California may have Silicon Valley, but a number of other states depend more on software for the health of their economies, according to a new report. Companies such as Apple and Google make up almost 4 percent of California's GDP, and while that's a lot for a single industry, it lags behind states like Washington, Virginia and Massachusetts.
It's not just jobs: Washington, Nebraska and Vermont are ahead of the Golden State in terms of software-related research and development. More than 40 percent of total R&D investment in those states comes from software companies, according to the new study conducted by the Economist Intelligence Unit and software trade group BSA.
"The data clearly demonstrate that the positive impact that software companies are having is not just in a handful of states as is commonly believed, but across the United States as a whole," said BSA CEO Victoria Espinel. "When we talk about the impact on people's lives, it's much broader than the picture of software that existed 10 years ago."
Overall, the study found that software directly employed 2.5 million people in the United States in 2014, adding more than a trillion dollars to the economy either directly or indirectly. Here's how the direct GDP impact breaks down state by state:
While most Americans are familiar with the big household names in California and Washington state, less-well-known companies are economic powerhouses in their own right in other states.
In Virginia, software companies have proliferated to serve the digital needs of the government. Companies like CSRA provide information technology services for a variety of government contracts, including $115 million to develop software for the U.S. courts case-management system, and $54 million for environmental simulations. The company employs about 18,000 worldwide, nearly 5,000 of whom work in Virginia, according to a company spokesperson.
Other major employers include CACI, SAIC, Accenture Federal Services and Oracle, according to Yes Virginia, the state's economic development organization. Over the past 10 years, tens of thousands of jobs and more than $12 billion in pledged investments have flowed into the state from the IT sector.
"Virginia being at the top of the list is not a surprise for us," said Vince Barnett, vice president of communications for Yes Virginia. "We have the highest percentage of tech workers per capita in the country, and Northern Virginia is just riddled with high technology companies and data centers."
Massachusetts too has its own massive software businesses such as EMC, the cloud-computing company that Dell plans to acquire for $67 billion. According to the company, it has 9,000 employees in the state. The Massachusetts software sector saw "outstanding" 3.5 percent employment growth from 2014 to 2015, according to Jay Ash, secretary of housing and economic development for the state.
"Over the past year, Massachusetts has also added two digital powerhouses, with GE and IBM Watson both relocating to the state," said Ash in an email. "The BSA study confirms what Bloomberg, the U.S. Chamber of Commerce and other national studies have found, that the mix of leading tech companies, strong research institutions and top-tier talent is setting Massachusetts apart."
Of course, the very top of the list isn't as surprising. Washington, the home of Amazon and Microsoft, has the highest portion of state GDP coming from software companies and the highest percentage of R&D — a stunning 63 percent.
Still, when it comes to the percent of overall jobs coming from the industry and the gross number of jobs, the state falls behind Virginia and Massachusetts. Even in states like Nebraska, Arkansas and Missouri, software is an important driver of state economies and job-creation.
"Software is having an impact not just on every sector in the United States, but in almost every state in the United States, and I think that's very telling," said Espinel.