The software industry serving the preK-12 market has grown by more than 3% over the course of 2011 to about $7.7 billion, according to a report put together by the Consulting Services for Education on behalf of the education division of the Software and Information Industry Association. The report – titled 2011 U.S. Education Technology Industry Market: PreK-12 Report – provided an analysis of data voluntarily submitted by 105 service providers, developers and publishers from around the country.

This is the second annual vendor study conducted by the SIIA and examines the size, direction and trends of the market for educational software and other digital educational content. The authors also looked at how the growth in the industry plays out in context of government policy on education and education funding, as well as in relation to other related industries like hardware and technology.

We define “software and digital content/resources” narrowly as education software and related platforms, products, and services sold to PreK-12 institutional markets within the U.S. These products and services can be used both in and outside of the classroom, including professional development but excluding hardware. The market for hardware, network infrastructure, and telecommunications and Internet services, which would dramatically increase the total market, is not included here.

The authors identified roughly 581 companies that fall in their target zone, dividing them up into three “market segments”: Companies that derive most of their revenue from content, those that provide instructional support and assessment, and those that sell administrative support tools that go to power the schools’ and districts’ IT backbone.

Those selected were asked to respond to an online survey, including questions about total revenue and revenue broken down by sector over the FY2011. For companies that didn’t respond, publicly available financial data was used to determine performance.

Based on our survey data, related research, and statistical extrapolations, we estimate the U.S. institutional market for education software and digital content/resources at $7.76B.

Researchers also observed several trends in the market. The biggest moneymaker for companies appeared to be Instructional Support, not a surprising finding in light of recent moves by many states to transition to a more data-rich and objective teacher assessment systems. The content segment was similarly substantial, although slightly smaller, with digital content bringing in the lion’s share of that sector revenues.

Content revenue was one of the only sectors to shrink over 2011 – by about 2% – however, those losses were more than made up for by growth in the Instructional Support sector which grew by an astonishing 17%.