Independent Software Vendors Market Size

Global Independent Software Vendors Market size was valued at USD 1.75 Billion in 2023 and is poised to grow from USD 1.99 Billion in 2024 to USD 5.65 Billion by 2032, growing at a CAGR of 13.9% in the forecast period (2025-2032).

The Independent Software Vendor (ISV) industry is undergoing a significant transformation driven by evolving technology ecosystems, shifting customer demands, and new partnership models. ISVs are at the forefront of innovation for cloud computing, artificial intelligence (AI), and software for vertical industries, and have assumed an important role in enterprise and consumer software. In fact, the U.S. Bureau of Labor Statistics (2024) forecasts employment for software publishing, which closely encompasses the activities of ISVs, to increase by 25% from 2024 to 2030, which is much faster than the average for all occupations. This increase is driven by companies’ increasing use of more specialized software to manage digital transformation projects.

Strategic collaborations are becoming a critical success factor. Salesforce, for example, reports that its AppExchange platform of ISV partners has grown by 40% in 2023, verticalization, or creating solutions for specific industries or verticals such as healthcare or financial services, being one of the main drivers of this growth. ISVs that make solutions specific to a niche market, while integrating closely with either AWS, Azure, or Google Cloud, are having more success. On the other hand, those not adjusting to these new demands are seeing a growth freeze or pressure to consolidate.

However, there are also challenges in the market. The costs of cybersecurity compliance are increasing, competition is coming from platform-native software, and regulations are changing, all putting pressure on ISV margins. For example, Microsoft’s announcement in 2024 about implementing stricter security requirements on the applications for Azure Marketplace, has added burden to ISV’s compliance and has led them to invest more on cybersecurity certifications such as FedRAMSP and SOC 2. In addition, the SaaS market has become saturated and moved to platform-as-a-service (PaaS) fueling customer demand for interoperability, which becomes a limitation for smaller ISVs who can’t as quickly scale.

Talent acquisition is another major constraint. The U.S. Chamber of Commerce’s 2024 “Workforce Report” also indicated that nearly 58% of software companies surveyed reported that they found it difficult to recruit skilled personnel to hire, particularly developers with AI and machine learning skills, that are particularly important for this kind of innovation for ISVs. If this scarcity is not addressed, expansion of operations and global competitiveness becomes a challenge for ISV’s.

How Growing Demand for Vertical-Specific Software Solutions driving the ISV’s Market?

One of the major factors behind the rapid growth of the ISV market is the requirement for customized, specialized solutions for various industries. Businesses today are looking for solutions that address the specific needs for compliance, operations and customer engagement that are inherent to their industry. Legacy off-the-shelf software also generally lacks the level of granularity and regulatory flexibility required in industries like healthcare, financial services, and logistics. Exploiting this space, ISVs are creating point solutions that seamlessly operate as part of the ecosystems of larger enterprise solutions like Salesforce, Microsoft Azure, or AWS. This shift is being propagated by greater investment in digital transformation, with IDC in 2024 reporting that “70% of enterprises worldwide have been focusing on vertical applications to solve specific business problems”. This focused demand creates a competitive advantage for ISVs versus generic software vendors in that ISVs are able to charge premium prices and it allows them to form longer-term relationships with their customers.

Recent market developments clearly reflect this trend. Veeva Systems, an ISV specializing in life sciences, reported a 14% annual revenue growth in 2024 driven by increased adoption of their regulatory-focused cloud solutions. Similarly, Guidewire Software, serving the insurance sector, noted a 12% increase in its subscription revenue in fiscal 2024 by offering tailored cloud services. Additionally, the U.S. Department of Health and Human Services’ 2024 technology modernization initiative explicitly recommended adopting vertical-focused digital solutions to improve efficiency, further opening opportunities for ISVs. These developments confirm that vertical-specific specialization is not just a short-term strategy but a sustainable growth engine for ISVs.

How Are Expanding Cloud Ecosystems and Strategic Partnerships Powering ISV Growth?

The rapid expansion of cloud ecosystems and strategic platform partnerships is significantly boosting the Independent Software Vendors (ISVs) market. As businesses have moved to cloud-based systems such as AWS, Microsoft Azure, and Google Cloud, the need for applications that adapted, customized, and expanded these systems grew. ISVs are positively affected by this ecosystem effect when they access a broad base of cloud customers that requires specific features and is not interested in developing custom software internally. In addition, the platform providers themselves promote participation by deploying co-marketing and technical support as well as revenue-sharing programs. The 2024 Microsoft Partner Report states that “more than 92% of their Azure customers are using at least one third-party ISV solution from Azure Marketplace”, which highlights how ISVs are an important component of the cloud ecosystem.

In 2023, Microsoft expanded its "ISV Success Program," providing technical and go-to-market support to over 1,400 ISVs, which led to a 30% increase in new ISV solutions published on Azure Marketplace by early 2024. Similarly, Amazon Web Services’ 2024 Partner Network report showed that 60% of its top-selling Marketplace solutions were developed by ISVs, with sectors like cybersecurity, AI automation, and industry analytics seeing the strongest traction. Google Cloud's ISV Partner Summit 2024 highlighted that ISV-led revenues grew by 25% year-over-year, thanks largely to co-sell initiatives and industry-specific partnerships.