Computer programmers write, test, and maintain the detailed instructions that computers must follow to perform their functions. Many custom computer programming firms provide additional information technology (IT) related services, such as consulting, training, systems integration and facilities management. This large IT services industry presents a one-stop solution scenario in which a single firm offers a comprehensive set of computer services to its clients. Therefore, many organizations do not separate custom programming from the overall IT industry.

According to the U.S. Department of Labor (DOL), approximately 499,000 computer programmers were employed in the U.S. in 2002. Just about every industry employs computer programmers, such as telecommunications companies, manufacturers of computer and electronic equipment, financial institutions, insurance carriers, educational institutions, and government agencies. However, most programmers work in computer systems design and related services and firms that write and sell software. Furthermore, a large number of computer programmers work on a temporary or contract basis, or as independent consultants. There were 18,000 self-employed computer programmers in 2002. [1]

Software development companies are classified in Standard Industrial Classification (SIC) code 7371:  Computer programming services. These companies are primarily engaged in providing computer programming services on a contract of free basis, as well as performing a variety of additional services such as computer software design and analysis; modifications of custom software; and training in the use of custom software.

According to Dun & Bradstreet (D&B), approximately 48,242 establishments in SIC code 7371 currently operate in the U.S. (headquarters and individual locations counted separately).  The industry employs 580,235 people and generates $103,949.50 million in annual sales. The average company employs 12 people and generates $2.30 million in sales a year. Some programming firms that report their data to D&B denote a specialty, such as computer code authors (See Table 1). [2] [3]

Table 1:  SIC 7371: Market Data by Specialty (sales in $ millions)

 

SIC Code	SIC Descr.	No Bus.	Total Emps.	Total Sales	Avg. Emps.	Avg. Sales
7371-0000	Custom computer programming services	12,605	126,851	13,797	10	1.2
7371-0100	Custom computer programming services	1,643	20,897	2,991	13	2
7371-0101	Computer software systems analysis and design, custom	8,950	74,559	34,166	8	4.1
7371-0200	Computer software writing services	627	4,828	430	8	.07
7371-0201	Computer code authors	86	413	38	5	.04
7371-0202	Computer software writers, freelance	453	1,602	146	4	.03
7371-0300	Computer software development and applications	4,917	73,261	11,597	15	2.5
7371-0301	Computer software development	17,672	261,880	38,806	15	2.4
7371-3012	Software programming applications	1,289	15,994	1,978	13	1.6
	Total/Avg	48,242	580,235	103,950	12	2.3

Source:  Dun & Bradstreet Sales & Marketing Solutions

Economists with Integra Information report the industry performed poorly between 2001 and 2003 and rebounded in 2004 (see Table 2). [4]  

Table 2: Industry Revenue Growth SIC 7371: Manufacturing:  Computer Programming Services 

Source:  Integra Information

After several rough years, software executives are continuing to keep a close watch on IT spending levels, but are also beginning to show more confidence in the industryÕs recovery. According to Jason Hancock of Spencer StuartÕs Software Practice, ÒWith the worst seemingly behind them, mid-size and larger software companies have begun to hire again.  In fact... demand outpace[s] supply for talented software executives across the majority of functions.Ó [5]  Currently, there is an increase in demand for custom software development. Corporate spending on computer systems and related software and services increased by 11.9 percent in 2004, decreased by 8.3 percent in the first quarter of 2005. [6]

Because computer hardware is becoming less expensive and more powerful, companies are finding more money to spend on software and support services. This factor should also contribute to continued growth in the custom software industry. [7]

Industry Issues

The outsourcing of IT jobs to other countries has created a loss of jobs in the U.S. According to the Washington-based Economic Policy Institute, between March 2001 to March 2004 the countryÕs software industry lost 16 percent of its jobs. The Bureau of Labor Statistics reports IT industries dismissed more than 7,000 U.S. workers in the first quarter of 2005. According to the consulting firm Cap Gemini Ernst & Young, wages and benefits for the average computer programmer are approximately $20 per hour in wages and benefits, compared to $65 per hour for an American with a comparable degree and experience. [8]

However, the latest data from the Bureau of Labor Statistics (BLS) shows the numbers of "computer and mathematical occupations," which include many programmers, increased in the second quarter of 2005 by 7.5% compared with the previous year. The BLS reports the increase is due to the demand for high-end programmers' skills as corporations and tech companies adopt new technologies. Even though American firms in India are hiring programmers overseas, they are also hiring programmers with design skills and business knowledge close to their clients in the U.S. and Europe. "You always need programmers on site or nearby," says analyst Gregory Smith of Merrill Lynch & Co. [9]

Research firm Gartner predicts India's 80% share of the estimated $10 billion global outsourcing market will decrease by 50% over the next three years because customers are looking for other low-cost locales, such as Mexico. [10]

Outlook

Market indicators for the combined IT spending outlook continue to improve as 2005 progresses.  However, buyer optimism has been flat or fallen for five consecutive months, reports market research firm IDC. ÒIT spending growth will continue to be highly sensitive to how the economy performs over the second half of the year,Ó says IDCÕs Carol Glasheen. [11]   Competitive pressures among computer programmers are likely to intensify as customers reduce their IT vendor base to Òfewer, deeper relationships.Ó  Still, IDC analysts say customers will most value strong lead vendors who build Òvendor ecosystemsÓ or communities of best-of-breed partners. [12]  

The DOL forecasts employment of programmers will grow about as fast as the average for all occupations through 2012.Ó The agency believes jobs for both systems and applications programmers Òshould be most plentiful in data processing service firms, software houses, and computer consulting businesses.Ó Still, the DOL expects employment of programmers will grow much more slowly than that of other computer specialists because:

Gartner Inc. forecasts up to 15 percent of IT workers will leave the profession by 2010, due to inability to find a job, the salaries, and lack of job satisfaction. During the same period, global demand for technology developers - a job category ranging from programmers to people who maintain everything from mainframes to employee laptops - is predicted to decrease by 30 percent. [14]

Integra Information forecasts industry revenues will increase by an average annual rate of 8.34 percent annual growth through 2009 (see Table 3). [15]

Table 3: Industry Revenue Growth SIC 7371: Manufacturing:  Computer Programming Services 

Source:  Integra Information