Custom Software Development Market in US: Developments, Data & Analysis

Investing in custom software solutions is one of the smartest moves a business can make. In today’s rapidly evolving landscape, innovation and personalization are the keys to staying competitive, and therefore, relying on generic software is no longer enough.

Off-the-shelf software applications typically follow a one-size-fits-all model. They often fail to meet the unique workflows and challenges individual organizations face. On the other hand, custom software is purpose-built to address unique business needs, offering flexibility and scalability.

It’s no surprise, then, that 2024 has seen a significant surge in adopting tailored software solutions. More companies are embracing custom software as they recognize its potential to drive growth and efficiency. 

This article provides a data-backed analysis of the custom software development market in the US, exploring current trends and forecasting the future.

Ready to dive in? Let’s explore!

Market Overview: Custom Software Development in the US

Due to high demand and ever-evolving technology, studies show indisputable growth in the US custom software development market. Let's explore the dynamics of this growth, its key drivers, and the industry's market share.

Market size & growth.

As per the statistics (1),

• In 2024, the US custom software development market is valued at 10.70 billion USD.

• Between the years 2024 and 2030, it will grow at a CAGR of 18.5%, reaching 29.67 billion USD in 2030.

• The US custom software development market accounts for one-fourth of the global market.

• Globally, the custom software development market grew from 36.36 billion USD in 2023 to 44.86 billion USD in 2024 at a CAGR of 23.4%. (2)

Market share.

Reports suggest the Enterprise software segment ruled the US market in 2023 and accounted for the largest revenue share of 61.1%. It is most prevalent in industries like BFSI, government, healthcare, IT & telecom, manufacturing, and retail, where custom software development is widespread. (3)

The custom software development market in the United States features a range of privately and publicly owned companies. Global software development firms such as Trigent Software, Inc. and Brainvire Infotech, Inc. are leading players in American markets. Moreover, emerging companies like Imaginovation LLC, Chetu, Inc., and Iflexion are also making their mark in the market.

Key drivers.

The growth of the custom software development market is due to the demand for personalized business solutions that automate work processes, improve business efficiency, reduce errors, and enhance customer satisfaction.

In addition, other reasons that contribute to the high demand for custom software development services are -

• Digital transformation: As more businesses aim to be efficient and customer-engaging, digital transformation is becoming a top priority.

• Integration of many emerging technologies: Businesses demand that their software be integrated with modern innovative technologies like artificial intelligence (AI), machine learning (ML), and the Internet of Things (IoT), which are being integrated mainly for data analytics and automation.

Evolution of the CSD Market

Over the last few decades, the landscape of custom software development has continuously changed. It has evolved from an expensive, code-filled endeavor into powerful, innovative, low-code, user-centric solutions. 

This evolution mirrors technological progress and a perspective change by including agile, collaborative, and customer-focused development methodologies.

Here are the key milestones highlighting the historical growth of custom software.

1. Rise of DevOps Practices

Custom software development is increasingly adopting DevOps practices. This methodology accelerates application delivery by focusing on collaboration, constant communication (feedback), and automation, which improves efficiency and quality in the software development process.

• By 2026, the DevOps market is expected to reach $20.01 billion, growing at a CAGR of 24.7% from 2022 to 2026. (4) 

• Organizations implementing DevOps practices experience a 50% improvement in deployment frequency and a 22% reduction in lead time for changes. (5)

2. Adoption of Agile Practices

Agile methodology streamlines software development processes by allowing the development team to respond quickly to changes by dividing tasks into smaller, manageable pieces. By keeping customers in the loop, the team is constantly focused on customer satisfaction.

• As of 2023, 71% of companies globally have adopted Agile as their primary development methodology. (6)

• Teams using Agile see a 64% improvement in project success rates compared to those using traditional methodologies. (7)

3. Cloud Adoption

Many custom software development firms prefer cloud platforms, which offer scalable, cost-effective, and accessible software development resources (codes, testing tools, development platforms). The cloud also allows uninterrupted interactions between development teams and clients in different geographic locations.

• By 2024, 90% of enterprises globally will use cloud-based services. (8)

• Cloud computing services are expected to grow at a CAGR of 17.9%, reaching $832.1 billion by 2028. (9)

4. Comparisons with Other Markets

Businesses have a choice between custom software and off-the-shelf solutions.

