As a percentage of IT budgets, software development and maintenance declined from 27% in 2018 to 19% in 2019, with almost no change expected in 2020 according to the Society of Information Management’s (SIM) annual survey of senior IT executives. At the same time, spending on cloud services has risen to 16% of the average IT budget and is expected to grow more this year. Hardware as a percentage of IT spending dropped significantly in the middle of the last decade, but those declines are moderating. It appears that companies are finding budget savings by 1.) paring back on commercial off-the-shelf software (COTS) used for both business applications and infrastructure management, and 2.) reducing spending on employees focused on day-to-day software maintenance and management.
Only some areas of software development are facing pressure. At 62%, “integration” is the leading answer to a question about the three largest categories of software spending. “Maintenance or enhancement of legacy” comes in second at 48%, and “new custom or bespoke” is a top area of software spending for 33% of the study. Custom software development is the only category to see a significant increase as it was only mentioned by 18% in 2017. Our hypothesis is that efficiencies achieved because of SaaS and open-source-reliant infrastructure have been redirected to innovative software projects, perhaps even some that can be classified as enabling digital transformation.
Our hypothesis is that efficiencies achieved because of SaaS and open-source-reliant infrastructure have been redirected to innovative software projects.
Increases in the total number of developers in the workforce are coming employment of programmers within individual business units and those that work for software vendors. In fact, recent data from Computer Economics indicates that developers as a percentage of all IT staff has actually slipped a percentage point to 14% over the last two years. The Computer Economics research has not seen a significant change in the percentage of code that has been custom-written, which indicates that enterprise developers are redirecting their efforts from modification and customization of COTS and towards the types of bespoke initiatives that can create more business value.
Spending on custom software is sometimes targeted for cuts because it could be wasteful when there is an easy to implement the commercial product. Because spending on contractors, consultants and application outsourcing have not risen, we believe that companies have redirected recent savings in their programming staff’s time towards other projects. If this is true, an increased emphasis on customized coding may be a good thing.
We previously wrote about software spending and the SIM study in “The Software Budget’s Appetite Kept in Check by the Bottom Line” and “Don’t Be Afraid of Your Shadow IT, Yet”.
Feature image via Pixabay.
The New Stack is a wholly owned subsidiary of Insight Partners. TNS owner Insight Partners is an investor in the following companies: Shelf.