The Growing
$1 Trillion
Economic Impact
of Software

The Findings: At a Glance

UNITED STATES

To quantify the software industry’s role as an engine for economic growth and to measure how quickly these benefits are expanding, Software.org commissioned The Economist Intelligence Unit to conduct a comprehensive analysis of software’s impact on the US economy. This analysis, based on 2016 data, is the first-ever to track the actual growth of software’s economic impact throughout the United States.

Total Value-Added GDP:
$1.14 trillion

(includes indirect and induced impacts)

Direct Value-Added GDP:
$564.4 billion

Software Job Growth

Select a state for more information about growth, jobs, and GDP.

 

EMPLOYMENT

Direct:

2.9 million jobs

Total:

10.5 million jobs

(includes indirect and induced impacts)

Software creates jobs for a wide variety of professionals in today’s workplaces — everything from software developers and web designers to project coordinators, administrative assistants, and accountants. The number of jobs created directly by the software industry has increased 14.6 percent since 2014.

WAGES

Average Annual Wage for
Software Developers:

$104,360

A software developer’s wage is more than twice the average annual wage for all US occupations, which was $49,630 in 2016.

R&D

R&D Investment by
Software Companies

$63.1 billion

19.6% of All Domestic Business
R&D in the US

The software industry’s commitment to R&D continues to spur innovation at unprecedented rates.

The EIU compiled these data and economic impact assessments using publicly available government data, maintaining full editorial control of the process and using industry standard approaches. Any views or opinions expressed in this document are not necessarily those of The Economist Intelligence Unit.

Key Findings

What Is Software?

Software is no longer just the code that brings our electronics to life, or the tool that puts the “smart” in our smartphone. Today software has been thrust into the very heart of the innovation ecosystem as a primary driver of new opportunities and economic growth.

Software powers our personal technology.
Software puts the apps on our tablets and smartphones — filling them with tools that create vital new ways to connect, bank, learn, shop, and travel at the touch of a fingertip. They help us share our feelings with friends, find faster routes, be more efficient, and get the best deals. These software apps have become indispensable smart assistants that help us every day.

Software delivers data-driven insights.
Software drives the data that transforms our world — enabling everything from better weather predictions, to new scientific discoveries, better economic modeling, more personalized information, and life-saving breakthroughs. It helps us use data to make more informed decisions across a range of disciplines — discovering unexpected insights from within seemingly unrelated data.

Software extends opportunity everywhere.
Software drives cloud computing and its ability to fundamentally revolutionize the way companies do business, and our own ability to collaborate — from any device, at any time, from anywhere around the globe. The cloud, for the first time, is putting the power of advanced technologies, which was once only available to the biggest players, into small businesses’ hands. At the same time, companies are avoiding expensive in-house IT costs by using the cloud to provide better, more reliable, scalable, affordable, and flexible use of applications and data.

Software enables improvements in every sector.
Software-driven advances are rippling through every major sector of the economy, in high-tech and low-tech industries alike to dramatically reduce health costs, cut crime, unclog traffic jams, reduce energy, lower carbon emissions, cut traffic fatalities, and improve quality of life. For example, in manufacturing, software is fundamentally transforming the way new products are designed, produced, and delivered to create what some now call a new era of smart manufacturing. In transportation, software is improving how we navigate our roadways, railways, and runways to save fuel, save time, and save lives.

Although software may sometimes seem like something hidden on hard drives, in apps, or on the cloud, its impact can now be readily seen in the growing ways it is used throughout our economy — boosting economic growth, creating jobs, lifting wages, and creating opportunity for the future.

Software Is…

METHODOLOGY

In 2017, Software.org: the BSA Foundation commissioned The Economist Intelligence Unit (EIU) to assess the economic impact of the software industry. The EIU collected and analyzed the most recent data available from several recognized and reputable sources. These sources included the EIU itself, IMPLAN, the National Science Foundation, the US Bureau of Economic Analysis, the US Bureau of Labor Statistics, and the US Census Bureau.

 

To estimate the total contributions of the software industry to the US economy, the EIU analyzed the direct contributions and estimated indirect and induced impacts using various economic multipliers. The economic contribution analysis presented in this paper uses input-output models, which describe the full inter-industry transactions between producers and intermediate and final consumers, to compute multipliers. Multipliers allow for the estimation and isolation of the direct, indirect, and induced contributions of an industry to economic outcomes (e.g., value-added GDP, employment, and wages). Direct and indirect contributions are estimated using different multipliers:

 

1. Direct contributions: The levels of output or employment from the software industry directly.

 

2. Indirect impacts: The indirect impacts estimate the inter-industry economic activity resulting from the direct contributions (e.g., purchases of inputs). These indirect effects look backward at the linkages of the software industry in the economy, and the demands inputs from other sectors, like real estate and other professional services. This demand generates additional output (and jobs) from those sectors that wouldn’t exist if it weren’t for that software industry demand. As a result, the indirect multipliers estimate this additional output from other industries that is attributable to the software industry.

 

3. Induced impacts: Induced impacts take the next step — identifying the additional economic activity supported by spending on goods and services by households whose income was affected by the direct contributions and indirect impacts.

The software industry pays its employees but also supports incomes in other sectors, like real estate. These jobs come with additional wage payments, which increase total earnings to people working in these upstream sectors. These people then buy more goods and services, which generate additional demand (and output) across the broader economy. Induced multipliers estimate this additional output from increased general demand due to higher total wages paid to people in the software industry and people in industries that supply to the software industry.

 

The modern definition of the software industry used in the study reflects recent technological advancements in the software industry — from one that focused on tangible and packaged software products to one that includes software-related services like the cloud-based software as a service (SaaS), cloud storage and computing, mobile app development, and hosting. As a result, the EIU analysis has defined the US software industry to include the following software sub-industries:

 

NAICS 5112: Software Publishers

 

NAICS 5415: Computer Systems Design and Related Services

 

NAICS 518: Data Processing, Hosting and Related Services

 

NAICS 519130: Internet Publishing and Broadcasting and Web Services

 

The EIU compiled these data and economic impact assessments using publicly available government data, maintaining full editorial control of the process and using industry standard approaches. Any views or opinions expressed in this document are not necessarily those of The Economist Intelligence Unit.

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