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Despite modest IT budget growth in the retail industry, spending on applications by the sector generated an estimated $6.6 billion in 2005, up 10% from the previous year, a new report by AMR Research estimates.

Although spending on IT in the industry is expected to grow by only 3% in 2006, a large proportion of that will be invested in new applications - for two key reasons. Businesses are increasingly interested in technology that affects “top-line” financial performance and improves the customer experience.

Secondly, the cost of supporting internally developed legacy applications has become increasingly untenable, and so businesses are looking to adopt applications from mainstream vendors to reduce these costs.

Those trends will continue to swell retail applications revenues by between 6.5% and 10% over the next four years, making the market worth $9.3 billion in 2009, says AMR.

However, the report also identified that much of the revenue growth enjoyed by retail applications vendors was derived from increased maintenance costs and professional services fees. Application licence revenue alone grew by just 5% in 2005, according to AMR.