Computer Software Sector, 2007

U.S. Market Overview

Computer software is generally divided into (1) packaged or shrink-wrapped programs that are published and marketed for mass consumption, and (2) custom software that is written for particular customers. Custom software developers are usually included in the IT services sector and may write programs for new applications or code that improves, integrates, and supports existing systems.

The U.S. computer software market is the largest in the world. Domestic demand for packaged software reached nearly $106 billion in 2005 and is expected to increase at a robust compound annual growth rate of 8.2 percent to $157 billion by 2010, according to International Data Corporation (IDC) estimates. Spending on systems infrastructure software (operating systems, operating system enhancements, and data center management) will grow the fastest (9.6 percent) followed by applications development tools (8.7 percent) and applications packages (7.1 percent) during this period.

IDC does not break out custom software development in its IT services market data. However, it is important to note that some custom software development in the United States has been moving offshore for several years as U.S. companies outsource programming to lower-cost countries. India is the main supplier of these services, although countries in Eastern Europe, Russia, Ireland, and Israel are also competing for this work.

The U.S. Government supports the computer software industry through substantial investment in research and development and vigorous enforcement of intellectual property rights laws.