What is the Size of the Custom Software Development Market?

The custom software development market is huge. While software development has been around since the 1960s, custom software development and particualrly website design and development came about with the rise of the internet and large enterprises. Large businesses want to optimize their processes by commissioning software tailored to their specific needs. The demand for custom software development has never been larger.

 

Learn the size of the custom software development market and its particular dynamics in the following article. In it, I will go over the market’s growth, characteristics, segmentation, and trends.

 

What is Custom Software?

 

First, let’s define custom software. Custom software (aka bespoke software) is software developed for a specific company, organization, or group. In other words, custom software is intended for a single user. It is not sold commercially nor marketed for multiple customers.

 

Other software is intended for more wide-spread use. For example, commercial software (aka off-the-shelf software) is marketed and sold to many users and businesses. To appease a wide range of users, owners brand commercial software more generically. They can keep the web development cost lower because by spreading it among many customers.

 

Just like any custom job, custom software can get expensive. But in the long-run, custom software is the cheaper option because it tailors to a business’ specific needs. The tailored software can be developed from scratch or integrated into a company’s existing software. Either way, custom software is made with the company’s needs in mind.

 

Market Growth of Custom Software Development

 

As mentioned, the market for custom software development is huge. But it is set to keep growing over the next few years. The market size was valued at $388.98 billion for 2020 and is expected to grow to $650.13 billion by 2025 at a CAGR of 10.7%. The key companies profiled for these estimates include Microsoft, IBM, and SAP.

 

Another metric for the size of the custom software development market lies in the number of custom software developers around the world. In 2019, there were 26.4 million software developers in the world. This number is expected to grow as high as 45 million by 2030. Consider the estimates by year in the table below:

 

Source: https://www.daxx.com/blog/development-trends/number-software-developers-world

 

As you can see, the number of custom software developers only increases with time. This will remain true so long as enterprises grow to require more custom programming to be as efficient as possible. Over time, every business tries to optimize its operations, and custom software is the number one way to do this.

 

Market Characteristics of Custom Software Development

 

Having established the immense size of the custom software development market, let’s take a closer look at some of the market’s unique characteristics. Among other traits, software developer demographics can be analyzed by age, gender, and nationality:

 

The median age of a software developer is 36. In North America, the median age is 39. Europe, the Middle East, and Africa (EMEA) has the highest median age of any region with 40. Male employees are younger than female employees by half a year on average.

Women make up 27.5% of developers in the world. In the US, less than 20% of software developers are women. Over 80% are men.

As far as nationality, the US has the most software developers of any country with 4.2 million. Europe has the second most software developers in the world with 5.5 million in 2018. India is predicted to overtake the US as having the largest population of software developers by 2024. Another notable country is Ukraine, which has the most number of C++ and Unity3D developers in the world. As of 2020, Ukraine has about 200,000 software developers. That number is expected to jump to 242,000 by 2025.

 

Consider the time it takes to develop a custom software: Custom software development projects can take anywhere from 1 to 9 months. The average time to develop a software is 4.5 months.

 

As for cost, custom software development projects can cost anywhere from $3,000 to $120,000. The price will depend heavily on the size of the enterprise and the required complexity of the software.

 

Custom software is developed with several different programming languages. The most preferred programming languages for custom software development include PHP, JavaScript, C#, Java, and Python, but there are many more.

 

Source: https://www.goodfirms.co/resources/software-development-research

 

Different coding languages require different skill sets. Consider the number of software developers in the world by programming language:

 

As of September 2018, the number of PHP developers in the world was 5.5 million.

JavaScript has the most number of software developers with 10.7 million in 2018.

In 2018, there were about 6.2 million C# software developers.

There were 7.1 million Java developers in 2018. This number was set to reach 7.6 million by 2019.

The number of Python developers was 7 million in 2018. Now there are closer to 7.6 million.

 

Other programming languages that are used less in custom software development include C/C++, Visual tools, Swift, Objective C, Ruby, Kotlin, and Lua.

 

Of course, the preferred programming language within custom software development fluctuates with time. But the main coding languages remain relatively constant. Knowing the number of software developers that code in the preferred custom software languages gives a better picture of the market.

 

Market Segmentation of Custom Software Development

 

Beyond its broad characteristics, the custom software development market can be segmented into different areas by software type, service, deployment, enterprise size, and end-use. These help break down the market into its smaller submarkets.

 

Custom software differs by software type. These types include software developed for Finance, Human Resources, Sales and Marketing, Supply Chain, Customer Support, and more. A company may commission custom software for any or all of these departments. Sometimes, companies commission custom software that integrates across multiple departments.

Custom software varies by deployment. It can be hosted in the cloud or installed on-premise. Cloud software allows users to access data from remote locations and minimizes the need for manual upgrades. On-premise custom software is installed locally, on a company’s computers and servers, and does not rely on connecting to the cloud.

