Global spending on software will continue to grow despite headwinds in the form of inflation, geopolitical risks and labor shortages, a new report from Forrester shows.\n\nDriven to a large degree by deployment of cloud and enterprise applications, software spending worldwide is expected to grow at a compound annual growth rate (CAGR) of 10.3% from 2021 to 2023\u2014more than two times faster than the rate of spending in other segments of IT, which is forecast to be 4.4%, according to the market research firm.\n\nThe report, which is based on a survey of 657 publicly traded software companies, forecasts that dramatic macroeconomic conditions and other factors will have little to modest impact due to the \u201cunderlying strength\u201d of the software industry fundamentals.\n\nMore than half of the companies surveyed are expected to grow revenue at a medium pace, or between 10% and 20%, the report says, adding that leading software vendors will see another year of solid revenue and profit, albeit at a slower pace than 2021.\n\nThe report also shows that software has been the fastest growing category within enterprise IT budgets, and has delivered high revenue growth rates consistently for vendors.\n\nCloud to drive enterprise software growth\n\nEnterprise software\u2014including application and infrastructure software\u2014is expected to grow by 12% growth in 2022, buoyed by investment in cloud technology as a result of accelerated digital transformation efforts due to the pandemic, the report says.\n\n\u201cInvestment in cloud to modernize legacy applications will drive strong software sales momentum in front- and back-office applications,\u201d the report reads.\n\nThe application software market will see a 11.4% CAGR in 2022 and 2023, exceeding $400 billion, Forrester says. Front-office apps\u2014such as CRM software and industry vertical programs\u2014will grow the fastest in this segment, according to the report, which forecasts the $64 billion CRM market to grow by 11.9% in 2022.\n\nERP application sales are expected to increase at a rate of 10.4% in 2022, also driven by digital transformation efforts. Sales of content and collaboration software, such as Microsoft Teams, Zoom and Slack, are expected to grow at a rate of 11.9%, according to the report.\n\nSales of custom-built software for various internal divisions across enterprises, which Forrester defines as vertical software, are also expected to grow. \n\nInfrastructure software sales to increase by 12.6%\n\nInfrastructure software sales, meanwhile, are expected to grow at a rate of 12.6% in 2022 and 2023 to exceed $400 billion, driven by the evolution of legacy database technology and investments in devops and database management software, according to Forrester.\n\nWithin the infrastructure software category, database management software is expected to grow at 12.8%, driven by demand for real-time analytics.\n\nFurther, tech management software, another subcategory within infrastructure software, is expected to maintain growth momentum of 13.1%, driven by the trend for businesses to modernize their tech stacks with complex serverless architectures and containers.\n\nHowever, security software\u2014also considered by Forrester to be infrastructure software\u2014is expected to grow fastest, at a CAGR of 15.4%, due to multiple attack incidents and geopolitical challenges such as the Russia-Ukraine war.\n\nSoftware has room for continued growth\n\nAggregate market capitalization of publicly traded software companies increased from $718 billion in April 2010 to $5.4 trillion currently\u2014equating to a CAGR of 18%, according to the report. The survey also shows that the software sector accounts for only 5.9% of total global market cap of public companies, indicating more room for growth.\n\nAnother reason for continued growth can be attributed to software vendors\u2019 ability to raise prices consistently without losing demand, as software forms a critical part of day-to-day operations, the report says, adding that this strategy results in high and stable margins for vendors.\n\nCompanies that have raised prices recently include the likes of Adobe and Microsoft. \n\nProfit margins, which could be as high as 70% on average, allow software vendors to strategize while weathering challenges such as uncertain macroeconomic conditions, the report says.