The Findings: At a Glance

EUROPEAN UNIONEU

Software is ubiquitous. It is at the heart of every aspect of modern life. We depend on software at the office, at school, at home, in our leisure time, when we travel, and when we communicate. Software helps us be more effective, more creative, and more efficient. BSA | The Software Alliance has commissioned this expert analysis by The Economist Intelligence Unit (EIU) on the economic contributions of the software industry in both the EU28 and its five biggest Member States: France, Germany, Italy, Spain, and the United Kingdom. The research findings provide important insights on how the European Union (EU) can take advantage of software’s potential.

Software delivers a total value-added (direct, indirect, and induced) GDP of €910 billion — over 7 percent of the EU28 total GDP. This contribution comes from all sectors and all levels of the economy: farming, manufacturing, services, education, health care.

EMPLOYMENT

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

by comparison...

All industries:

€33,790

Service sector:

€25,214

The EU average wage for the software industry is 34 percent higher than the EU average wage and 80 percent higher than the EU average wage for the services sector.

R&D

Software companies in the EU invest strongly in software R&D — almost €12.7 billion in 2013.

findings

KEY FINDINGS

The results confirm software’s pivotal importance to Europe and that its economic influence far outweighs its size.

  • Economic contribution: Software delivers a total value-added (direct, indirect, and induced) GDP of €910 billion — 7.4 percent of the EU28 total. This is greater than the GDP of 23 of the 28 EU Member States. Only the EU’s ‘big five’ countries — France, Germany, Italy, Spain, and the United Kingdom — can lay claim to larger GDPs.
  • Job creation: The software industry in Europe supports the employment of 11.6 million people — more than the entire population of Belgium. This is equivalent to 5.3 percent of all jobs in EU28. The software industry directly employs over 3 million people, and this research shows the industry supports a further 8.5 million when including indirect and induced effects. In addition to programmers and coders, the industry creates demand for other experienced professions, including lawyers, designers, consultants, accountants, and marketing specialists.
  • Salaries: The software sector attracts talented, highly skilled workers that command aboveaverage salaries. The average annual wage for someone employed in the software industry is €45,333 — almost 35 percent higher than the estimated EU average, and nearly 80 percent higher than the service sector average.
  • R&D Investment: Software companies invest strongly in R&D — almost €12.7 billion in 2013. This is more than 7.3 percent of total business enterprise research expenditure in the EU.

    However, software means more than these bare economic statistics. Software brings broader benefits, improving our daily lives by letting us work better, smarter, and faster.

    By putting the right rules, policies, and incentives in place, Europe can harness its full potential and reap the rewards.
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.

FRANCE

France is the EU’s third-largest economy and host to an increasing number of cloud-born software companies with a promising future. It is also home to leading IT companies serving businesses and critical sector organisations worldwide such as Atos, Dassault Systèmes, Cegedim, and Thales.

The software industry in France directly contributed €37 billion to the economy and more than €113 billion in total — more than double that of Italy and almost three times as much as Spain.

Of the five EU Member States covered in this report, the total industry contribution (including direct, indirect, and induced impacts) to France’s economy as a percentage of GDP (5.3 percent) is second only to that in the UK (7.1 percent).

EMPLOYMENT

Providing 1.6 percent of total jobs, the French software sector is second only to the UK in its impact on the domestic employment market.

WAGES

by comparison...

All industries:

€36,086

Service sector:

€31,069

Software wages in France are the second highest among all “Big Five“ countries, 33 percent more than the country average and more than 54.5 percent higher than the French services sector average.

R&D

French investment in software R&D is, in relative terms, third among all “Big Five” countries, after the UK and Spain. In absolute terms it is second only to Germany.

GERMANY

Germany is the most populous country in the EU and has the largest economy. It boasts a modern, efficient manufacturing and engineering sector, with particular strengths in automobiles, electrical equipment, and chemicals. These sectors increasingly rely on software to optimise production, improve products, and remain competitive. For example, German car manufacturers are developing software to run a growing number of core functions in modern cars as well as maintenance and repair analytics tools. Germany is also home to some of Europe’s largest software companies like SAP and Software AG.

The software industry directly contributed €62.3 billion to German economy — second only to the UK within the EU.

The software industry makes a higher relative contribution to Germany’s GDP than in Spain and Italy, but less than the UK or France.

EMPLOYMENT

The software industry’s contribution to total jobs is higher in Germany than in most of the other major EU countries analysed in this study; only the software sectors in the UK and France account for a greater share.

WAGES

by comparison...

All industries:

€40,931

Service sector:

€25,773

Software wages in Germany are the highest in the EU, 33 percent higher than average wage paid in the country and more than double the average wages in the services sector.

R&D

In relative terms, the software industry’s R&D investment in Germany is the lowest of all countries covered in the report. In absolute terms it is higher than in any of the other “Big Five” countries examined in this report.

ITALY

Italy is the EU’s fourth-largest economy. Its main industrial sectors are automotive, machine manufacturing, and aerospace. In addition, Italy also supports a large rural sector and is a major producer of food and wine. The Italian economy supports large numbers of small- and medium-sized enterprises with an emphasis on high-end, high-margin products.

The software industry in Italy directly contributed more than €20 billion, much lower than the UK, Germany, or France, but still considerably more than Spain.

At 3.2 percent, the software industry’s added-value GDP in Italy was, in relative terms, about 43% of the EU average and almost on a par with Spain.

EMPLOYMENT

The Italian software sector provides almost 300,000 highly paid, highly skilled jobs.

