The Growing
€1 Trillion
Economic Impact
of Software

The Findings: At a Glance

Software changes lives. The way we work, play, and move is being transformed by new software — not just on your computer, but by apps, big data, and access to the cloud. From optimizing plane routes to improving life for people with Parkinson’s disease, innovation is happening at every level. To understand the impact of this, Software.org: the BSA Foundation commissioned the experts at The Economist Intelligence Unit (EIU) to examine the software industry’s economic role. They studied the European Union (EU) and seven member states: France, Germany, Italy, the Netherlands, Poland, Sweden, and the United Kingdom. The research shows which countries are seeing the biggest benefits from software’s growth — and how others can share in that success.

The stakes are high: All in, software was responsible for €1 trillion of total EU value-added GDP in 2016.b That’s an increase of 9.9 percent from 2014, compared to overall GDP growth of 6.0 percent over the same period. And software supports other sectors, too — think of it as double-clicking on growth.

Total Value-Added GDP:

€1 trillion

light blue arrow up Up from €910 billion in 2014, a 9.9% increase

Direct Value-Added GDP:

€304 billion

light blue arrow up Up from €249 billion in 2014, a 22.4% increase
Job Opportunities page graphic

EMPLOYMENT

Direct:

3.6 million jobs

Up from 3.1 million in 2014, a 16.5% increase

Total

12.7 million jobs

11.6 million in 2014

It’s not just about coders. The software industry provides jobs in every field, from disaster recovery services to data processing and accounting. As Europe closes the digital skills gap,e companies are hiring for jobs that simply didn’t exist a decade ago — roles like strategic cloud data engineer, big data product specialist, and futurist. Across the EU, work supported by the software industry through direct, indirect, and induced contributions represents 12.7 million jobs.

Country currency graphic

WAGES

Average Annual Salary
for Software Industry:

€45,307

Total Annual Salaries
Paid by Software Industry:

€162.1 billion

The total direct wages paid by the software industry for all 28 EU member states grew to €162.1 billion from €139.2 billion in 2014, an increase of 16.4 percent. Wage growth in smaller countries is particularly impressive: total salaries paid by the sector in Sweden grew 31.4 percent over the two years to 2016, and by 30.4 percent over the same period in Poland.

Key Findings and 2014 Comparison

Strong Growth Across Europe

Two years on from the inaugural edition, the data in this report updates and expands the analysis of software’s role in Europe’s economy. Alongside new figures, it widens country-by-country analysis to include smaller, more recent EU member states who are expanding their software sector with impressive speed.

As in the last edition, this study sets out to quantify this economic impact of software in three channels:

  • The industry’s direct impact
  • its indirect impact through inputs of goods and services from their EU supply chain
  • the induced impact, from increased general demand due to higher total wages paid to people in the software industry and to people in industries that supply to the software industry.

Direct Impact

  • The software industry directly contributed €304 billion to the EU economy in 2016, representing 2 percent of total EU value-added GDP — up 22.4 percent from €249 billion in 2014.
  • The sector employed 3.6 million people and paid €162.1 billion in wages. Software companies were responsible for an average of 1.8 percent of total jobs in the seven EU countries in this study (Sweden’s software industry directly accounts for 3 percent of all jobs in the country).

Indirect and Induced Impacts

  • Indirectly, the industry contributed a further €221 billion to EU GDP and supported an additional 2.6 million jobs.
  • The induced impact — the economic effects driven by higher wages in the software industry and sectors supplying it — works out at another €474.6 billion, and 6.6 million more jobs.

When incoming President Emmanuel Macron posed with two iPhones for his official portrait, he was making a clear statement about putting France on the digital map. With the foundation of tech hubs like Sophia Antipolis, established in the 1970s to draw high-tech industries to the South of France, and new initiatives such as Station F, La French Tech, and France Digitale, the country is wasting no time.

