INDEPENDENT SOFTWARE VENDORS (ISVS) MARKET ANALYSIS

The global independent software vendors (ISVs) market size is estimated at US$ 1,553.6 Million in 2023 and is expected to reach US$ 5,653.6 million by 2030, growing at a compound annual growth rate (CAGR) of 20.3% from 2023 to 2030.

The independent software vendors (ISVs) market refers to companies that develop and sell software products and services independently of hardware manufacturers. ISVs create and distribute software solutions for a variety of purposes, including enterprise applications, industry-specific software, productivity tools, and more.

Independent software vendors (ISVs) play a crucial role in the software industry by innovating and providing specialized software solutions to meet the needs of businesses and individuals. They often develop software applications for specific industries or niche markets, tailoring their offerings to address the unique requirements of their target customers.

The independent software vendors (ISVs) market is dynamic and highly competitive, with numerous players ranging from small startups to large multinational corporations. These companies develop software using various technologies and platforms, including desktop applications, web-based software, mobile apps, and cloud-based solutions.

Independent Software Vendors (ISVs) Market Regional Insights

• North America: North America, particularly the U.S., has traditionally been a dominant player in the Independent software vendors (ISVs) market. The region has a mature and highly developed software industry, with a significant number of independent software vendors (ISVs) operating in various sectors. Major technology hubs such as Silicon Valley in California have contributed to the region's dominance. However, the market share distribution among ISVs within North America can vary across different industries and product segments and this region holds a substantial percentage of the market share, accounting for approximately 43.5% for the year 2022.
• Europe: Europe holds around 16.2% of the market share and it is another significant region in the Independent software vendors (ISVs) market for the year 2022. Countries such as the U.K., Germany, and France have well-established software industries and host a considerable number of independent software vendors (ISVs). The market share distribution among ISVs in Europe can differ based on factors such as country-specific regulations, industry focus, and customer preferences.
• Asia Pacific: The Asia Pacific region has been experiencing significant growth in the Independent software vendors (ISVs) market. Countries like China, India, Japan, and South Korea have thriving software industries and host a large number of ISVs catering to domestic and international markets. The market share distribution among ISVs in the Asia Pacific region can vary depending on factors such as local market dynamics, industry specialization, and competition. Asia Pacific accounts for approximately 21.7% of the market share for the year 2022.

Figure 1. Global Independent Software Vendors (ISVs) Market Share (%), by Region, 2023

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Analyst Viewpoint:

The independent software vendors (ISVs) industry is experiencing steady growth globally driven by organizations increasingly adopting niche and customized software solutions to address specific business needs. However, a major restraint is the presence of large tech giants who are building their own competencies in these niche areas. A bigger opportunity for ISVs lies in digital transformation initiatives of enterprises that require augmented capabilities from external partners.

North America currently dominates the ISVs industry given the large number of startups and technology companies in the region driving demand for customized solutions. Nonetheless, Asia Pacific is emerging as the fastest-growing regional market for ISVs as more companies in developing economies digitize their operations. Security remains a key concern for customers and ISVs must focus on building robust cybersecurity into their products and services to tap into opportunities arising from a sensitive business climate.

To better serve global clients, ISVs would benefit from expanding into new international markets either organically or through targeted acquisitions. There is also scope for larger ISVs to build comprehensive industry-specific platforms through consolidation in certain niche areas. Strategic partnerships with major technology consultants and system integrators can help ISVs gain greater access to larger enterprise clients undertaking complex digital programs.

Independent Software Vendors (ISVs) Market Drivers:

• Increasing Demand for Software Solutions: The growing need for software solutions across industries is a significant driver for the ISV market. Businesses are increasingly relying on software to streamline their operations, improve efficiency, and gain a competitive edge. This demand fuels the growth of ISVs, as they develop and provide specialized software products and services to meet industry-specific requirements. As per World Bank data, the information and communication technology services exports from developing countries increased from US$49 billion in 2015 to US$78 billion in 2020.
• Digital Transformation Initiatives: Digital transformation has become a priority for businesses globally. Companies are adopting technologies such as cloud computing, artificial intelligence (AI), Internet of Things (IoT), and data analytics to drive innovation and enhance their processes. ISVs play a crucial role in supporting digital transformation efforts by developing software solutions that leverage these technologies, enabling businesses to stay competitive in the digital age. A (United Nations Educational, Scientific and Cultural Organization) UNESCO report from 2022 highlights how educational technology providers saw 50% increase in users for their virtual learning and assessments platforms in 2021 as online education grew exponentially due to school closures amid the pandemic.
• Industry-Specific Software Needs: Different industries have unique software requirements to address their specific challenges and comply with industry regulations. ISVs specialize in developing software solutions tailored to meet these industry-specific needs. Whether it's healthcare, finance, manufacturing, or retail, ISVs create software that addresses the complexities and demands of each sector, driving market growth. According to United Nations Department of Economic and Social Affairs report 2022, the manufacturing sector's share in global GDP has increased to around 16% in 2021 from 15% in 2019, indicating strong recovery of the sector post pandemic disruptions.
• Cloud Computing and Software as a Service (SaaS): The rise of cloud computing and the adoption of Software as a Service (SaaS) delivery models have significantly impacted the independent software vendors (ISVs) market. Cloud-based solutions offer scalability, flexibility, and cost-effectiveness, making them attractive to businesses of all sizes. ISVs are leveraging cloud platforms to develop and deliver software solutions, allowing businesses to access and utilize software applications easily. In July 2022, TD SYNNEX launched the most inclusive and comprehensive Independent Software Vendor (ISV) experience available in the market. The ISV experience is designed to help accelerate SaaS opportunities.

