Computer Programming Services

SIC 7371

Companies in this industry

Industry report:

This industry consists of establishments primarily engaged in providing computer programming services on a contract or fee basis. Establishments of this industry perform a variety of additional services, such as computer software design and analysis; modification of software; and training in the use of custom software. Mass-produced software development is discussed under SIC 7372: Prepackaged Software.

Industry Snapshot

According to Dun & Bradstreet's Industry Reports, 48,795 establishments were involved in the custom computer programming services industry in 2010. Together these firms employed 548,580 people and generated $61.1 billion in revenues. As such, computer programming was one of the largest segments of the broader information technology (IT) services sector.

Organization and Structure

Among the industry's top players, such as IBM and Hewlett-Packard, custom programming services are only one of a multitude of IT services offered, ranging from consulting and training to systems integration and facilities management. Indeed, the broader IT services industry has increasingly evolved toward a one-stop solution model, where a single contractor provides a comprehensive set of computer services to its clients. As such, many nongovernment statistical sources, and often the companies themselves, do not separate custom programming from these other activities.

Custom programming services are used primarily as an alternative to using packaged software unmodified and hiring in-house programming staff to write custom software. The first use is noteworthy as a reminder that packaged software is often modified by third-party vendors for specific businesses; not all custom software work begins from scratch. The second use highlights that the industry is closely associated with outsourcing technical functions. In fact, it is sometimes described as the IT outsourcing industry.

A separate and popular way for companies to obtain programming services without committing to maintaining an in-house staff of programmers is to contract for leased or temporary programmers and consultants. Several large national agencies have special units devoted to placing experienced technical workers. However, unless the contracting firm is itself a programming services provider, such activities are considered outside the scope of this industry.

A variety of trade and professional organizations represent the industry. Among others, the TechServe Alliance (formerly the National Association of Computer Consultant Businesses) and the Independent Computer Consultant Association (ICCA) represent independent contractors who work as computer consultants and programmers. These trade associations represent their members in different ways. The TechServe Alliance, headquartered in Alexandria, Virginia, lobbies government officials on behalf of member businesses. The ICCA is based in St. Louis and offers benefits such as support services, news feeds, networking, and a job board.

Background and Development

As computer systems became commonplace in businesses and other organizations, the need for custom programming and other computer programming services increased. From the 1950s through the 1980s technology made huge leaps forward. Computer programmers were difficult to find in the early years, and many companies did not bother to hire them. By the late 1980s and early 1990s, very sophisticated computer equipment needed equally sophisticated code to handle growing amounts of information at rapidly increasing speeds.

Computer service companies were originally hired to automate record-keeping tasks, such as payroll. Later they expanded into customer-related areas, such as fund transfer systems, just-in-time inventory systems, and customer information systems. Many companies could hire these service firms only in the best of financial times--given the high cost of the services. Early programming was highly customized, but the needs of businesses by the 1990s necessitated more standardization.

Computer programming companies grew in part by presenting themselves as a cost-saving alternative to in-house programming departments. According to the prevailing logic, they were specialists and could save corporations money by programming systems and software on a contract basis. Although there has been the occasional backlash against service firms when their clients are not satisfied with the outside service's performance--sometimes spurring the disgruntled customer to bring the project back in-house--custom programming services are still widely seen as being more cost-efficient than internal development.

The Census Bureau estimated that in the late 1990s more than 32,000 U.S. establishments provided custom programming services as their primary line of business. Most were small companies--more than 95 percent had fewer than 50 employees. Those figures did not include firms that offer custom programming as secondary activities.

The industry grew rapidly during the 1990s, as businesses sought higher levels of automation and efficiency, greater control over internal and external information, and the ability to conduct business transactions electronically, particularly over the Internet. Although annual growth was uneven from throughout the decade, ranging from as low as 6.8 percent in 1992 to more than 28 percent in 1998, the industry's gross receipts climbed during the period at a compound average of 13.6 percent a year and more than tripled from $21 billion in 1990 to $64 billion in 1998, according to U.S. Census Bureau data. However, the surge in the late 1990s was fueled in part by one-time Year 2000 (Y2K) compliance services, Web-enabled applications, e-commerce, and the overall dot-com craze. The Y2 process, which involved checking and modifying software to ensure it would work properly after the date change, cost businesses worldwide anywhere from $280 billion to $600 billion by various estimates. Only part of that money went for programming, though, as a great deal was also spent on other preparedness measures, such as keeping extra staff and special supplies on hand in the event of a major crash. January 1, 2000, proved an uneventful day for most computer systems--provoking sharp criticism of computer consultants who some believed overstated the risks.

