The Economic Impact
of Software

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UNITED STATES

Total Value-Added GDP:

$1.07 trillion

(includes indirect and induced impacts)

Direct Value-Added GDP:

$475.3 billion


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Software is so much more than your desktop at work. Software is apps. Software is data. Software is cloud computing. It creates breakthroughs and drives growth in nearly every industry. Software empowers countless people and American businesses, and improves our lives each day in ways big and small. Along with all this progress comes the dramatic, positive impact software is making on our national economy each year. The Economic Impact of Software, a first-of-its-kind study from BSA | The Software Alliance conducted in 2016 by The Economist Intelligence Unit (EIU), captures the breadth of the software industry in the US and the sweeping economic impact it is making at state and national levels.*

*All data is from 2014 unless otherwise indicated.

EMPLOYMENT

Direct:

2.5 million jobs

Total:

9.8 million jobs

(includes indirect and induced impacts)

From software developers and web designers to futurists, project coordinators, administrative assistants, and accountants, software creates jobs for a wide variety of professionals in today’s workplaces. These numbers capture jobs created directly by the software industry, as well as jobs the software industry supports through indirect and induced impacts.

WAGES

Average Annual Wage
for Software Developers:

$108,760

A software developer’s wage is more than twice the average annual wage for all US occupations, which was $48,320 in 2015.

RESEARCH & DEVELOPMENT

$52 billion

R&D Investment by Software Companies

17.2% of All Domestic Business
R&D in the US

From developing new data analytics to driving breakthrough technologies like cognitive computing, the software industry’s commitment to R&D continues to spur innovation at unprecedented rates.

KEY FINDINGS

The products and services of software companies are making an enormous, positive impact on our national economy, GDP, and employment across all 50 states.

As part of The Economic Impact of Software, a first-of-its-kind global study from BSA | The Software Alliance conducted by The Economist Intelligence Unit (EIU), researchers aimed to capture:

  • The breadth of the software industry in the US; and
  • The sweeping economic impact it is making at state and national levels.

The study’s results illustrate the importance of software as a major, much-needed factor in America’s economic health:

  • The software industry was responsible for a total $1.07 trillion of all US value-added GDP in 2014, and directly drove $475.3 billion of that amount.
  • The software industry directly employed 2.5 million people in the US in 2014. When including indirect and induced impacts, research shows that the software industry supports a total of 9.8 million jobs.
  • Software developers’ average annual wage in 2014 was $108,760 — more than twice as much as the $48,320 average annual wage for all US occupations.
  • R&D expenditures in support of software development accounted for more than $52 billion in 2012. Domestic R&D paid for and performed by software companies accounts for 17.2% of all domestic business R&D.

The promise of software is as limitless as the human mind. The next era of human achievement will be made possible through a combination of talented minds, software, and the industries that create using these powerful tools. Software will unlock infinite potential and in the process continue to grow and strengthen our national economy as a whole.

The Economist Intelligence Unit

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.

What Is Software?

Software advances are improving our lives in thousands of ways every day. We use software almost ubiquitously throughout our daily lives for everything from helping us with simple tasks and conveniences to fundamentally expanding our human potential. For example:

The apps we use every day are software.

When you use apps to connect with friends, check the weather, find the fastest route to work, share the latest viral video, or bank online — you are using software. These software apps have now become vital to our daily lives.

Learn More >>

Data is driven by software.

Data’s transformative impact is being driven by software innovations that enable everything from smarter cities and better weather predictions, to life-saving health breakthroughs and improved crop yields. Already, 90 percent of business leaders cite data innovation as one of the key resources and a key differentiator for businesses on par with basic resources like land, labor, and capital.

Learn More >>

Cloud computing is enabled by software.

Cloud computing — enabled by software — is transforming the way companies work by revolutionizing how computing power and storage is bought, sold, and delivered. It enables companies both big and small to affordably access data, share computing power, and collaborate in new ways — at any time, from any device, from anywhere around the globe.

Learn More >>

Industry solutions are powered by software.

Software helps optimize, analyze, and visualize everything from aerodynamics systems to our global financial infrastructure. Throughout our airways, railways, and roadways, software is helping make transportation more efficient to save time, money, fuel, and lives. In classrooms, software is transforming the way teachers teach and students learn. In manufacturing, software is improving the way products are designed, built, and distributed.

Learn More >>

These are just a few examples of the pervasive ways we benefit from software. One particularly exciting advance is the way these benefits are being magnified and amplified throughout broad sectors of the economy. New software advances are sparking unprecedented advances that extend benefits more deeply into almost every sector of the economy — to make businesses work better, introduce new jobs, and make opportunities more profound.

Methodology

In 2016, BSA | The Software Alliance 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 generates 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:

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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