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Talent Shortages Disrupt Digital Business Growth

Many CEOs continue to invest in enterprise software to enable digital business transformation. The benefits include improving employee productivity and efficiency, gaining a competitive advantage, staying ahead of the competition, and improving customer service.

According to the latest market study by International Data Corporation (IDC), the European enterprise software market grew by 13.1 percent year-on-year in 2022, despite economic turbulence and ongoing global instability.

IDC claims that this is the highest growth rate in the prior 20 years, further demonstrating the resiliency of demand for digital business applications software in the face of macroeconomic volatility.

Enterprise Software Market Development

The growth was primarily driven by the increased price of software licenses, customers locked in with existing partners that were unable to cancel SaaS subscriptions, and contracts signed for longer time periods than was standard in previous years.

According to IDC’s research, the enterprise software market in Europe is expected to record a 2022-2027 compound annual growth rate (CAGR) of 9.2 percent, reaching a value of $115.5 billion by 2027. 

Key drivers of enterprise applications will be Customer Relationship Management (CRM) and Human Capital Management (HCM) applications, which are predicted to outpace the overall market, with CAGRs of 12 percent and 11.5 percent, respectively.

While CRM applications and collaborative applications peaked as investment areas during the COVID pandemic era, high demand remained for CRM due to continuing remote work adoption and recent widespread Artificial Intelligence (AI) enablement.

The introduction of the OpenAI ChatGPT offering for software developers and the general public in November of 2022 allowed anyone to experience and experiment with Generative AI technology.

According to the IDC assessment, Gen AI with voice integration will further aid in consistent channel handling, especially for complex and high-value customer interactions.

"Customer service applications continue to be growth markets as we emerge from the pandemic into the 'resiliency' phase of COVID recovery," said Tomas Doktor, research manager at IDC.

IDC analysts also believe that the associated customer care personnel remain in a fluid work environment requiring additional software functionality.

In comparison to the CRM segment, where holds a dominant position, the HCM market showcases a far more varied array of vendors, from legacy IT players to disruptive niche vendors.

Growth in the HCM space is anticipated to gain momentum, and major European vendors are making a significant number of acquisitions.

For example, Visma acquired 42 companies in 2022, and Workday unlocked $250 million in a venture fund to invest in HCM and finance start-ups.

However, many European organizations are struggling with ongoing digital business talent shortages and are seeking solutions to streamline their talent acquisition and management.

Human Capital Management Applications Growth

The shortage of skilled workers and other factors -- such as the focus on employee experience, and substantial investments in re-skilling employees -- will drive HCM market growth in the near term.

That said, I believe digital talent scarcity is a significant challenge for most executive leaders across the globe. It's created several problems, including higher recruitment costs, delayed business model innovation, and the increased risk of disruption from new challengers in the global marketplace.

Savvy C-suite leaders must therefore address the talent scarcity to ensure their digital business growth.

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