During the early 2000s the IT industry was hit hard by the economic recession, and the software design industry struggled, along with the larger IT industry. These difficult times were due to a slack economy and a decrease in technology spending within the corporate sector as corporations tightened their belts and canceled or postponed any new projects or upgrades. However, by the mid-2000s the economy had revived and IT was growing once more. Advanced technology, Web-based designed, and customizable out-of-the-box software was influencing the industry.

Census Bureau data suggests that the industry's revenues increased more than 16 percent between 1999 and 2000, reaching $69.4 billion. However, as the economy weakened, these overall numbers decreased considerably in 2001 and 2002. Despite an overall decline, it is worth noting that industry players fared differently depending on their area of programming specialty. For example, according to Weekly Corporate Growth Report , research firm Gartner indicated that some portions of the custom software industry, including companies concentrating on Internet software, suffered declines of up to 30 percent. Those in the database management field fared much better, with decreases closer to 2 percent. Other firms, such as those offering security software, were actually able to achieve growth in a difficult economic climate, with revenue increases of more than 12 percent.

Information released in the June 2002 IT Services Business Report indicated that U.S. IT service revenues in the system integration category, which included firms engaged in application development and management, were expected to increase 9 percent in 2003 to $126 billion. Although these figures include more than just custom programming service revenues, they serve to illustrate the industry's recovery in the early 2000s.

By 2000 the Census Bureau reported that industry firms typically brought in around 58 percent of their gross revenues from programming services; the rest came from activities classified under other industries. This percentage was somewhat lower in comparison to late 1990s levels, which were closer to 75 percent.

Traditional custom-developed applications and utilities continued to face rising competition from packaged software, which had grown more powerful, flexible, and cost-efficient, particularly since the mid-1990s. Indeed, some package vendors, including SAP and Oracle, increasingly tooled their high-end applications like enterprise resource planning (ERP) suites to enable relatively fast customization. Such packages came with a range of standard functions, as well as a development environment that allowed individual businesses--usually mid- to large-sized ones--to adapt the software to their own needs and existing systems. SAP, for example, was at the forefront of working with customers to build hybrid applications that were in large part custom but were then generalized and resold to other customers with similar needs. In effect, customers enjoyed benefits of customization without as many costs and uncertainties as with all-out custom development.

The emerging application service provider (ASP) model, where businesses rent software applications over the Internet instead of installing and running them on their own machines, further changed the competitive dynamic in the custom software business in the early and mid-2000s. ASPs were achieving much success with Web native applications, and IDC indicated that e-marketplaces represented an especially lucrative market. By the late 2000s, ASPs had gone beyond hosting and maintaining software and actually performed customization for individual clients, which constituted a threat to the conventional custom programming industry.

In 2003 so-called Web services were an especially hot area of the custom software market. In this scenario, programmers used a number of standards to enable communication between different Web-based applications. The ultimate goal of Web services was to enable universal system communications within or between organizations. In an article by Roy Schulte, research firm Gartner predicted that the emergence of Web services would "affect application design, many types of software products and even the nature of business-to-business value-added networks."

Web-based services continued to cut into the traditional custom software business later in the decade, led by such companies as, which provided customer relationship management solutions. However, traditional software development continued to grow during the mid-2000s as the economy emerged from the recession and corporations blew the dust off projects that had been shelved during the downturn. Many still turned to tradition custom software design, with customer and sales applications more often looking to Web-based designs.

ASP designs also continued in popularity during the mid-2000s, especially among businesses in which mobility was important, as ASP systems can be tapped into wherever a user has an Internet connection. The advantages of ASPs included the security that all information is held on a third-party system that is backed up against natural threats (power outages, etc.) and hardware failures; however, ASP is not easily customized, and only the largest customers could afford to have an ASP system alter to fit their specific needs.

During the mid-2000s many companies struggled between generic off-the-shelf software, which did not provide full functionality, and custom software, which often proved more expensive. Custom software also usually required numerous glitches to be worked out in the coding, often sending the project over budget. According a study by consulting firm Standish Group, 15 percent of customized software failed to operate as promised and over half (51 percent) either resulted in being over budget or provided fewer capabilities than originally promised. Users of customized software also ran the risk that the software developers would close up shop, leaving the users with no technical support and no way to upgrade as the software became obsolete.