WAGES

by comparison...

All industries:

€34,506

Service sector:

€23,607

The average wage in the Italian software industry is almost 50 percent higher than that in the services sector and slightly higher than the national average wage.

R&D

The software industry’s investment in R&D in Italy is, in relative terms, fourth of the “Big Five” countries.

SPAIN

Spain is the EU’s fifth-largest economy. Although its main industrial sectors are automotive; renewable energy, including wind and solar power; agribusiness; and a large tourism sector, the software industry directly contributed €12 billion to Spain’s economy.

The software industry in Spain directly contributed €12.9 billion to the economy — 1.2 percent of Spain's GDP.

At 3.4 percent, the software industry’s added-value GDP in Spain was slightly higher than in Italy and about half of the percentage of the software industry’s contribution to EU GDP.

EMPLOYMENT

At 3.7 percent of the workforce, the Spanish software sector is small compared to other major EU countries and is only two-thirds of the percentage of workers employed by the software sector across the EU.

WAGES

by comparison...

All industries:

€27,390

Service sector:

€22,549

Software sector wages in Spain are significantly higher than service sector wages or the national average wage. They are however below the EU average wage for the software sector — roughly 21 percent lower — and only marginally higher than Italy.

R&D

Spain and the UK have the highest software industry-related R&D expenditure as a percentage of total R&D spending of all countries in the report, and the only ones to exceed the EU average.

UNITED KINGDOMUK

The UK is the EU’s second largest economy by GDP in 2014. Its large banking, financial, and services sector make software a vital component of a successful UK economy. The software industry’s impact on the UK economy is one of the highest in the EU.

Several UK software companies have made a name for themselves on the global stage, including Sage, Misys, and Micro Focus.

The software industry in the UK directly contributed €65.3 billion to the economy — the highest of any country in the EU and almost 3 percent of UK GDP.

The software industry’s contribution to GDP is higher in the UK than in any of the four other “Big Five” EU markets — Germany, France, Spain, and Italy.

EMPLOYMENT

The UK software sector supports the employment of the most people, and the highest percentage of total jobs, compared to the other major EU countries analysed in this study.

WAGES

by comparison...

All industries:

€39,316

Service sector:

€30,015

Wages in the UK software sector are 22 percent higher than the UK average wage and 60 percent higher than those in the UK services sector.

R&D

The UK and Spain have the highest software industry-related R&D expenditure as a percentage of total R&D spending of all countries in the report, and the only ones to exceed the EU average.

What Is Software?

Software is at the heart of the digital revolution, providing us with the tools that can turn data into ideas, ideas into inspiration, and inspiration into execution. It helps us deliver what was previously unimaginable, and enhances life in the process. Software is:

  • Improving medical imaging techniques, helping doctors diagnose diseases earlier and improving outcomes;
  • Reducing pollution by developing engine management systems that reduce fuel consumption and minimise exhaust fumes;
  • Helping farmers keep crops adequately watered and free of pests, maximising yields and minimising waste;
  • Building smarter, more energy-efficient homes, reducing greenhouse gas emissions;
  • Delivering greater security for businesses of all sizes, as well as for critical industries such as online banking, reducing the risk of cyberattacks;
  • Controlling smart energy grids, improving reliability, security, and efficiency;
  • Helping local authorities deliver more efficient public transport systems, tailoring responses to meet demand and relieving congestion; and
  • Connecting families and friends in new and novel ways.

Software helps us to achieve much more, including:

  • Providing faster, easier, and cheaper access to technology. The unprecedented connectivity, productivity, and competitiveness of cloud computing is dramatically improving efficiency in businesses of all sizes. Large and small companies, as well as governments, benefit from massive computing power by scaling operations to their individual needs;
  • Making sense of the ever-increasing amounts of data, allowing individuals, enterprises, and governments to make smarter, better informed decisions;
  • Providing traditional industries with a passport to the Fourth Industrial Revolution and the benefits of technological breakthroughs including artificial intelligence, smart manufacturing, and the Internet of Things (IoT).
  • Contributing to the development of innovations we haven’t even imagined yet. Already, software is enabling new, cheaper manufacturing methods through 3D printing, as well as faster and more transparent transactions through blockchain technologies.

Software Is...

A hospital in the Netherlands is using SAS software to visualize diverse data sets and improve decisionmaking as well as resource allocation.

Autodesk 3D design software has provided a German Paralympian silver medal cyclist with a lighter, better, and cheaper prosthesis.

Software is central to everything we do. For example:

Delivering data-driven insights.

Using software, scientists interpret data to give new insights into complex topics. Detailed economic modelling, accurate weather forecasting, and screening for genetic diseases all use data-processing software.

Learn More >>

Delivering technology on the move.

Cloud computing is revolutionising how and where we work and use data. It frees us from our desks and offices and lets us collaborate wherever we are. Software makes this possible.

Learn More >>

Making our world greener, cleaner, and leaner.

Every manufacturing and service sector, from the complex to the routine, depends on software to design, refine, produce, test, and optimise what they do. Software is making our world greener, cleaner, and more efficient.

Learn More >>

Powering personal technology.

The apps on our tablets and smartphones use software to provide messaging, banking, shopping, and travel at our fingertips.

Learn More >>

This just scratches the surface of software’s contribution. Every facet of our lives or work can offer similar examples, and every day sees further advances.

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 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, Spanish, 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.
  1. 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 Publishers
    • NACE 620: Computer programming, consultancy and related activities
    • NACE 631: Data processing, hosting and related activities; 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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