Custom software is very quickly becoming so expensive, only the richest companies can afford it

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A recent article on AG Connect, a Dutch IT website, states that half of all IT professionals is going to either switch jobs or demand a big raise this year. In Great Britain it’s even worse, with 76% of all IT specialists looking to switch jobs. Everything considered, companies will be paying a premium for their IT specialists this year.

The reasons for IT specialists to demand a raise or switching jobs is because they feel they deserve to be paid more. Some even said that the global shortage of IT specialists was the sole reason to ask for a raise.

Demand for custom software

The world-wide demand for custom software has increased enormously over the past 5 years, Forrester Research found. From USD 43 billion 5 years ago to USD 136 billion now. That is more than 25% growth per year!

The most important reasons for the growth of the demand for custom made software are the gap between installed software and cloud based software, mobile applications and niche players with complex needs that cannot be met by standard software.

The IT specialist shortage in numbers

IT specialists are in short supply, as can easily be seen in the top 20 most desired skills on Out of that top 20, a whopping 12 are IT specialist skills. So there seems to be a big demand for them. But how big is that exactly?

In the United States, the number of graduates in Computer Science was about 50.000 last year. If we compare that to the number of job openings for software engineers in the US, we see a huge gap. There are 223.000 job openings. This shortage is of course reflected in the average salary, which in the US is already at USD 100.000 for an entry level software engineer. Even higher salaries are very common.

The number of graduates is expected to grow over the next years though, to about 400.000 graduates in 2020. The big problem is that the expected growth of the number of job openings is even larger. In 2020 it is expected that the US alone has about 1.4 million job openings for software engineers.

Let’s do the math

We have all learned that if demand increases, price also increases. The question of course is, how much will the salary of entry level software engineers rise, given the numbers discussed?

Simply filling out the formulas for supply and demand gives a number that may come as a shock. On the low end we’re talking USD 270.000. And at the top-end it is USD 335.000. Please note that this does NOT include inflation, and that we’re talking about people who have just graduated university.

And at that price level, it seems that making custom software will simply be too expensive for all but the richest companies.

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