Quickest rising core worth chain software program class: Product Lifecycle Administration (PLM)
Zooming in on the core worth chain software program section, the PLM software program class had the quickest progress between 2021 and 2023, rising at a 13.6% CAGR. Whereas robust progress stays anticipated for PLM, the EDA software program section might take over because the “fastest growing core value chain software” class within the coming years. Driving EDA’s enhance in share is the beginning of a brand new AI chipset tremendous cycle, through which corporations are utilizing EDA software program to design and simulate these new, high-power chips.
Stat 3: Greatest general market share gainer in 2023: Microsoft
US-based know-how firm Microsoft had a 13% share of the worldwide industrial software program market in 2023, a 2-percentage-point achieve over its 2021 market share. Driving Microsoft’s industrial software program market efficiency was its Azure cloud companies deployed in manufacturing and industrial eventualities, which aligns with the expansion of the cloud infrastructure and companies class (different cloud companies like AWS and Google additionally noticed sizeable positive factors). Current evaluation from IoT Analytics discovered that Microsoft is main within the cloud AI and cloud generative AI (GenAI) race.
Stat 4: Greatest core worth chain market share gainers: Oracle, Synopsys, and Cadence
On the subject of the businesses that gained essentially the most share within the core worth chain software program market since 2021, three corporations noticed essentially the most at 0.6 proportion factors every:
Oracle, a US-based info know-how firm
Synopsys, a US-based EDA options firm
Cadence Design Methods, a US-based EDA options firm
Oracle’s market share achieve is attributed to its provide chain planning, design, and execution software program, its cloud companies, and its area service software program. In the meantime, as EDA distributors, Synopsys and Cadence are benefitting from EDA’s market enhance talked about above.
Stat 5: Prime industrial software program vendor enterprise precedence: SaaS
Industrial software program distributors are more and more specializing in increasing their SaaS income. Although few distributors publicly publish their SaaS income figures particularly, those that do have a standard trait: they’re presently growing the share of SaaS of their general income combine.
For instance, for Germany-based enterprise software program firm SAP, SaaS comprised 41% of its income in 2023, up from 34% in 2022. SAP goals to have all its prospects transitioned to cloud-based options by 2027, with a former head of product administration noting in This autumn 2023 that the corporate feels it “[does not] have a choice but to move to the cloud” and make its prospects acknowledge that it’s essential.
In the meantime, France-based 3D design and manufacturing software program firm Dassault Systèmes reported that 24% of its FY2023 software program income was from cloud income, up 12% from FY2022.
“We will continue to invest, enhancing the strong fundamentals of our business, driven by an increasing share of predictable revenue and an accelerating 3DEXPERIENCE and Cloud adoption.” – Bernard Charlès, CFO, Dassault Systèmes in June 2023
Stat 6: Prime industrial software program vendor innovation precedence: AI and GenAI
Most of the main industrial software program distributors have made the introduction of GenAI capabilities their high strategic innovation precedence for 2024. The evaluation exhibits that 88% of the 180 main industrial software program distributors have now launched at the very least one new AI-based software program characteristic, and plenty of extra are planning to launch comparable merchandise. Examples of current GenAI options in industrial software program embrace:
Manhattan Associates’ Energetic Mavin, a GenAI-powered customer support chatbot
IBM’s Maximo Utility Suite, which leverages IBM watsonx’s GenAI to enhance asset administration workflows
Key industrial software program vendor quotes on AI/GenAI
“There have been many hype cycles with technologies in the past, but with generative AI, it feels truly different. Customers see value very fast, and we keep on getting positive feedback.” – Tony Hemmelgarn, CEO of Siemens Digital Industries Software program
“Of course, I have to say that our 1st business priority is about Business AI now. It is, for us, key. We are not just developing AI for the sake of AI. We want to add value with new AI capabilities in our entire portfolio.” – Salvatore Castro, Sr. director of digital manufacturing at SAP
Stat 7: Most fragmented industrial software program class: Manufacturing operations administration (MOM)
Of all the commercial software program class markets, MOM is the one one the place no vendor has a 2-digit market share, indicating the market is extremely fragmented but extremely aggressive. A core motive is that totally different manufacturing sectors, reminiscent of automotive, electronics, prescribed drugs, and meals and beverage, have particular operational necessities. Equally, producers fluctuate throughout areas when it comes to particular know-how used, regulatory necessities, and operational complexity. Additional, producers require various functionalities, together with manufacturing scheduling, high quality administration, upkeep, and stock monitoring.