In today's diverse business landscape, custom software is crucial for its tailored approach, scalability, and enhanced security. Custom IT solutions offer increased efficiency, better user experience, and a competitive advantage.

On the other hand, off-the-shelf software may lack the flexibility of a custom solution, come with hidden costs, and present integration challenges with existing systems.

Another point to note is that industry-specific software requirements differ; thus, it is best to design software specific to the sector to which the business belongs. Generic software can be made for companies in IT, healthcare, gaming, tourism, and other sectors, but it will have limitations. You need custom software to resolve issues related to industry standards, customer engagement, and other unique business challenges.

• Custom software solutions offer a 30%-50% improvement in operational efficiency compared to off-the-shelf solutions. (10)

• Off-the-shelf software requires additional customization in 78% of cases, leading to hidden costs and integration challenges. (11)

• Tailored software increases customer satisfaction by 45% due to its alignment with specific business needs. (12)

5. Post-Pandemic Impact

The COVID-19 pandemic has changed the way software development works. It has made remote work, agile methods, cloud computing, security, and user experience crucial. Lessons from this time will guide future innovations and teamwork in software development.

• Remote work adoption increased by 400% since the start of the pandemic, and 70% of software development teams now operate fully or partially remotely. (13)

• Agile and DevOps practices surged in adoption post-pandemic, with 60% of companies prioritizing agile transformations to handle rapidly changing market demands. (14)

• Spending on cloud solutions grew by 23% during the pandemic and continues to rise as businesses prioritize remote collaboration. (15)

Current Trends in the US CSD Market

Many organizations struggle to get the most out of their custom software projects because they fall behind on current trends. 

In the fast-paced world of software development, trends change quickly—what’s popular today might be outdated tomorrow. Therefore, you must stay up-to-date on these changes.

Technology Trends:

1. AI and ML integration.

Integrating AI and ML into custom software development is a trend that's picking up with every passing year. Reasons are many - AI automates routine time-consuming tasks like coding, debugging, and testing, allowing developers to focus on complex challenges and improve efficiency. ML uses predictive analytics to analyze past data of projects and forecast timelines, helping project managers plan more accurately.

2. Low-code/no-code platforms.

Low-code is the future of software development. With drag-and-drop features, this modular approach allows developers and non-developers to build solutions quickly without writing code line by line. Businesses are adopting low-code/no-code platforms for their ease of use, speed, and cost efficiency, reducing development time by up to 90% (16). By 2025, 70% (17) of new enterprise solutions will use these technologies.

3. Blockchain and cybersecurity features for secure software.

Security is a critical element in software development. Blockchain is used to secure data from tampering and unauthorized access. It is especially useful for businesses handling sensitive information, e.g., healthcare and financial services. The blockchain tech reduces fraud by giving a tamper-proof trail of transactions. Moreover, including modern cybersecurity features like zero trust architecture, passwordless security has become necessary.

Business Trends:

1. Startups leveraging CSD for competitive differentiation.

Startups struggle to find ready-made software for their needs. Custom software helps them stand out by offering unique features. It also allows flexibility as the business grows, adapting to its changing needs and supporting growth/scalability.

2. Rise of subscription-based custom software models (SaaS + CSD hybrid).

Over the last few years, there has been a clear shift in the software industry. More and more companies are adopting subscription-based models instead. This trend of adopting SaaS plus custom software hybrids is due to the predictable revenue model it provides. Unlike traditional models, SaaS offers recurring revenue, helping companies plan for future growth more accurately.

Outsourcing and Nearshoring:

1. Role of US companies outsourcing development vs. in-house development.

According to Payscale (18), The average salary of an IT developer in the US is 71,508 USD, excluding hidden costs like sick leaves, insurance, social security, etc. Additionally, the teams require constant upskilling, which adds to your responsibility. To address these challenges, many US companies are now outsourcing development as a business strategy to access IT expertise at lower costs with less hassle. In 2023, 60% (19) of US businesses outsourced software development, and the trend continues.

