Application modernisation services market set to soar

Polaris Market Research projects the global application modernisation services market will reach USD $81.24 billion by 2034, up from USD $20.55 billion in 2025.

That implies a compound annual growth rate of 16.5% from 2026 to 2034, reflecting continued corporate spending on updating older software systems and moving workloads to cloud environments.

Application modernisation services include updating legacy software, moving applications to newer infrastructure and redesigning systems for cloud-based deployment. Organisations are using approaches such as re-hosting, re-platforming, re-architecting and cloud migration to reduce the cost and risk associated with older IT estates.

Cloud adoption is a central driver of the market's expansion. Companies are moving applications into public, private, hybrid and multi-cloud environments to improve flexibility, disaster recovery and cost control, while addressing security weaknesses and slow deployment cycles in older systems.

Artificial intelligence is also beginning to shape the sector. The analysis says AI tools are being used to automate code analysis, identify obsolete components and support testing, debugging and migration work, reducing manual effort in complex modernisation programmes.

Low-code and no-code platforms, along with wider adoption of DevOps practices, are also adding to demand for external services. These trends are pushing providers to combine automation, analytics and cloud migration with longer-term application improvement projects.

Service segments

By service type, application re-platforming held the largest share in 2025 at 25.9%. The category has gained ground because it lets businesses update legacy applications for more modern environments without rewriting large amounts of existing code.

Wider use of containerisation, microservices, serverless computing and AI-led software tools is supporting re-platforming. Cloud application migration is expected to record the fastest growth over the forecast period as businesses continue moving systems across hybrid, multi-cloud, public cloud, private cloud and edge environments.

Industry demand

Among end markets, banking, financial services and insurance accounted for the largest share in 2025 at 24.0%. Financial institutions are updating core banking platforms, payment systems, risk applications and customer-facing software in response to demand for real-time transactions, stronger resilience and tighter cybersecurity controls.

The research also links demand in the sector to open banking, embedded finance, API-based architectures, AI fraud detection and blockchain-related projects. Each requires software systems that can integrate more easily with external services and process data faster than older platforms.

IT and telecommunications is expected to post the fastest compound annual growth rate, at 21.0%. Growth in 5G infrastructure, network automation, software-defined networking, edge computing and cloud-native applications is increasing pressure on telecoms and technology companies to replace or redesign older systems.

Regional picture

North America held the largest regional share in 2025 at 36.7%, driven by strong cloud adoption, broad digital transformation programmes and the presence of major technology providers in the region.

Asia Pacific is forecast to be the fastest-growing region, with a compound annual growth rate of 18.0%. Cloud-first strategies, AI adoption, industrial digitisation, fintech expansion and state-backed digital programmes in markets including India, China and Southeast Asia are contributing to that momentum.

Obstacles remain

Despite the growth outlook, the sector still faces practical barriers. Legacy applications often create compatibility and integration problems, while security requirements, regulatory rules and the need to maintain business continuity can complicate migration work.

The analysis also highlights a shortage of specialists in cloud architecture, DevOps, microservices and legacy transformation. That skills gap can extend project timelines and raise costs for organisations trying to modernise large application estates.

For many businesses, the decision to modernise now goes beyond routine IT maintenance. As software systems become more closely tied to customer experience, regulatory compliance and internal efficiency, companies are treating application updates as a broader operational and strategic issue.

Cloud-native architectures, AI-led automation, microservices, containerisation, DevOps, low-code and no-code software, and API-led integration are expected to shape the market's next phase.