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In 2005, licence sales of enterprise applications will grow at their fastest rate since the market's heyday in the mid-1990s, according to AMR Research.

Analysts at the IT strategy advisor estimate that after a series of sluggish years the software licence demand will expand by around 8% to reach $17.3 billion for the year. Meanwhile, the entire market - covering sales, support and maintenance - will amount to just under $50 billion.

AMR says the fastest growth within the market will be seen in the hosted applications segment in which applications are delivered as a service over the Internet. Driven by take-up of products by companies such as Salesforce.com and NetSuite, hosted applications sales will rise by 16% to nearly $1 billion.

Increasingly, demand will not be limited to customer relationship management service providers, such as Salesforce, as companies widen their offerings to include other hosted business application services for accounting, HR and other distinct business areas.

While still constituting almost a quarter of the total enterprise applications market, the maintenance segment will exhibit the slowest growth in the forthcoming year, at only 2%. AMR predicts that third-party maintenance and support service companies will expand in 2005 after several tough years, and it foresees the emergence of new third-party service providers.

The service-oriented architecture (SOA) approach being adopted by most enterprise software development teams will be the key technology behind the next wave of enterprise applications, says AMR, and will open up the market for vendors of component for 'composite applications' - applications created by assembling the required functionality from libraries of reusable components.

This in turn may cut into license and service revenue in the enterprise application market