Application Modernization Services Market

Market Definition

Application modernization services involve transforming legacy software systems into modern, scalable, and efficient architectures using current technologies such as cloud, microservices, and APIs. The market includes solutions and services that help organizations enhance agility, reduce operational costs, and improve user experiences.

These services are widely applied across industries to support digital transformation, optimize IT infrastructure, and ensure business continuity by aligning outdated applications with modern business and technology demands.

Application Modernization Services Market Overview

The global application modernization services market size was valued at USD 18.23 billion in 2024 and is projected to grow from USD 20.18 billion in 2025 to USD 45.46 billion by 2032, exhibiting a CAGR of 12.30% during the forecast period.

Market growth is driven by the shift toward cloud-native, scalable architectures supporting microservices, containerization, and DevOps for enhanced agility and efficiency. Additionally, the integration of AI further boosts performance through real-time insights, predictive analytics, and intelligent automation.

Major companies operating in the application modernization services industry are IBM, Microsoft, Oracle, HCL Technologies Limited, Accenture, Capgemini, Cognizant, NTT DATA, Inc., TATA Consultancy Services Limited, Aspire Systems, Dell Inc., Infosys Limited, EPAM Systems, Inc., DXC Technology Company, and LTIMindtree Limited

Market expansion is fueled by the increasing use of automation and AI in modernization processes. Legacy system upgrades previously relied heavily on manual coding and lengthy assessments, leading to high costs and delays.

Automation and AI increasingly streamline code analysis, data mapping, and application refactoring, significantly reducing time and errors. These technologies enable faster, more accurate modernization while improving scalability and performance, making them essential for enterprises aiming to accelerate digital transformation and optimize long-term operational efficiency.

• In May 2025, TCS launched an enhanced version of TCS MasterCraft featuring GenAI and Agentic AI to automate legacy application modernization. This solution accelerates business logic extraction, cuts costs by over 70%, and doubles modernization speed. It addresses challenges such as high technical debt, limited documentation, and costly manual efforts, ensuring sustainable, future-ready digital transformation.

Key Highlights:

1. The application modernization services market size was recorded at USD 18.23 billion in 2024.
2. The market is projected to grow at a CAGR of 12.30% from 2025 to 2032.
3. North America held a market share of 39.70% in 2024, with a valuation of USD 7.24 billion.
4. The application re-platforming segment garnered USD 4.17 billion in revenue in 2024.
5. The private cloud segment is expected to reach USD 18.88 billion by 2032.
6. The large enterprises segment is anticipated to witness a CAGR of 13.92% over the forecast period.
7. The BFSI segment is estimated to grow at a share of 26.57% by 2032.
8. Asia Pacific is anticipated to grow at a CAGR of 14.90% over the forecast period.

Market Driver

Growing Demand for Cloud-Native Applications

The market is experiencing notable growth, propelled by the shift from traditional monolithic architectures to scalable, cloud-native solutions. Organizations are prioritizing modernization to enable containerization, microservices, and DevOps practices, enhancing deployment speed and operational efficiency.

This transition supports continuous integration and delivery, allowing businesses to rapidly adapt to changing demands, reduce infrastructure costs, and improve resilience through cloud-based platforms optimized for performance and scalability.

• In November 2024, Kyndryl partnered with Microsoft to launch new end-to-end application modernization services for mainframe customers adopting the Microsoft Cloud. These services accelerate mainframe migration, integrate generative AI capabilities using Azure OpenAI, Microsoft Copilot, and Azure DevOps, and support compliance needs. Kyndryl Consult provides tailored strategies to modernize applications and data on Microsoft Azure, enhancing performance and business outcomes.

Market Challenge

Data Migration Risks and Integration Issues with Existing Systems

One of the key challenges in the application modernization services market is the complexity and risk associated with data migration and the integration of modernized applications with legacy systems.

Many organizations operate with deeply embedded legacy infrastructures that have evolved over decades, often lacking proper documentation and standardized data formats. Migrating these systems to modern cloud-native or microservices-based architectures involves significant risk of data loss, corruption, or inconsistency, which can disrupt business operations.

