Wonder

Research Outline

Prepared for ben s. | Delivered February 16, 2021

Software Development Services

Goals

Find how much the average company in each of the three segments, (SMB, mid-market and enterprise) spend on software development services. What types of services do they pay for (such as staff augmentation, project-based development, configuration, deployment, etc.) and who are the typical decision makers for each segment.

Early Findings

How much does the average company spend on software development services?
CIO Magazine published findings in 2018, that suggested SMBs spent proportionally more than large enterprises. The average small company spends 6.9% of revenue on IT. Mid-sized companies spend was reported to be 4.1% of revenue, and larger companies 3.2%.
Following on from this, software development (and maintenance) as a percentage of IT budgets was reported to be 19% in 2019, and this was down significantly from 27% in 2018. This decline was mostly due to the rise spending on cloud services, over the same period.
Software spending varies significantly by industry. SaaS (Software as a Service) companies were found to be spending 23% of revenue on research and development in 2018.

What type of services do they pay for?
Software development tends to focus broadly on one of three areas. A particular aspect of software production (for example, frontend or backend), more general software projects or delivering IT consulting services.
 2019 saw a reported shift towards product-based development. Companies were changing their outlook and culture surrounding the software development life-cycle and are increasingly moving away from project-based development in order to achieve better automation, customer-centricity, increased collaboration, spread of responsibility and long-term outlook.
 Industry statistics suggest a trend for companies to outsource their projects, which is predicted to continue growing in 2021. Outsourcing reduces costs, provides greater efficiency and expertise. 
 Service based software development companies have become a top choice for businesses in recent years. Such companies work directly for business and provide a wide range of services. By hiring skilled and experienced software developers, and investing in their professional growth, they allow businesses to leverage top talent and specialized expertise and experience.
Cloud computing is one of the key current tech industry trends, forecasted to reach over $330 billion by 2022, according to Gartner. Business users are increasingly moving workflows to the cloud, with increasing investment in public cloud infrastructure as a service (IaaS).
Continuous delivery is an evolving software development technology that improves and automates the software delivery process in any industry. Continuous delivery and continuous deployment have emerged as two of the most popular trends in modern software development. The market has registered a CAGR of 19.75% over the forecast period 2021-2026. Continuous delivery enables rapid deployment, if businesses choose not to deploy continuously, and speed up the flow of delivering software changes to production environments.
 The 2020 developer trends for software developers and programmers, a survey of 65,00 developers revealed that back-end developer has overtaken full-stack developer as the most common role
Who are the typical decision makers?
Depending on the size of the company, the strategy, budget and software development goals, managers and individual contributors from many departments play a part in providing information for company executives to draft proposals.
 Product owners and project managers are best placed to provide a vision of the end-product and to optimize the efficiency of the development team.
 Developers are playing an increasing role in technology corporate decision-making regarding software development tools.
Tech companies rely on well-informed CEOs/CFOs/Controllers understanding the accounting standards surrounding capitalized software costs in order to determine and support, company policy on software capitalization costs.
Challenges
There is a lack of available information on the specific spend by companies on software development, however there is more documented evidence of software as a percentage of IT spending and budgets.
Software development and IT spending varies by industry, with tech and software companies likely to spend significantly greater amounts as proportion of revenue.