France has a strong system of technical universities and is also home to leading IT companies that provide software to the defence, banking, and service sectors such as Atos, Dassault Systèmes, SopraSteria, Cegedim, and Thales. The software industry in France directly contributed €39.4 billion to the economy in 2016 — up 6.4 percent from 2014 — and more than €115.1 billion in total.

In addition, France spent €2.6 billion on software R&D in 2013 — the latest available data.

Total Value-Added GDP:

€115.2 billion

light blue arrow up Up 1.9% from 2014

Direct Value-Added GDP:

€39.4 billion

light blue arrow up Up 6.4% from 2014
Job Opportunities page graphic

EMPLOYMENT

Direct:

478,177 jobs

Up 7.1% from 2014
1.7% of total French jobs

Total:

1.2 million jobs

Up 3.4% from 2014

The French software sector offers a diverse range of roles across the industry — and La French Tech offers assistance for visas for those seeking roles in the sector.

Country currency graphic

WAGES

Total annual French wages
paid by the software industry:

€22.9 billion

Up 6.7% from 2014

As with GDP, France is one of the big three: Total direct wages paid by the software industry are highest in Germany, followed by the UK and France.

Europe’s largest economy, Germany is the continent’s manufacturing powerhouse and recognised worldwide for its motor industry, precision engineering, and chemicals expertise. The German economy isn’t just driven by global names like Siemens, Daimler, and BASF, but also the wide range of SMEs that supply them, or are world leaders for a specific niche product, known as the Mittelstand.

These smaller companies are increasingly using software to improve manufacturing techniques, integrate their products with the internet of things (IoT), or just make more effective use of data for a better customer experience.

Germany is also home to major software companies like SAP, Maxon, and Software AG. The software industry directly contributed €66 billion to the German economy in 2016, up 6 percent from 2014. Within the EU, it is second only to the UK in terms of this metric. Germany spent €2.9 billion on R&D in 2015, the latest available data. In addition, Germany’s software industry paid the highest direct annual wages from the countries surveyed.

Total Value-Added GDP:

€159.7 billion

light blue arrow up Up 4.6% since 2014

Direct Value-Added GDP:

€66 billion

light blue arrow up Up 6.0% from 2014
Job Opportunities page graphic

EMPLOYMENT

Direct:

693,804 jobs

Up 7.6% from 2014
1.6% of total German jobs

Total:

2 million jobs

Up 4.1% from 2014

While most jobs are concentrated in computer programming, Germany saw an increase in direct jobs in data processing, hosting, and related activities of 12.1 percent since 2014.

Country currency graphic

WAGES

Total annual Germany wages
paid by the software industry:

€39.4 billion

Up 12.4% from 2014

Total direct wages paid by the software industry are the highest in Germany, followed by the UK and France.

Italy is a global reference for luxury goods, fine wine, and tourism, but the EU’s fourth-largest economy is also home to a growing software industry. This supports other GDP generators such as automotive engineering, machine manufacturing, and aerospace, as well as the country’s large agricultural sector. Italy is also home to plenty of SMEs that specialize in high-end, high-margin products — companies that are increasingly using software to manage accounting, inventory, and customer relations.

Large multinationals are also taking an interest: In 2016, Cisco said it would invest $100 million in supporting Italy’s digital acceleration through a two-fold approach that focuses on increasing students’ digital skills and fostering innovative tech startups.

The software industry in Italy directly contributed €22.9 billion to value-added GDP, up an impressive 12.7 percent from 2014. That puts the sector’s contribution some way behind the UK, Germany, and France, but still ahead of smaller EU member states. It was also responsible for 1.2 percent of total jobs in Italy.

Total Value-Added GDP:

€52.3 billion

light blue arrow up Up 2.8% from 2014

Direct Value-Added GDP:

€22.9 billion

light blue arrow up Up 12.7% since 2014
Job Opportunities page graphic

EMPLOYMENT

Direct:

304,335 jobs

Up 5.3% from 2014
1.2% of total Italy jobs

Total:

759,264 jobs

Up 2.1% from 2014

More than 300,000 highly paid, highly skilled jobs are provided by Italian software companies.