To address this challenge, companies are adopting phased modernization approaches, leveraging automated tools for data mapping and transformation, and implementing robust testing protocols.

They also use hybrid integration platforms to ensure seamless communication between legacy and modern systems, minimizing disruption and ensuring data accuracy throughout the migration process.

Market Trend

Integration of Artificial Intelligence to Enhance Application Performance

The market is experiencing a growing trend toward the integration of artificial intelligence (AI) to improve application performance. Leveraging advances in cloud computing and data analytics, AI is incorporated into applications to enable real-time insights, predictive maintenance, and smarter decision-making processes.

This integration enhances resource efficiency and improves user experience by enabling applications to adapt and learn continuously. The trend highlights a shift toward more intelligent and responsive software systems within modernized application environments.

• In April 2025, AWS launched the ‘Move to AI’ Modernization Pathway, offering organizations a structured method to identify and implement high-impact AI opportunities within their application portfolios. This approach enables innovation, workflow automation, and enhanced customer experiences by leveraging data-driven AI and ML technologies.

Application Modernization Services Market Report Snapshot

Segmentation	Details
By Service Type	Application Re-platforming, Application Portfolio Assessment, Cloud Application Migration, UI Modernization, Application Integration, Post-modernization, Others
By Deployment Mode	Hybrid Cloud, Private Cloud, Public Cloud
By Enterprise Size	Small & Medium Enterprises (SMEs), Large Enterprises
By Industry Vertical	BFSI, IT & Telecommunications, Healthcare & Life Sciences, Retail & E-Commerce, Government & Public Sector, Manufacturing & Automotive, Others
By Region	North America: U.S., Canada, Mexico
	Europe: France, UK, Spain, Germany, Italy, Russia, Rest of Europe
	Asia-Pacific: China, Japan, India, Australia, ASEAN, South Korea, Rest of Asia-Pacific
	Middle East & Africa: Turkey, U.A.E., Saudi Arabia, South Africa, Rest of Middle East & Africa
	South America: Brazil, Argentina, Rest of South America

Market Segmentation

• By Service Type (Application Re-platforming, Application Portfolio Assessment, Cloud Application Migration, UI Modernization, Application Integration, Post-modernization, and Others): The application re-platforming segment earned USD 4.17 billion in 2024, mainly due to the increasing enterprise demand for scalable, cloud-native infrastructure that enhances performance while minimizing code changes.
• By Deployment Mode (Hybrid Cloud, Private Cloud, and Public Cloud): The hybrid cloud segment held a share of 41.20% in 2024, propelled by its ability to offer a balanced approach to flexibility, security, and cost-efficiency for modernizing legacy systems.
• By Enterprise Size (Small & Medium Enterprises (SMEs) and Large Enterprises): The large enterprises segment is projected to reach USD 24.06 billion by 2032, fueled by their greater financial capacity and strategic focus on large-scale digital transformation initiatives to enhance operational efficiency.
• By Industry Vertical (BFSI, IT & Telecommunications, Healthcare & Life Sciences, Retail & E-Commerce, Government & Public Sector, Manufacturing & Automotive, and Others): The IT & telecommunication segment is anticipated to grow at a CAGR of 14.52%, largely attributed to rising demand for agile, cloud-native applications that support rapid service delivery and scalable network infrastructure.

Application Modernization Services Market Regional Analysis

Based on region, the global market has been classified into North America, Europe, Asia Pacific, Middle East & Africa, and South America.

The North America application modernization services market share stood at 39.70% in 2024, valued at USD 7.24 billion. This dominance is reinforced by its advanced cloud infrastructure and strong adoption of integrated multi-cloud solutions that enhance workload flexibility and performance.

The regional market further benefits from seamless cloud interoperability and optimized database management across multiple platforms, enabling enterprises to accelerate application migration and modernization efficiently. This capability supports diverse industries, including financial services, healthcare, and retail, by reducing operational costs and improving scalability.