Despite the drawbacks to customized software, many firms were willing to pay the price to get software applications that fit their specific needs. In 2005 several companies--including iRise, based in El Segundo, California--were emerging to offer simulation software that allowed both programmers and customers the ability to test custom software before implementation. Olga Kharif noted in Business Week Online in 2005, "Just as CAD software allows engineers to design a plane and take it for a ride right on their computer screen, before the aircraft is even built, iRise lets programmers and businesspeople see and test-drive software before it's actually created." Although iRise was a minor player in the large IT industry in 2005, with revenues of $11.5 million, several competitors were already hitting the market with similar plans to take the unknowns out of custom software applications.

Current Conditions

According to Software Magazine in January 2011, "The trend of engaging outside service firms to perform critical IT functions continues." This statement was borne out by the specialities reported by firms in the journal's list of top 500 computer software and services companies of 2010. The largest primary business sector--for the third year in a row--was system integration services and IT consulting. Outsourcing services was the second largest, followed by IT services/consulting/staffing and outsourced product development/testing. Of companies with more than $1 billion in revenues, increased its sales by 44 percent. According to Software Magazine, "The company, "insists on continuing its 'no software' marketing positioning even though [it] sells access to its software through the Software-as-a-Service (SaaS) model." Hewlett-Packard also showed strong growth, increasing its revenues by more than 50 percent, due mostly to its acquisition of former rival Electronic Data Systems Corp. in 2008.

Those providing computer programming and related services were required to keep up with constantly changing technology. For example, according to a report by IBISWorld, in the 2010s, "Newer platforms and technologies, such as software as a service, open source software, and cloud computing, will penetrate the industry and change the landscape." In the meantime, services in wireless and mobile applications were strong growth areas as the nation entered the second decade of the twenty-first century. According to research firm Gartner, the mobile applications industry was predicted to almost triple in 2011 to $15.1 billion.

Industry Leaders

Custom programming services are furnished by a diverse group of companies, including several multinational firms that provide a comprehensive set of IT services to large businesses and government agencies. One of the largest was IBM Corp. By 2010 IBM's services unit accounted for more half of its revenues, which in 2010 were just under $100 billion. Hewlett-Packard was another leader. The firm doubled its size when it purchased Electronic Data Systems Corp. in 2008, and revenues in 2010 reached $125 billion. Oracle and Computer Sciences Corp. were other significant players, registering 2010 sales of $26.8 billion and $16.1 billion, respectively, as was Accenture, whose annual revenues surpassed $23 billion. Smaller companies that provided programming services included Analysts International Corp., CIBER (Consultants in Business, Engineering, and Research) Inc., and Keane International Inc., which was acquired by NTT Data in 2011.


The U.S. labor market for programmers and others with IT skills was exceptionally tight in the mid- to late 2000s. Acute demand for high-tech employees led to worker shortages, aggressive recruitment of foreign workers, and rising salaries for individuals with highly sought skills. Software engineers and programmers represented a major occupational group within the industry. Software engineers design and develop software, and afterward computer programmers write accompanying programs. In 2008 there were 1.3 million Americans working in this occupation, according to the Bureau of Labor Statistics (BLS). About 32 percent of these were computer programmers, who earned an average of $69,620 a year. The remaining workers were engineers who averaged about $89,000 a year.

Professionals employed by computer programming firms often receive ongoing education and training in new technologies. More programmers are needed in software maintenance than in software development, and these maintenance programmers must be familiar with many types of hardware and software. They need to understand Internet and networking technology and to be flexible enough to work as development programmers. Many employers are interested in technical staff that not only has a strong understanding of prevailing languages and technologies in their field but also are willing to quickly develop new skills, as corporate needs change. Programmers with broad training and in-depth knowledge of several fields had the greatest potential for success as the second decade of the twenty-first century began.

Computer services jobs are predominately white-collar positions. Unlike workers in telecommunications equipment, who are more likely to find jobs as precision workers, computer services workers are more likely to work as professionals, technicians, or managers. The employment outlook for computer services was positive into the 2010s, especially for software engineers. Whereas the number of jobs for computer programmers was expected to decline slightly, the BLS predicted employment for software engineers would increase 32 percent by 2018.

