Software adding $1 trillion total value-added GDP contribution, millions of software industry-related jobs, economic gains in all 50 states, and billions in R&D investment

WASHINGTON — June 15, 2016 — Software is making a profound impact on the American economy, adding more than a trillion dollars to the US economy, supporting nearly 10 million jobs nationwide, driving economic gains in all 50 states, and expanding America’s economic potential across numerous sectors. This economic progress, coupled with tens of billions in software research and development investments, translates into software serving as a powerful catalyst for economic change – making businesses more effective and the US economy more prosperous.

So finds the just-released “The $1 Trillion Economic Impact of Software” report, a first-of-its-kind study written by BSA | The Software Alliance, incorporating data and economic impact assessment conducted by The Economist Intelligence Unit (EIU). The study captures the breadth of the software industry in the US, and the sweeping economic impact it is making at national and state levels. 

Noteworthy findings include:

• Software innovation adds more than a trillion dollars a year to the US economy. The software industry directly added $475 billion to the US economy in 2014. When factoring in its full effect (both indirect and induced), software was responsible for a total of over $1 trillion of all US value-added GDP in 2014.

• Software supports nearly 10 million jobs nationwide. Software creates jobs for a wide range of professionals across the US economy. While the software industry itself directly employed 2.5 million people in the US in 2014, research shows the software industry supports a total of nearly 10 million jobs when including the indirect and induced jobs that software supports.

• The software industry contributes 17 percent of all domestic R&D. By investing more than $52 billion into cutting-edge R&D in 2012, the software industry is helping support breakthrough advances that can spur further innovation and an even more prosperous future.

• Software is driving economic gains in all 50 states. Every state’s economy and workforce are benefitting from new jobs that fit our modern digital economy, and opportunities driven by software advances. In terms of Direct GDP Contribution, the top 10 states ranked in order were:

California$90.5 billion

New York

$37.1 billion

Texas

$30 billion

Washington$27.6 billion

Virginia$25.8 billion

Massachusetts$22.6 billion

New Jersey$16.4 billion

Illinois$16.1 billion

Florida$15.8 billion

Pennsylvania$13.3 billion

In addition to the study’s findings, EIU provided additional figures from 2004-2014 which give further context for the software industry’s growth not only in size, but in terms of its increasing importance to the US economy:

• Software has grown at nearly twice the annual growth rate for the US economy as a whole from 2004-2014.

• With regard to value-added GDP, in 2004, the software industry directly contributed $267 billion to the US economy. In 2014, that number had risen to $475 billion, representing a $208 billion – or 78% – increase.
• In terms of total effects, in 2004 the software industry was responsible, directly and indirectly, for a total of nearly $649 billion of total US value-added GDP. In 2014, that figure had risen to over $1 trillion, representing a nearly $351 billion (or nearly 54%) increase. 
• Software employment numbers also significantly increased. In 2004, the software industry directly employed 1.8 million people in the US. By 2014, this number had jumped by nearly three-quarters of a million people, to 2.5 million people employed by the industry.

The findings in BSA’s study are important and merit attention, according to Drs. Vijay Gurbaxani and Vidyanand Choudhary of the University of California’s Irvine Paul Merage School of Business. The professors, who served as third-party validators of the BSA study, note in the report that BSA’s study is “well-designed, uses the best data available and draws reasonable, thought-provoking conclusions.”

The economic impacts in BSA’s study are more than simply figures, Espinel emphasized. Software-driven data innovation and data analytics are leading to benefits throughout broad sectors of the US economy.

“More than ever, software is an extremely influential part of our nation’s economic fabric. But when many people think of software today, they’re still thinking about their desktop at work,” noted BSA | The Software Alliance President and CEO Victoria A. Espinel. “Software is so much more – the apps we use every day are software. Data analytics is driven by software. Cloud computing is enabled by software. Software powers industry solutions in everything from our global financial infrastructure to aerodynamics systems to more efficient transportation.”

The real question is how we continue this positive economic impact, and at the same time protect and encourage the progress software is making worldwide, Espinel added. “Our future competitiveness will demand greater competence in software-related skills across the economy’s many sectors – and government policies that support continued software growth and innovation – if we’re to maintain our competitive edge in the global marketplace,” she said.

To view BSA’s full report, methodology and source material, and specific examples of software-driven data tools which are improving our lives each day, visit www.bsa.org/softwareimpact.

Stream the video here: http://www.newamerica.org/oti/events/softwares-economic-impact-drive-talent/