Country currency graphic

WAGES

Total annual wages
paid in Italy by the software industry:

€10.9 billion

Up 8% from 2014

With impressive growth in direct wages paid by the software industry over the last two years, the sector is more attractive than ever in Italy.

The EU’s sixth-largest economy, the Netherlands has been one of the world’s foremost trading nations for centuries and software is helping support its natural strengths as an exporter. Home to oil and gas giants, banks and insurers, life sciences pioneers as well as a vast food processing industry, many areas exist where software is increasing efficiency. Major software players include TomTom, Bridge Global, and Exact.

The country has a strong digital infrastructure, and, as the government notes in a 2016 paper setting out the country’s digital agenda, “the Netherlands is internationally seen as an interesting place of business for countless ICT-related enterprises, such as data centres, cybersecurity companies, cloud providers, new media providers and telecom companies.”

The software industry in the Netherlands directly contributed €15.5 billion to value-added GDP, rising a remarkable 12.5 percent from 2014. It was also directly responsible for 1.9 percent of total jobs in the country.

Total Value-Added GDP:

€45 billion

light blue arrow up Up 4.8% from 2014

Direct Value-Added GDP:

€15.5 billion

light blue arrow up Up 12.5% since 2014
Job Opportunities page graphic

EMPLOYMENT

Direct:

165,826 jobs

Up 6.5% from 2014
1.9% of total Dutch jobs

Total:

482,891 jobs

Up 4.2% from 2014

The Netherlands’ software industry provides a wide range of highly skilled, well-paid jobs. The smallest three countries in terms of direct jobs in the software industry among those surveyed were the Netherlands, Sweden, and Poland.

Country currency graphic

WAGES

Total annual wages
paid in the Netherlands by the software industry:

€8.9 billion

Up 12.4% from 2014

With impressive growth in direct wages paid by the software industry between 2014 and 2016, the sector is more attractive than ever in the Netherlands.

Poland had the smallest software industry of the countries surveyed, but it is growing at an impressive pace, with a skyrocketing contribution to GDP, jobs, and wages. Over the past decade, Poland has done a lot to attract technology jobs and start-ups, including numerous back-office roles for multinational companies that involve software design jobs. There’s also plenty of homegrown success stories, thanks to companies like Netguru,10clouds, and Comarch.

The Polish software industry’s direct value-added GDP grew to €6 billion in 2016, up 28.3 percent from 2014. There’s a lot more growing to do: Poland spends the least amount on software R&D across the countries surveyed, investing just €250.5 million in 2015. But investment is just one aspect where things are diverse: whereas Sweden’s software industry is larger than Poland’s in terms of value-add GDP, Poland’s software sector employs more people than Sweden’s.

Total Value-Added GDP:

€11.6 billion

light blue arrow up Up 23.2% from 2014

Direct Value-Added GDP:

€6 billion

light blue arrow up Up 28.3% since 2014
Job Opportunities page graphic

EMPLOYMENT

Direct:

151,294 jobs

Up 26.3% from 2014
1% of total Polish jobs

Total:

97,367 jobs

Up 19.4% from 2014

Poland is seeing remarkably strong growth in software jobs: direct software industry employment increased by 28.3 percent in Poland during the two-year period. The average increase since 2014 for the five countries excluding Poland and Sweden in this study is 6.8 percent.

Country currency graphic

WAGES

Total annual wages
paid in Poland by the software industry:

€3 billion

Up 30.4% from 2014

Smaller software industries in places like Sweden and Poland are seeing faster wage growth. Total wages paid by the software industry in Poland increased 30.4 percent between 2014 and 2016.

The European Commission’s most recent Digital Economy and Society Index ranks Sweden as the EU’s second most advanced digital economy, after Denmark, so it’s no surprise that the country’s software industry is flourishing. The Swedish software industry’s direct value-added GDP grew to €16 billion in 2016, up an astounding 43.9 percent from two years earlier. That turbo-charged growth between 2014 and 2016 saw it overtake the Netherlands in terms of direct value-added GDP.

