Which One Should You Use?

Have you ever wondered what the business code is for software development? Maybe you’re a small business owner trying to classify your company, or maybe you’re just curious about the industry. Whatever the reason, understanding NAICS and SIC codes can be confusing, especially when it comes to specific fields like software development.

In this article, we’ll dive into the world of NAICS and SIC codes and explore the specific code for software development.

Did you know that according to the Bureau of Labor Statistics, employment in software development is projected to grow 11% from 2019 to 2029? With such rapid growth, it’s no wonder there’s confusion around how to categorize this industry.

So let’s get started by breaking down what NAICS and SIC codes are and why they matter for businesses in the software development field.

What is a Business Code?

A Business Code is a series of numbers used to identify the primary activities of a business. It is typically categorized by either the North American Industry Classification System (NAICS) or the Standard Industrial Classification (SIC) code, which are used to group businesses together based on their products or services. These codes are useful for market research, analysis, and government reporting purposes.

What is a NAICS Code?

A NAICS (North American Industry Classification System) code is a 6-digit number that identifies the industry a business is in. It’s used by government agencies to collect and analyze data on different industries. The code helps businesses identify their competitors, customers, and suppliers based on industry classification.

NAICS Code Meaning

The numbering system for NAICS codes works in the following manner:

• Numbers 1 and 2:  Indicate the economic sector in which the company is located
• Number 3: You will find the company’s sub-sector
• Number 4: Indicates the industry group that the company is a member of
• Number 5: The company’s particular industry is identified
• Number 6: The national industry of the company is identified

As a result, every NAICS code relates to an individual business and describes what it does

NAICS Code for Software Development

The NAICS (North American Industry Classification System) code for software development falls under the broad category of “Custom Computer Programming Services”.

The specific code depends on the type of development, such as applications or systems software. Please find below a list of NAICS and SIC codes commonly used in the software development industry:

What is a SIC Code?

A Standard Industrial Classification (SIC) code is a four-digit numerical code assigned to industries in the United States to identify and classify businesses. It was replaced by the North American Industry Classification System (NAICS), which uses six-digit codes, including for software development.

SIC Code Meaning

The SIC codes have four digits and there are more than 1,000 unique codes nationally recognized.

• The first two digits are used to identify the major group, which is then further divided into 12 groups at higher levels
• The third digit reveals a little more detail – more specific industry groupings
• The fourth digit shows the industry sector

The official US Standard Industrial Classification code is always four digits; however, some private companies use six, seven, or eight-digit versions of these codes for more specific marketing or research.

SIC Code for Consulting Businesses

The SIC code for Software Development is 7371, which falls under the major group category of “Computer Programming, Data Processing, and Other Computer Related Services.” This major group includes establishments primarily engaged in providing services, such as computer programming, software development, data processing, and other computer-related services.

To further help you identify the specific types of businesses included in the SIC code for Software Development, below is a table of SIC codes related to this industry:

Table of SIC Codes for Software Development:

What is the Difference Between NAICS and SIC Codes?

The North American Industry Classification System (NAICS) and Standard Industrial Classification (SIC) codes are used to categorize businesses for various purposes, including government statistics and market research. While both systems serve a similar purpose, there are some key differences between them.

NAICS codes were introduced in 1997 to replace the SIC system. NAICS is used primarily by the United States, Canada, and Mexico, while SIC codes are still used in other countries. One significant difference between NAICS and SIC codes is their structure. NAICS codes are organized into sectors, sub-sectors, industry groups, and industries, while SIC codes consist of ten divisions based on broad industry categories.

Another difference is that NAICS codes are updated every five years to reflect changes in the economy, while SIC codes have not been updated since 1987. As a result, NAICS codes provide more up-to-date information on industries, including software development. In fact, the NAICS code for software development is 541511, while the SIC code for computer programming services is 7371.

Conclusion

In conclusion, we have discussed the importance of Business Codes (NAICS & SIC) for software development companies. These codes help businesses in various ways, including identifying their competitors, obtaining government contracts and funding, and more. It’s essential to choose the correct code that accurately represents your business.

If you want to learn more about software development and related topics, check out the BetterStudio blog. We offer a variety of tutorials and articles on this subject and more.

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Thank you for reading our article. If you have any questions or problems related to this topic, please feel free to ask us in the comment section below.