With a lot specificity and ranging practical necessities, few distributors are able to offering the total vary of industry- and regional-specific necessities and assembly all operational wants. Subsequently, many distributors specialise in distinct industrial or regional elements, resulting in extra corporations getting into the market with options tailor-made to very focused finish customers.
Analyst opinion
Digital transformation and AI improvements set to drive long-term progress. Industrial software program performs a key function in digital transformation within the manufacturing sector, and corporations report robust ROI from introducing or increasing numerous industrial software program instruments. Additional, AI is now displaying its affect on software program, particularly EDA, knowledge analytics, and cloud, in addition to usually. AI integration enhances software program performance, providing better effectivity and insights (thus, worth) to finish customers. Whether or not distributors will achieve monetizing these new options stays to be seen, as it’s not clear whether or not prospects will anticipate AI options to be a part of commonplace choices within the close to future or whether or not they’re prepared to pay a premium for AI options.
Software program boundaries are fading. Enterprises are decreasingly utilizing giant, well-defined, on-premises software program suites with restricted interoperability. Over the last decade, software program suites have turn out to be extra built-in—and typically overlapping—with added utility parts being delivered from the (public) cloud and, in some instances, on the edge. This pattern affords finish customers the pliability of choosing the particular capabilities they want with out essentially buying a big, all-encompassing software program suite. One future situation is that enormous software program suites (reminiscent of a full-scale MOM suite) might get solely changed by a bundle of small SaaS purposes that may run wherever and be procured from edge or cloud marketplaces, reminiscent of AWS Market within the cloud or BoschRexroth ctrlX market on the edge.
Basic & overarching software program outgrowing worth chain-specific software program. Industrial software program purposes that aren’t tied to a selected industrial worth chain step (e.g., normal knowledge analytics or cybersecurity) are presently outgrowing these which might be worth chain particular (e.g., CAD for design or MOM for manufacturing) as corporations see the most important want in procuring holistic cybersecurity options or overarching cloud and knowledge analytics options that set them up for a future the place knowledge is the important thing foreign money.
The perfect software program corporations help their prospects in shifting to the cloud. As indicated in stat 5, some producers stay reluctant to maneuver to the cloud (for numerous causes, together with safety and privacy-related ones) regardless of the customarily superior technical efficiency of cloud-based software program. IoT Analytics analysis exhibits that profitable software program distributors assist their prospects overcome these hurdles and proceed to assist fashionable on-premise software program stacks.
4 traits to win within the industrial software program market. Primarily based on the above evaluation, future market winners can be these distributors that may do the next:
Create true end-to-end choices. Mix totally different components of the worth chain into significant end-to-end choices (e.g., from design to service and shutting the suggestions loop to design), both by themselves or by deep partnerships.
Present most deployment flexibility. Stability finish customers’ wishes for each cloud and on-premises software program, leaving deployment flexibility whereas offering strong know-how additionally for these prospects that won’t enable cloud-based deployments.
Take the shopper by the hand. Assist prospects combine new know-how effectively (e.g., by extra companies) and assist remedy non-technological limitations, reminiscent of change administration inside organizations (e.g., by involving key stakeholders all through the whole challenge or by providing related coaching).
Flip AI into buyer worth. Translate AI into significant worth for finish customers (e.g., by simplifying consumer interfaces or offering coding help and documentation) that saves builders vital time and quickens time-to-market or time-to-action.