In recent years, Sweden has become known as the “Unicorn Factory” because of the number of tech start-ups with a valuation of more than $1 billion based there. Alongside Spotify, Minecraft developer Mojang, and online payments service iZettle, there are more traditional software groups like Enea, Pelarion, and Acando.

Across the countries surveyed, the Swedish software industry contributes the second largest share of direct value-added GDP, accounting for 3.4 percent of the country’s total. Only the UK beats it, with 3.6 percent. For comparison, in Sweden, the financial and insurance activities sector represents 4.3 percent of value-added GDP and the real estate activities sector represents 8.6 percent.

Total Value-Added GDP:

€46.8 billion

light blue arrow up Up 38.8% from 2014

Direct Value-Added GDP:

€16 billion

light blue arrow up Up 43.9% since 2014
Job Opportunities page graphic

EMPLOYMENT

Direct:

145,723 jobs

Up 26.7% from 2014
3% of total Swedish jobs

Total:

452,444 jobs

Up 8.4% from 2014

Sweden’s software industry directly accounts for 3 percent of all jobs in the country. To put that in perspective, the financial and insurance sector represents 2 percent, and the real estate sector generates 1.6 percent of jobs.

Country currency graphic

WAGES

Total annual wages
paid in Sweden by the software industry:

€8 billion

Up 31.4% from 2014

Smaller software sectors in places like Sweden and Poland are seeing faster wage growth. Total wages paid by the software industry in Sweden increased 31.4 percent between 2014 and 2016.

The UK boasts Europe’s leading software industry, with its vast financial sector and service industry using technology to improve productivity and drive innovation. Tech hubs in major cities, strong relationships with universities, and an open economy have helped companies grow. Big names include Sage, Sophos, Fidessa, and MicroFocus.

The software industry created direct value-added GDP of €85.8 billion in 2016 — up a remarkable 31.5 percent since 2014, and a much larger increase than the industry in Germany (6 percent) or France (6.4 percent). The UK spent just over €2.4 billion on R&D in 2015, the latest available figure.

The British software industry also contributed the largest share of direct value-added GDP as a share of the total economy across the countries surveyed. Indeed, 3.6 percent of the UK’s whole value-added GDP came from software, edging out Sweden (3.4 percent) for the top spot. To put that in perspective, the financial and insurance activities sector in the UK represents 6.7 percent of value-added GDP and the real estate activities sector represents 13.9 percent.

Total Value-Added GDP:

€170 billion

light blue arrow up Up 6.1% from 2014

Direct Value-Added GDP:

€85.8 billion

light blue arrow up Up 31.5% since 2014
Job Opportunities page graphic

EMPLOYMENT

Direct:

697,960 jobs

Up 7.2% from 2014
2.2% of total UK jobs

Total:

2.7 million jobs

Up 3.6% from 2014

The UK and Germany are in close contention for directly supporting the most software industry jobs in the EU, although the UK supports far more roles indirectly than Germany.

Country currency graphic

WAGES

Total annual UK wages
paid by the software industry:

€37.1 billion

Up 19% from 2014

The UK software industry paid the second-highest total direct wages of the countries surveyed — after Germany.

What’s Changed Since 2014

The software industry was responsible for €1 trillion of total EU value-added GDP in 2016, an increase of 9.9 percent over 2014.

The industry supported 12.7 million jobs across the EU, up from 11.6 million in 2014.

The total direct wages paid by the software industry for all 28 EU member states grew to €162.1 billion from €139.2 billion in 2014, an increase of 16.4 percent.

Diverse Rates of Growth

Pie graph

The UK, Germany, and France contribute 63 percent of total EU direct software industry value-added GDP. But things are changing: during 2014–2016, the UK was the only one of these three countries that increased market share in the EU software industry. That’s because smaller countries such as Sweden and Poland are grabbing a bigger piece of the software pie.