2. Popularity of nearshoring to regions like Latin America.

Partnering with nearshore or offshore firms can save companies 40% to 70% of overall costs. US companies are increasingly adopting nearshore outsourcing to access skilled professionals in neighboring countries like Latin America. With time zone compatibility, strong cultural fit, and high English proficiency, this model ensures seamless collaboration and efficient project delivery. Nearshore outsourcing is projected to contribute 78 billion USD to Latin America's export sector post-2023.

Challenges and Opportunities

Modern companies often use customized solutions to address their business-specific needs and improve customer experiences. However, the custom software development market in the US faces notable challenges such as:

1. Rising costs of software development:

Building custom software is often more expensive than off-the-shelf solutions, and these costs are rising over time. This is due to the personalized development approach, rising IT staffing costs, and complex software requirements that demand advanced solutions and extensive testing.

2. Talent shortages:

Companies need skilled software developers, designers, and testers to build innovative digital products. However, this expertise is hard to find. The global shortage of developers is expected to grow from 1.4 million in 2021 to 4 million by 2025.

3. Cybersecurity risks:

The data on which the custom software solution works may be sensitive, and thus, more companies demand robust cybersecurity measures. However, the increasing complexity of cyberattacks makes security vulnerable for both the developer and the client. Without protection and compliance measures, they risk a data breach, financial loss, and damage to reputation.

Opportunities

Here are the various opportunities in the custom software development market.

1. Growth potential in small and medium-sized businesses (SMBs).

SMBs are vital to the US economy, contributing 44% of GDP (20), nearly half of all employment, and half of the 370 billion USD in overall tech spending. In some areas, SMBs outspend the large enterprises that tech providers traditionally target. 

From 2023 onward, SMBs are projected to grow at a CAGR of 24.1% (21). And custom software solutions offer an efficient way for SMBs to optimize workflows. 

2. Emerging sectors like fintech, health tech, and edtech.

Emerging sectors, such as healthcare, finance, and education, are set to benefit the custom software development market. With the advent of modern technologies, many innovative custom solutions are being developed for these sectors. 

Technologies like AI/ML, cloud, 5G, blockchain, etc., are primarily set to streamline routine procedures, such as online transactions, online teaching, robotic surgeries, online consultations/bookings, etc.

Conclusion

As we navigate this blog on the custom software development market of 2024, one thing is clear: the industry is full of opportunities.

Do’s and don’ts for you -

• Explore how tailored solutions can benefit your business and take advantage of the US's growing market for custom software development.

• Schedule a consultation with leading players in the industry to discuss how custom software can address your business needs.

• Integrating AI/ML, leveraging low-code/no-code platforms, and enhancing cybersecurity features in your custom software development strategy will help you stay ahead of your industry competition.

• Consider outsourcing or nearshoring strategies to access cost-effective development resources and specialized expertise in custom software solutions.

• Custom software development is an investment and not an expense. Embrace digital transformation and enhance operational efficiency with customized software for your company.

• Take the first step towards leveraging the power of custom software development to propel your business toward growth and success.

References

1. Custom Software Development Market Size, share & Trends Analysis Report by type (Mobile App, Enterprise Software), by deployment mode (Cloud, on-premise), by enterprise size, by industry vertical, by region, and segment Forecasts, 2024 - 2030. (n.d.). https://www.grandviewresearch.com/industry-analysis/custom-software-development-market-report

2. The Business Research Company. (2024). Custom Software Development Global Market Report 2024. In The Business Research Company. https://www.thebusinessresearchcompany.com/report/custom-software-development-global-market-report

3. U.S. Custom Software Development Market Size, share & Trends analysis Report by solution, by deployment (Cloud, on-premise), by enterprise size, by end-use, and segment forecasts, 2024 - 2030. (n.d.). https://www.grandviewresearch.com/industry-analysis/us-custom-software-development-market-report

4. MarketsandMarkets. https://www.marketsandmarkets.com/report-search-page.asp?rpt=devops-market

5. Gartner says cloud will be the centerpiece of new digital experiences. (2021, November 10). Gartner. https://www.gartner.com/en/newsroom/press-releases/2021-11-10-gartner-says-cloud-will-be-the-centerpiece-of-new-digital-experiences