America and the World

The United States is a leader in computer programming, as well as in other computer professional services. Because of the U.S. high-tech worker shortage, however, the U.S. industry has grown more dependent on skilled contract workers overseas to keep pace with the steep demand for IT services. The shortage has also spurred U.S.-based IT services companies to lobby for higher immigration rates of technically skilled workers into the United States. Non-U.S. programmers often earn somewhat less than their U.S. counterparts and, according to some studies, are more productive, making international labor at times more cost-efficient. Important international labor markets for U.S. firms include India, Ireland, and Israel.

Computer professional services such as programming were encouraged by the passage of the North American Free Trade Agreement (NAFTA) and the expansion of the General Agreement on Tariffs and Trade (GATT). The U.S.-Canada Free Trade Agreement of 1989 led some U.S. computer services companies to expand into other markets by buying Canadian firms. Some U.S. companies also had subsidiaries in South America and Europe.

Custom programming remained an area of vigorous cross-border trade. Most international trade in computer services is realized through affiliate organizations based in the target market. Despite their historically lopsided market advantage, U.S. firms face stiff competition from foreign companies, particularly those located in Western Europe and Japan.

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News and information about Computer Programming Services

Contract Notice: Colorado Department of Information Technology Issues Solicitation for Computer Programming Services
US Fed News Service, Including US State News; December 27, 2017; 263 words
...Department of Information Technology has published a solicitation/notice (No. 2018000158) on Dec. 26 for computer programming services.Contract, Tender Notice Type: RFPVendor must be registered for BIDS as of the bid submission deadline...
Contract Notice: Colorado Department of Economic Development Issues Solicitation for Computer Programming Services
US Fed News Service, Including US State News; November 14, 2017; 275 words
...Department of Economic Development has published a solicitation/notice (No. 2018000050) on Nov. 13 for computer programming services.Contract, Tender Notice Type: Sole Source(NPSS1)Vendor must be registered for BIDS as of the bid submission...
Presolicitation Notice: Department of Health and Human Services Seeks "Custom Computer Programming Services"
US Fed News Service, Including US State News; March 3, 2017; 313 words
...Services, Indian Health Service, has issued a presolicitation notice (16-102-SOL-00028) for "Custom Computer Programming Services".This presolicitation notice was posted on March 2 and the response date is March 17.Contract, Tender...
Contract Award: EastPlus USA Wins Federal Modification Contract for "Custom Computer Programming Services"
US Fed News Service, Including US State News; June 27, 2017; 299 words
...00 includes Base Year plus Four Option Years combined federal modified contract on Jun. 22 for "Custom Computer Programming Services."Contractor Awardee: EastPlus USA, 10819 Hillbrooke Lane, Potomac, Maryland 20854, United States For...
Contract Notice: Texas Dept of Criminal Justice Issues Solicitation for "Computer Programming Services" (Texas)
US Fed News Service, Including US State News; March 8, 2017; 274 words
...Texas, March 8 -- Texas Dept of Criminal Justice has posted has posted a solicitation on March 07 for "Computer Programming Services".Contract, Tender Notice Type: SolicitationThe Agency Requisition number is IT860223.Open Date: March...
Presolicitation Notice: Department of the Army Seeks "R-The United States Army Contracting Command - Aberdeen Proving Ground, 21005 - Announcement of Government's Intent to Solicit for Custom Computer Programming Services (541511)."
US Fed News Service, Including US State News; March 17, 2015; 352 words
...Contracting Command - Aberdeen Proving Ground, 21005 - Announcement of Government's intent to solicit for Custom Computer Programming Services (541511).".This presolicitation notice was posted on March 16 and the response date is March 19.Contract...
Contract Awards: Virginia Polytechnic Institute and State University Awards Contract for Computer Programming Services
US Fed News Service, Including US State News; May 8, 2012; 254 words
...May 8 -- Virginia Polytechnic Institute and State University has awarded a contract (No. P2306968) for computer programming services (92040) to Bell & Whistle on May 7. Solicitation Type: Sole Source Closing Date: May 3, 3:00 p.m...
Contract Awards: New Jersey Treasury Department Awards Contract for Data Processing, Computer Programming Services (New Jersey)
US Fed News Service, Including US State News; May 26, 2010; 249 words
...Division of Purchase and Property has awarded a contract (Index No. T-2496) for data processing and computer programming services to Electronic Data Systems as published on May 25. Solicitation Number: 36579 Contract Period: Aug. 1...

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