Bar chart graphic with arrow going upward

Europe’s digital frontrunners are performing brilliantly

The direct value-added GDP contribution from Sweden’s software industry grew 43.9 percent between 2014 and 2016. But the sector is also driving growth in countries where the economic situation has been tougher in recent years: Italy saw an increase in the direct value-added GDP impact of 12.7 percent during this period.

Computer

The industry’s R&D expenditure varies greatly between countries

Germany and the UK saw just under €3 billion and €2.4 billion, respectively, in 2015. Of the seven markets studied, Poland was home to least spending on R&D activity within the software industry — just €250.5 million in 2015.

Jobs icon graphic

There’s a huge range of roles within the industry

Across Europe, 85.2 percent of software industry jobs are in computer programming, consultancy, and related activities. Software publishing contributed 3.6 percent of jobs; 11.2 percent were in data processing, hosting, and related activities.

People graphic

And within those roles, there’s a range of responsibility levels

Interestingly, while Sweden’s software industry is larger than Poland’s in terms of value-added GDP, Poland’s software sector employs more people than Sweden’s.

A Day in the Life of Software

Software improves our lives, but its impact can be hard to quantify. Although the EIU figures reflect the industry’s huge economic impact, how does it affect our everyday lives? Most people now carry a smartphone, accessing apps that inform, entertain, and even track health.

In addition, large-scale software solutions used by governments, corporations, and others play a huge role in making our days more comfortable and efficient. Perhaps the best way to describe it is through a day in the life of software. Let’s consider how it affects a European MRI specialist who’s travelling to Milan for a conference.

Software Is…

Cube graphic

Smoother Roadworks

Autodesk’s Building Information Modelling system combined 3D scanning, a cloud service for remote teams, and centuries of Dutch engineering prowess to ensure the plan was solid before work started on the Velsertunnel renovation.

Book graphic

Smarter teaching

Sweden’s Berghs School of Communication uses Salesforce to manage their database to offer each student a more personalised learning experience — wherever they are. Software has helped them win “School of the Year” at the Cannes Lion Awards multiple times.

EU and UK flags on a pole graphic

What does Brexit mean for the EU’s software industry?

The UK is home to the Europe’s biggest software industry, with a direct value-added GDP contribution of €85.8 billion in 2016 — up 31.5 percent over two years. It employs almost 700,000 people directly and distributed €37.1 billion in wages. Thousands of start-ups took their first steps at London’s Silicon Roundabout; Microsoft set up its first research lab outside the US in 1997 in Cambridge, in an area that has become known as Silicon Fen.

But the UK vote to leave the EU has led to a time of uncertainty, with the vision for the UK’s future relationship with the EU still being debated at the highest political level.

The UK’s positioning as an open economy has helped firms set up and grow there. At the same time, EU membership has made it very attractive to European tech talent, with no visa required to work in the UK.

Although the UK may be leaving, the effect on the software industry remains unclear. Stephen Kelly, CEO of Sage, a British company that supplies cloud-based accounting software to SMEs, told The Times recently that British companies have “just kept calm and carried on and grown their business, they haven’t been distracted by Brexit.”

Whatever the outcome of Brexit talks, the EIU figures show solid growth for the software industry across the EU and the individual countries surveyed. In a world where the power of apps, big data, and AI are changing lives, the industry looks set to continue creating jobs and inventing products regardless of political headwinds.

Methodology

In 2018, BSA | The Software Alliance commissioned The Economist Intelligence Unit (EIU) to assess the economic impact of the software industry. The EIU collected and analysed the most recent data available from several recognised and reputable sources. These sources included the EIU itself as well as Eurostat.

To estimate the total contributions of the software industry to the EU, French, German, Italian, Dutch, Swedish, Polish, and UK economies, the EIU analysed 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 itself.
  2. Indirect impacts: The indirect impacts estimate the inter-industry economic activity resulting from the direct contributions (e.g., purchases of inputs). These indirect impacts 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 EU software industry to include the following software sub-industries:

  • NACE 582: Software Publishing
  • NACE 620: Computer programming, consultancy, and related activities
  • NACE 631: Data processing, hosting, related activities, and web portals

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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