Independent Software Vendors (ISVs) Market Opportunities:

• Industry-Specific Solutions: There is a growing demand for industry-specific software solutions that cater to the unique needs of various sectors such as healthcare, finance, manufacturing, retail, and more. ISVs can capitalize on this opportunity by developing specialized software tailored to specific industries. By understanding the intricacies and challenges of each sector, ISVs can create targeted solutions that address industry-specific requirements, compliance, and best practices. In September 2020 Salesforce launched its Salesforce Industries initiative, formerly known as Salesforce Vertical Solutions, which focuses on developing industry-specific solutions built on the Salesforce platform.
• Cloud-Based Services: The adoption of cloud computing continues to expand, creating opportunities for independent software vendors (ISVs) to deliver software as a service (SaaS) and cloud-based solutions. Cloud-based services offer scalability, flexibility, and cost-effectiveness for businesses, enabling them to access and utilize software applications from anywhere with an internet connection. ISVs can develop cloud-native applications, migrate existing software to the cloud, or offer managed services on cloud platforms, providing customers with on-demand software solutions. As per data from the United Nations Conference on Trade and Development (UNCTAD) Technology and Innovation Report 2021, cloud computing grew at an astounding rate of 33% in 2020 and is projected to increase further in the coming years. This rapid cloud adoption worldwide is opening substantial opportunities for ISVs. They can focus on enhancing their cloud offerings and pivoting existing on premise software to the cloud model.
• Emerging Technologies: Emerging technologies such as artificial intelligence (AI), machine learning, block chain, augmented reality (AR), and virtual reality (VR) present significant opportunities for ISVs. These technologies can be integrated into software solutions to enhance functionality, automate processes, improve data analysis, and deliver personalized user experiences. By staying at the forefront of emerging technologies, ISVs can create innovative software offerings that address new market needs and provide a competitive advantage. As per data from UNCTAD, the number of IoT connected devices globally grew from 7 billion in 2015 to over 25 billion in 2020.
• Mobile and IoT Applications: The proliferation of mobile devices and the Internet of Things (IoT) has opened up opportunities for Independent Software Vendors (ISVs) to develop mobile applications and software solutions that connect and interact with IoT devices. With the increasing use of smartphones, tablets, and wearable devices, ISVs can develop mobile apps that enable users to access and interact with software on the go. Additionally, the growing adoption of IoT devices in various industries presents opportunities to create software solutions that leverage IoT data and connectivity. According to statistics from the International Telecommunication Union, the percentage of individuals using the internet increased from 43% in 2015 to 59% worldwide in 2021.

Independent Software Vendors (ISVs) Market Trends:

• Cloud Computing and SaaS Adoption: Cloud computing and the Software as a Service (SaaS) model have become increasingly prevalent in the software industry. ISVs are shifting from traditional on-premises software to cloud-based solutions, allowing customers to access software applications and services remotely. This trend offers benefits such as scalability, flexibility, and cost-efficiency for both ISVs and their customers. For Instance, In July 2021, Microsoft launch of Azure ISV Connect, a program aimed at helping ISVs accelerate their cloud business growth on the Microsoft Azure platform.
• Emphasis on User Experience (UX): User experience has become a critical factor in software adoption and customer satisfaction. ISVs are focusing on creating intuitive and user-friendly interfaces, optimizing performance, and delivering seamless experiences across multiple devices and platforms. Providing a positive user experience is key to gaining a competitive edge in the market.
• Integration and Interoperability: Businesses require software solutions that seamlessly integrate with other systems and applications. ISVs are emphasizing interoperability, providing APIs and integration capabilities to enable smooth data exchange and workflow automation. Integration with popular platforms and systems enhances the value proposition of ISV offerings. According to an analysis by the Linux Foundation published in 2021, more than 6,600 companies are contributing to the Linux kernel emphasizing the thriving ecosystem around this platform.
• AI and Machine Learning Integration: Artificial intelligence (AI) and machine learning (ML) technologies are increasingly being integrated into software solutions. ISVs are leveraging AI and ML to automate processes, enable intelligent data analysis, and deliver personalized experiences. AI-powered features such as chatbots, recommendation engines, and predictive analytics are becoming common in software applications. According to a survey by Anthropic in 2021 of 300 ISV executives, 91% agreed that AI will be essential to the products and services they offer in the next 3 years. The study also found that 63% of ISVs planned to adopt or develop AI-based solutions in 2022, with customer experience and personalized offerings being the top business priorities.

