Fact bite #2 Robustness of the enterprise software industry: significant impact on employment

In fact bite #2 we discuss the significant impact on employment of the software industry.

Main Capital Partners

Last year we wrote an article about the size and impact of the software industry in the Netherlands. Based on our research and discussions with domain experts from Dialogic we estimated that the direct contribution of software to the Dutch economy alone is about 4-4.5% of the Gross National Product (GNP). Now, less than 12 months later, the economic situation is significantly different: supply and demand is unbalanced – and resources are scarce – in many industries. This, in combination with the Russian aggression in Ukraine, negatively impacts consumer confidence and drives inflation. At the same time, Forrester reports a continued revenue growth rate of 12% for the global enterprise software market. How come? In this blog series Bram Kaashoek, head of Main’s Market Intelligence practice, highlights 3 fact bites that reflect the robustness and consistent contribution of the enterprise software market to the overall economy.

In fact bite #2 we discuss the significant impact on employment of the software industry.

Growing direct employment in the ICT sector, and indirect effect on employment in other industries

Information Technology and Internet Technology, as one of the main enablers of cloud-based enterprise software solutions, are generally accepted as “General Purpose Technologies” (GPR). GPTs, which also include the steam engine, electricity and automobile technology for instance, have a broad, transformative and disruptive impact on the way how people live and work. Distinctly for these type of technologies is the huge impact on employment, the rise of new (type of) jobs, and improved productivity in (existing) jobs and tasks across many industries too.

This also goes for ICT and software in specific. To highlight this impact, we first show an example of the direct effect of employment: direct jobs (in FTEs) in the ICT industry. In the figure below we have analyzed data gathered by the European Centre for the Development of Vocational Training (CEDEFOP, 2022). We combine long-term historical data (2011-2020 timeframe) on the employment growth per industry with the employment growth forecast for this decade (2020-2030). Our analysis shows clearly that the ICT industry is top-performer in the creation of jobs in the last decade and is expected to contribute to employment growth in the next 10 years too, next to e.g. the Healthcare sector.

Figure 1 Employment growth: retrospective and forecast figures [bubble size represents total employment in FTEs] (source: European Centre for the Development of Vocational Training, 2022. Analysis: Market Intelligence Main Capital Partners, 2022)

What is the rationale behind this? Kaashoek explains: “If we look back at the last 10 years, some interesting developments can be observed. First of all, a couple important technological advancements: although IT and internet technology exist longer, in the last 10-15 years technology really drove changes in the underlying business models of a wide set of industries and verticals. Economic impact really kicked in, accelerated by cloud adoption. Cloud architecture made software companies scale more rapidly and widely. Think of the impact on the retail sector, travel agencies, banking, and so on. Software companies delivered (parts) of the solutions in mission-critical work processes of end-users in many industries and the ICT Services, with its consultancy activities, contributed to large-scale digital transformation projects too. This drove the continued need for software developers and other ICT professionals. Even in times of economic uncertainty, because in those periods end-customers were looking for ways to make operations more efficient. Not occasionally software is seen as key for delivering efficiencies in mission-critical work process. This continuous need for IT, and software and IT service providers in specific, as critical component of digital transformation in many industries significantly boosted the need for IT talent and employment in the sector.”

In addition, ICT professionals do not only work in the IT sector. The figure below, based on the Dutch labor market (pr-eDICT, 2021) illustrates nicely that for five selected industries a significant part of the workforce (5-14%) exists of ICT-related professions too.

Figure 2 Percentage of ICT employment within different industries (source: pr-eDICT/Dutch Statistics/Dialogic, 2021. Analysis: Market Intelligence Main Capital Partners, 2022)

Main Software 50: facts & figures on the industry

Main’s portfolio companies employs about 8000 persons in total and this number is growing steadily, in line with the market forecast (see above). 

Are you a software entrepreneur and interested in hearing more about the statistics of and developments within the enterprise software industry? Please join our Main Software 50 industry event in November. The Benelux edition will be hosted for the 11th time this year and we are coming to Germany too. Read more here: https://mainsoftware50.com/.


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