 

Custom software hosted in the cloud, aka Software as a Service (SaaS), has become increasingly popular due to its low start-up price. Instead of an initial one-time cost, custom cloud software usually has a monthly or annual subscription fee. Interestingly, the cost of either software type converges over time:

 

Source: https://www.softwareadvice.com/resources/cloud-erp-vs-on-premise/

 

The above graph shows the total costs of ownership (TCO) for both on-premise and cloud-based software over the span of ten years. By year 9, cloud-hosted and on-premise software cost about the same. Which software is right for you will depend on your starting budget.

 

The custom software market is divided by enterprise size. Both large enterprises and small and medium enterprises (SMEs) commission custom software. Obviously, large enterprises require greater, more rigorous and complex software. But no matter their size, all enterprises benefit from custom software.

 

Finally, the custom software market is segmented by the software’s end-use. Custom software is developed for diverse industries, including aerospace, defense, government, healthcare, IT, manufacturing, retail, transportation, among others. Custom software developers may specialize in a certain industry. After all, nearly any industry can benefit from custom software.

 

Again, custom software is a giant market. Any of the above submarkets will offer an array of opportunities for software developers and enterprises alike. The need for custom software is prevalent across many departments, industries, and enterprises.

 

Market Trends of Custom Software Development

 

With the size of the custom software development market in mind, consider some of the current trends in custom software development. Below I list just a few:

 

Many companies are asking for the development of chatbots. Chatbots are designed to simulate conversation with a real human over the internet. They are a popular feature used to streamline customer service. Instead of requiring live human support, many companies implement a chatbot algorithm to answer simple questions that the computer program can handle. This saves the company money by automating away some of their customer support.

 

Demand for Platform as a Service (PaaS) solutions are on the rise. Many companies want to eliminate the need for maintaining the infrastructure that helps them develop, run, and manage applications. Instead, they prefer cloud computing services like PaaS that will take care of that for them.

 

Many custom software developers are looking to Open-source software (OSS) for the latest trends and techniques. OSS allows for collaborative software development and encourages diverse perspectives. Software developers can learn from each other by using OSS.

 

Many companies commission customer experience (CX) driven software solutions. The customer is still king for large enterprises. To ensure that customers have a good experience, the software needs to cater to them. Often, this takes the form of user-friendly websites. User experience (UX) design is incredibly important for a website to retain traffic, for example, especially on the landing page.

 

Finally, some of the newest areas of custom software development lie in blockchain and artificial intelligence (AI).

 

Blockchain or distributed ledger technology (DLT) is revolutionizing the financial sector. But its uses are not limited to finances. Many large corporations are researching ways to use blockchain securely in their businesses, including Facebook and Microsoft.

 

Artificial Intelligence (AI) is the number one trend in custom software development. When implemented, AI can automate processes which otherwise require more people. In the long-run, AI can lead to massive cost savings, which explains why it is trending in custom software development.

 

All of these exciting new trends in custom software development are worth looking into. See the graph below for some other trends in custom software development:

 

Source: https://www.goodfirms.co/resources/software-development-research

Benefits of Custom Software Development

 

So why is custom software development such a large market, anyway? To answer this question, you must look at the benefits that custom software has to offer.

 

Custom software pays off in the long-run. While it is more expensive at first than commercial software, the long-term savings and efficiency that come with custom software make it cheaper over time. Eventually, the tailored functions outweigh the low start-up cost of commercial software. Off-the-shelf software is rarely exactly what a company needs. And even if it works, companies usually outgrow the software and must then adapt to a new one anyway.

 

Besides the cost savings over time, custom software allows for increased scalability, profitability, lower integration costs, and independence:

 

Scalability: If your business grows, you may outgrow any commercial software you first bought. Custom software is more programmable along the way, so your business can scale its growth more easily.

 

Profitability: Businesses with custom software are usually more profitable because they can capitalize on gains more easily. They are not bogged down by redundant or otherwise unnecessary features that come with commercial software.

 

Lower integration costs: Off-the-shelf software must be adapted to the business, so they come with larger integration costs. Because custom software is designed specifically with your business in mind, integration costs are minimal if they exist at all.

 

Independence: Finally, businesses with commercial software must rely on another provider for support, updates, and licenses to continue use. With custom software, you own the software, making you independent of the company that made it.

 

In the end, custom software comes with far more benefits if you can afford the higher start-up cost. Companies are realizing this and favoring custom software development as a result. As enterprise software needs evolve, software market companies are also emphasizing the importance of custom solutions in areas like data management, mobile app development, and supply chain management. This shift is contributing to software market growth, as software vendors and developers continue to innovate in creating enterprise solutions tailored to unique business processes.

 

Find a Custom Software Developer

 

If you want to dive into the custom software development market, look no further. Dev.co can help you with all of your custom software & website development needs. From Blockchain (DLT) to Extended Reality (AR/VR), we will help your business save money in the long-run. So don’t hesitate to contact us today.