The Rise of the Independent Software Vendor



What is an ISV?
Independent software vendors (ISVs) develop, market and sell software and applications that run on another company’s platform or software. They are companies that typically develop a particular type or class of application software that can work across different operating systems and hardware platforms.

Independent software vendors are independent from hardware and operating system vendors. They develop customized software solutions instead of developing platforms. Some examples of popular ISV software include Tax preparation software like TurboTax, accounting systems like QuickBooks, CRM (Customer Relationship Management) solutions like Salesforce and video conferencing tools like Zoom.

Why do ISVs matter?
ISVs play an important role in the technology ecosystem by innovating new software solutions and driving technology advancements. Some key reasons why ISVs are significant:

– They extend functionality: ISVs build new applications and extensions that provide additional capabilities on top of existing platforms like Windows or Android. This allows platforms to flexibly scale by harnessing third-party development.

– Drive industry specialization: ISVs focus on developing deep expertise in specific verticals or problem domains. This allows for more specialized solutions tailored for industries like healthcare, education, manufacturing etc.

– Fuel customer choice: By having many independent ISVs building solutions, customers have more options to choose software tailored to their specific needs. This competition drives better quality, features and pricing.

– Grow technology use cases: ISVs pioneer new ways technologies can be applied by envisioning novel software types and scenarios. This expands the addressable market for platforms and creates new categories.

– Contribute to platform innovation: Success of popular ISV applications incentivizes hardware and OS vendors to build new capabilities. ISV needs also shape the evolution of programming frameworks and interface standards.

– Job creation: ISVs create many direct and indirect jobs involved in developing, marketing, selling, implementing and servicing the independent applications they produce. This is a major contributor to the digital economy.

How have Independent Software Vendors (ISVs)  evolved over time?
ISVs have come a long way from their early origins. Some of the key milestones in their evolution include:

– Mainframe era (1960s-1970s) – Early ISVs developed software for mainframe computers like IBM and targeted specialized tasks like payroll processing. These applications were often customized to specific customer needs.

– PC software boom (1980s) – The rise of personal computers allowed ISVs to proliferate by addressing a large consumer and small business market with easier to use applications. Companies like Microsoft and Lotus became major players.

– Client-server systems (1990s) – ISVs adopted client-server architecture to build scalable, networked applications for growing organizations. Database management and enterprise resource planning software were popular.

– Cloud computing shift (2000s) – Leveraging cloud infrastructure enabled ISVs to deploy Software as a Service models and do away with local installations. This drove the explosion of SaaS companies like Salesforce, Workday and many others.

– Mobile applications (2010s) – Emergence of smartphones led ISVs to create mobile versions of software or reconceive applications from the ground up for mobile form factors. Geolocation services also emerged.

– Artificial intelligence (today) – ISVs infuse AI capabilities like predictive analytics, computer vision and natural language processing into their solutions to automate tasks and gain actionable insights from data.

Challenges for Independent Software Vendors (ISVs)
While the opportunities are large, ISVs also face certain unique challenges in today’s competitive environment:

– Platform dependence: ISVs rely on external platforms and changes made by OS/infrastructure vendors can impact applications or require substantial updates. Cloud lock-in is also a risk.

– Short innovation cycles: To stay relevant, ISVs have to aggressively innovate their offerings in tune with rapid tech changes. Development requires sizable investments and risks.

– Fierce competition: The booming app economy has intensified rivalry with many startups offering similar solutions. Customer acquisition and retention costs are high.

– Skilled talent crunch: Building high quality, cutting-edge software demands top-caliber technical workers who are in short supply. Compensation needs to be highly competitive.

– Managing growth: Successful ISVs face growing pains sustaining product quality and scaling operations as the customer base expands rapidly post-initial traction. Overheads increase substantially.

The future looks bright
Despite challenges, the future prospects for ISVs stay bright on account of secular technology trends accelerating over the coming years:

– Cloud will open new monetization models like software licensing and consumption-based pricing. ISVs can focus on innovation vs infrastructure.

– AI and analytics capabilities will demand new generation of applications across all industries transforming how work gets done.

– Edge/IoT networks will empower devices with intelligence necessitating associated software ecosystems.

– New programming languages, frameworks and coding environments will level the playing field for startups.

– Emerging technologies such as 5G, AR/VR, blockchain have untapped horizons for creative ISV problem solving.

With ongoing digital transformation, the role of Independent Software Vendors (ISVs) in developing specialized solutions to power the modern digital enterprises will continue gaining importance. Those that can sustain agile development cycles and leverage future platforms effectively stand to prosper immensely.


  1. Source: Coherent Market Insights, Public sources, Desk research
  2. We have leveraged AI tools to mine information and compile it