The U.S. Software and IT Services Industry

The United States has the most advanced software and information technology services industry in the world. The industry has increased its revenue by 4 percent each year for the past 10 years to $551 billion in 2010, and has increased its research and development expenditures by 6.1 percent to $34.8 billion in 2010 from the previous year. The United States accounts for over 70 percent of global software research and development.

There are more than 100,000 software and information technology (IT) services companies in the United States, and over 99 percent are small and medium-sized firms (i.e. under 500 employees). This total includes software publishers, suppliers of custom computer programming services, computer systems design firms and facilities management companies. The industry draws on a highly educated and skilled U.S. workforce of nearly 2 million people, which has continued to grow over the past decade.

U.S. software firms operate in a mature, harmonized market and have a reputation for producing reliable and effective solutions that accelerate quickly to the marketplace. International companies in the industry have shown a keen interest in the U.S. market because of its strong intellectual property rights laws and enforcement. U.S. companies lead the world’s packaged- and custom-software markets and are competitive in nearly all other market segments with a relatively stable overseas market share.

The International Data Corporation (IDC) estimates that U.S. demand for software will increase more than 5 percent to $150.9 billion in 2011, and demand for information technology services will rise 4.2 percent to $226.4 billion from the previous year. IDC surveys show that infrastructure projects are high priorities for U.S. businesses and interest is growing rapidly in collaborative tools, green information technology, cloud computing and mobile applications. 

Industry Subsectors

Cloud Computing Services: The IDC expects that global revenue from public cloud computing services will grow five times as fast as information technology spending generally, increasing by 27 percent from $16 billion in 2009 to more than $55 billion in 2014. The U.S. market currently represents about half of this demand, and U.S. companies routinely dominate the annual rankings of cloud services providers. 

Entertainment Software: Combined revenues in entertainment software from computer and video games expanded by 10 percent from 2005 to 2009 to $10.5 billion. The subsector employs more than 120,000 people directly and indirectly.

Green Information Technology: The global market for carbon management and related information technology services is expected to grow by more than 40 percent annually to more than $4.3 billion in 2017, according to projections from Pike Research. U.S. information technology companies have developed state-of-the-art technologies to provide customers with smart solutions for energy and greenhouse gas management. 

Health Information Technology: Also called eHealth or Health 2.0, this subsector consists of an array of products and services that electronically record and track a patient’s healthcare while providing enhanced treatment and diagnostics. Extensive investment is underway in this area by government and the private sector to keep up with profound demographic changes, such as an aging population. Specific health information technology areas of interest are electronic medical records, infrastructure, storage and exchange systems, and related professional services.