The Rise of Developer Tools

Software developer tools are becoming a major industry. Last year the venture capital community plowed $640 million into software development tool startups. Recent exits in the space from Rally Software and Crashlytics for valuations of $315M and $100M respectively, and venture capital funding to the industry growing 77% annually, something new is happening.

You can’t swing a cat in Seattle without hitting a software developer. Before the Amazon boom the region had 55,000 developers. Today Amazon hires 5,000 developers each year. Coders once used multipurpose integrated development environments but now use dozens of free tools to build, test and ship code in hours.

This is a far cry from the Microsoft Visual Studio dynasty. Launched in 1997, the Microsoft IDE was and still is the most popular developer tool. But not cheap. A Visual Studio license costs about $6,000 per year, a big turnoff for frugal startups. Other tools serve niche requirements, like Intel Parallel Studio or one of more than 30 debuggers like FusionDebug.

Part of the developer tool growth is the growth of the workforce itself. The U.S. government predicts that the developer workforce will grow 22% over the next ten years, and many in Silicon Valley would argue that such an estimate is conservative.

Ultimately, more customers means more revenues and greater potential for building sustainable companies. Perhaps no company embodies this trend as well as Atlassian, which had revenues of $150 million in fiscal year 2013 and was recently valued at $3.3 billion by investors.

I would posit that strategic control is the end game for world’s 18 million developers and the tools they use. If you want to control the future, you need to control software developers. Tools vendors can steer the industry as long as they don’t get hit by the swinging cat.