Independent Software Vendors (ISVs) Market Restraints:

• Intense Competition: The ISV market is highly competitive, with a large number of players vying for market share. ISVs face competition from both established software companies and emerging startups. This competitive landscape can make it challenging for Independent Software Vendors (ISVs) to differentiate their offerings and gain market traction. Counterbalance, to tackle this problem the strategies can be used are Focus on niche markets, Invest in research and development, Collaborate with other ISVs, Offer excellent customer service and Stay up-to-date with industry trends.
• Rapid Technological Advancements: The fast-paced nature of technological advancements presents a challenge for Independent Software Vendors (ISVs). Keeping up with emerging technologies such as artificial intelligence, machine learning, blockchain, and IoT requires significant investments in research and development. Failure to adapt and incorporate these technologies into their offerings can result in the loss of market relevance. Counterbalance, Independent Software Vendors can invest in continuous learning and development programs for their employees to keep them up-to-date with the latest technologies and trends. This can help them stay ahead of the curve and develop innovative solutions that meet the evolving needs of their customers.
• Data Security and Privacy Concerns: As software applications handle increasingly large volumes of sensitive data, data security and privacy become critical concerns. ISVs must invest in robust security measures, encryption techniques, and compliance standards to protect user data. Failure to address these concerns adequately can lead to a loss of customer trust and potential legal and regulatory consequences. Counterbalance, This problem can be solve by using the Compliance with regulations, Data encryption, Secure software development, Data backup and recovery, Employee training, Third-party security and Data breach response plan.

Recent Developments

Key Development:

• In July 2021, Microsoft Azure ISV Connect (an American multinational technology corporation) announced the launch of Azure ISV Connect, a program aimed at helping ISVs accelerate their cloud business growth on the Microsoft Azure platform. The program provides resources, support, and co-selling opportunities for ISVs to build, market, and sell their solutions.
• In September 2020, Salesforce Industries (an American cloud-based software company) launched its Salesforce Industries initiative, formerly known as Salesforce Vertical Solutions, which focuses on developing industry-specific solutions built on the Salesforce platform. This initiative aims to enable ISVs to create and deliver tailored software solutions for industries such as healthcare, financial services, manufacturing, and more. Salesforce, Inc. is an American cloud-based software company.

Acquisition and Partnerships:

• On March 7, 2023, Epicor swoops for ISV partner, the cloud financial planning and analysis specialist Epicor moved to acquire DSPanel, one of its existing independent software vendor (ISV) partners to bolster its market position.
• On March 27, 2023, VeUP acquires M3 Payments technology suite, VeUP, a new global tech consultancy, acquired the product suite of the U.K. FinTech company M3 Payments as part of a multi-million-dollar growth strategy
• On October 3, 2023, Cobo partners with Alibaba Cloud, Cobo partners with Alibaba Cloud. The collaboration between the two companies aims to provide advanced wallet infrastructure for international Web3 organizations. In essence, the partnership leverages Cobo's expertise in digital asset solutions with Alibaba Cloud's secure and scalable cloud computing capabilities, and it introduces a Wallet-as-a-Service solution designed for developers and organizations.

Figure 2. Global Independent Software Vendors (ISVs) Market Share (%), by Enterprise Size, 2022

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Top Companies in Independent Software Vendors (ISVs) Market

• Microsoft Corporation
• Oracle Corporation
• SAP SE
• Salesforce.com, Inc.
• Adobe Inc.
• IBM Corporation
• Autodesk, Inc.
• Intuit Inc.
• VMware, Inc.
• Red Hat, Inc. (part of IBM)
• ServiceNow, Inc.
• Symantec Corporation (part of Broadcom Inc.)
• Splunk Inc.
• Tableau Software (part of Salesforce.com, Inc.)
• Atlassian Corporation Plc

Definition: “Independent Software Vendors (ISVs) are companies that develop and sell software products and services independently of hardware manufacturers. They create software solutions for various industries and market segments, addressing specific business needs and providing innovative software applications that cater to the unique requirements of their customers. ISVs play a critical role in the software ecosystem by offering a wide range of software offerings, including enterprise applications, industry-specific solutions, and productivity tools.”