Inside Advanced Scale Challenges|Friday, September 22, 2017
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Software Emerges as Economic Force 

(Vintage Tone/Shutterstock)

If it is true that "software is eating the world," then cloud software appears to have the most voracious appetite, according to a new industry report that estimates software technology generates $1.4 trillion in economic value and represents nearly 8 percent of U.S. Gross Domestic Product (GDP).

The attempt to gauge the economic impact of software was released Thursday (May 18) at an industry conference in New York City. Lead author Neeraj Agrawal, a general partner with technology investor Battery Ventures, drew heavily on data gathered by the software industry trade group, BSA. That survey found that the software industry directly created an estimated 2.5 million jobs and employed nearly 10 million workers in related fields.

The average wage of a software developer was more than $108,000, BSA found.

Much of the explosive growth in the software sector is attributed to software-as-a-service offerings along with "cloud-first" and cloud-native options delivered via web browsers. Agrawal predicted that software would account for 10 percent of U.S. GDP by 2020 while generating $2 trillion in economic value.

"People don’t realize how big this industry actually is—partly because so much software is baked into everyday products we use at the office and at home," the veteran cloud-software investor told the conference. "The cost of starting a software company is lower than ever.

"And as spending on traditional software categories, like ERP and CRM, continues to grow—and as software seeps into newly smart products like cars, medical devices, and next-generation industrial tools—we are looking at a category that is a major component of our nation’s economy and a driver of jobs."

Conference organizers noted that in the New York City area alone, enterprise technology startups have managed to raise about $3.5 billion in venture funding in 2016, up from $1.8 billion raised by startups the previous year.

Proponents also make the case that software technology and the IT infrastructure its increasingly underpins contributes mightily to U.S. productivity growth. Indeed, one key to reviving American manufacturing is retraining workers to operate automated tools.

Agrawal argued that software is not only overtaking hardware but also services and labor. "Every company is becoming a software company," he argued. That trend is being driven by steady increases in cloud investments. Battery Ventures estimates that 60 percent of enterprises it surveyed expect to increase spending on cloud applications as software services make headway in more enterprises.

Furthermore, emerging applications such as AI and machine learning are driving software applications for everything from web searches to voice recognition. Software giants like Google (NASDAQ: GOOGL) and Microsoft (NASDAQ: MSFT) have made major bets on what the search giant calls an "AI-first" era.

Among the other drivers of the emerging software economy is the IT shift toward micro-services that have accelerated the delivery of software.

The combination of all these factors along with the flexibility and cost savings associated with cloud software paint a rosy picture for an industry that continues to innovate across many industrial and consumer sectors, proponents note.

 

About the author: George Leopold

George Leopold has written about science and technology for more than 25 years, focusing on electronics and aerospace technology. He previously served as Executive Editor for Electronic Engineering Times.

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