Research Outline

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?
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.

Suggested Industry

Your research manager recommends working with analysts that have the below expertise.
Consumer Goods & Products
Work with a
Generalist
Prepared By
Jason W.
127 assignments