• In June 2024, Oracle and Google Cloud partnered to strengthen application modernization services. The collaboration allows customers to integrate Oracle Cloud Infrastructure with Google Cloud technologies, simplifying the migration and modernization of Oracle applications and supporting more flexible, efficient deployment across both cloud platforms.

The Asia-Pacific application modernization services industry is poised to grow at a robust CAGR of 14.90% over the forecast period. This growth is bolstered by the region’s rapid digital transformation across industries, supported by increasing investments in IT infrastructure and government initiatives promoting technology adoption.

The growing demand for improved operational efficiency and enhanced customer experience is promoting enterprises to update legacy systems. Additionally, the rising focus on regulatory compliance and data security is accelerating modernization efforts, as organizations seek scalable, flexible solutions to remain competitive in the dynamic market landscape.

Regulatory Frameworks

• In the U.S., application modernization services are regulated by the Federal Trade Commission (FTC), which enforces data privacy and cybersecurity standards, and the Occupational Safety and Health Administration (OSHA), which oversees workplace safety regulations in IT environments.
• In Europe, application modernization services are monitored by the European Data Protection Board (EDPB), which enforces the General Data Protection Regulation (GDPR) to protect data privacy, and the European Union Agency for Cybersecurity (ENISA), which provides cybersecurity guidelines and support across member states.

Competitive Landscape

Major companies are contributing significantly to the growth of the application modernization services market through strategic collaborations, mergers and acquisitions, and the launch of innovative solutions.

Key players are forming alliances to strengthen cloud capabilities, acquiring firms with specialized modernization expertise, and introducing advanced tools and platforms to expand their service portfolios.

These strategic initiatives reflect a competitive landscape focused on enhancing market presence, accelerating service delivery, and capturing greater market share across diverse industry verticals and global regions.

• In March 2024, Accenture Federal Services partnered with Microsoft to launch a comprehensive Cloud Modernization and Migration Factory on Microsoft Azure Government. Designed for national security environments, this end-to-end solution streamlines migration to classified Azure Government clouds using a secure “connection-in-a-box,” enabling federal agencies and partners to modernize with the highest levels of data protection and compliance.

List of Key Companies in Application Modernization Services Market:

• IBM
• Microsoft
• Oracle
• HCL Technologies Limited
• Accenture
• Capgemini
• Cognizant
• NTT DATA, Inc.
• TATA Consultancy Services Limited
• Aspire Systems
• Dell Inc.
• Infosys Limited
• EPAM Systems, Inc.
• DXC Technology Company
• LTIMindtree Limited

Recent Developments (M&A/Partnerships/Agreements)

• In January 2024, IBM signed a definitive agreement to acquire application modernization capabilities from Advanced, strengthening IBM Consulting’s expertise in mainframe application and data modernization. This acquisition enhances IBM’s ability to support clients in their modernization initiatives and aligns with its broader hybrid cloud and AI-driven transformation strategy.
• In March 2024, Fujitsu and AWS expanded their global partnership by launching the Modernization Acceleration Joint Initiative to support the migration and modernization of legacy applications from mainframes and UNIX servers to AWS Cloud. This initiative offers assessment and modernization services, enabling industries such as finance, retail, and automotive to enhance agility and resilience through secure, cloud-based digital transformation.
• In November 2023, Perficient partnered with CAST to launch App Modernization IQ and Green Impact IQ, leveraging CAST’s software intelligence to enhance application modernization and cloud migration strategies. These solutions provide actionable insights to improve software health, manage open-source risks, and support ESG goals by optimizing energy use and reducing carbon footprint, accelerating enterprise-wide transformation.
• In August 2023, SourceFuse collaborated with Amazon Web Services (AWS) to accelerate modernization-led migrations to the cloud. Leveraging AWS’s technical and business support, SourceFuse is establishing a Centre of Excellence to enhance the development and deployment of modernization solutions such as ARC. ARC utilizes AWS products across applications, infrastructure, and data, enabling customers to achieve greater agility, cost efficiency, and operational resilience in their modernization efforts.