How to Choose the Right NAICS Code for IT Services

North American Industry Classification System (NAICS) codes aren't just bureaucratic jargon; they're a key part of understanding and navigating government spending patterns. For information technology (IT) service providers, selecting the appropriate NAICS code—such as 541511 for Custom Computer Programming Services or 541512 for Computer Systems Design Services—is essential. The right code aligns your offerings with federal procurement needs, increasing your chances of securing contracts. The wrong one? It could keep you invisible to agencies looking for exactly what you offer.

To maximize your opportunities, you need to stay on top of which NAICS codes are pulling in the most funding and make sure your business is positioned accordingly. That’s how you compete—and win—in federal IT contracting.

What Are NAICS Codes and Why are they Important?

NAICS codes are the federal government’s way of categorizing businesses based on their primary economic activity. These codes help agencies manage budgets, track spending, and maintain consistency across thousands of industries and vendors. 

If you’re considering government contracting, NAICS codes can be a powerful tool. They provide insight into where federal money is going, helping you identify opportunities you might otherwise overlook. For example, while aircraft manufacturing pulls in a massive chunk of federal contracts (no surprise there), other high-dollar categories like computer systems design services (541512), custom computer programming services (541511), human resources (541612), administrative management (541611), and data processing (518210) offer more accessible entry points—especially for small businesses.

Unsurprisingly, many top-funded NAICS codes belong to the defense industry, since it accounts for the largest share of federal spending. However, IT NAICS codes have been steadily climbing, with software publishers (511210), computer facilities management services (541513), and other computer related services (541519) seeing consistent growth in government contracts. 

If you’re in IT, picking the right NAICS code for IT services can determine whether you get noticed or get ignored.

How the NAICS Code System Works

NAICS codes follow a hierarchical structure:

• The first two digits represent broad sectors (e.g., 54 = Professional, Scientific, and Technical Services).
• The next digits refine the category into subsectors, industry groups, and individual industries.
• The more digits, the more specific the classification.

That said, NAICS codes aren’t perfect. Some industries—like the creator economy (think YouTubers, influencers, and digital content creators)—don’t have dedicated NAICS codes, forcing businesses to choose the closest match. The same goes for emerging tech sectors that don’t fit neatly into existing classifications. In such cases, businesses often rely on cross-references to related industries to determine the best possible NAICS code for their offerings.

Common NAICS Codes for IT Services

Federal agencies allocate billions of dollars to IT, computer hardware, and computer-related services each year, and we’ve pulled together some of the trends that show where the demand is strongest. If your business operates in one of these NAICS categories, targeting the agencies that use them most regularly can increase your chances of securing high-value contracts.

Based on data from USASpending.gov, in fiscal year 2023 alone, the federal government allocated significant budgets to IT-related services.

NAICS 541519 (Other Computer Related Services) – $7.57 billion

Firms in this category provide IT project management and outsourcing, offer cybersecurity consulting and risk assessment, deliver data recovery, backup, and storage services, provide IT helpdesk and technical support, and manage IT services and cloud hosting.

The Department of Defense (DoD), Department of Veterans Affairs (VA), and Department of Homeland Security (DHS) have been the largest buyers in this category. 

NAICS 541511 (Custom Computer Programming Services) – $5.85 billion

Businesses under this code develop custom software applications for businesses and government agencies, create mobile apps and cloud-based solutions, provide software development consulting and system integration, develop cybersecurity software tailored to specific agency needs, and write, modify, and test proprietary software.

The DoD, Department of Health and Human Services (HHS), and DHS have spent heavily on custom software development and enterprise system integrations.

NAICS 511210 (Software Publishers) – $4.90 billion

Software publishers under this NAICS code develop and license software products such as office productivity software and security applications, provide software-as-a-service (SaaS) solutions for businesses and government agencies, publish video games and entertainment software, create enterprise software platforms like CRM and HR management tools, and offer software updates, patches, and technical support.

The DoD, HHS, and General Services Administration (GSA) are the top spenders in this category.

NAICS 541512 (Computer Systems Integration Design Services) – $2.62 billion

Companies under this code provide IT consulting and strategy development, design and implement IT infrastructure and cloud solutions, offer systems integration and enterprise resource planning (ERP) services, customize and configure commercial off-the-shelf (COTS) software, and develop data analytics and business intelligence solutions.

No surprise that the DoD, GSA, and HHS are the biggest buyers in computer systems design services.

NAICS 334111 (Electronic Computer Manufacturing) – $956 million

Businesses in this category manufacture computers and server systems, produce mainframes and high-performance computing equipment, develop workstations and personal computers, design and assemble storage devices and peripheral equipment, and manufacture custom computing hardware for specialized applications.

And again, the DoD, VA, and HHS lead spending in this category.

Other professional IT related NAICS codes include NAICS 518210 (Data Processing, Hosting, and Related Services) covering data processing facilities and data processing services or NAICS 54141 (Highly Adaptive Cybersecurity Services) covering consulting and development services related to cybersecurity. 

These figures make it clear: if you're in IT and not paying attention to your NAICS code, you're leaving money on the table.

What NAICS Code Should I Use for My Business?

Beyond categorization, NAICS codes play a direct role in government procurement. Agencies use them to determine whether your business qualifies for certain contracts, including small business set-asides. Since the system is self-assigning, it’s up to you to select the most relevant code for your company. Choose wisely, because an ill-fitting NAICS code can limit your eligibility for lucrative opportunities.

Steps to Identify the Best NAICS Code

1. Review your core services and revenue sources
   Your NAICS code should reflect the primary service or product that generates the most revenue for your business. If you provide custom computer programming services (NAICS 541511) but also offer computer facilities management services (NAICS 541519), choose the code that best aligns with your main source of income.
2. Consider overlapping or secondary NAICS codes
   Many businesses qualify for multiple NAICS codes, especially in computer systems design services and IT support services (or, in a different industry, you might offer both engineering services alongside research and development). If your offerings span different areas, you may need multiple codes to reflect your full range of capabilities.
3. Check what government agencies are buying
   Using USASpending.gov, you can research how much federal agencies have spent under different NAICS codes. If you're unsure where your business fits, look at similar companies and see which codes they use for government contracting.
4. Verify NAICS size standards
   The Small Business Administration (SBA) assigns size standards to each NAICS code, determining whether a business qualifies as "small." Choosing a code where you qualify as a small business could make you eligible for small business set-aside contracts, which can significantly increase your chances of winning government work.

Choosing the wrong NAICS code can significantly impact your ability to secure government contracts. Here are some common pitfalls to avoid:

• Misclassifying your business can result in missed set-aside opportunities and prevent you from appearing in agency market research, costing you potential contracts.
• Many businesses make the mistake of guessing their IT NAICS code without checking federal spending data to confirm that contracts are actually being awarded under it.
• While your primary NAICS code is essential, overlooking secondary services that could qualify under different categories limits your potential, so consider expanding your eligible codes for more opportunities.

Tools and Resources to Help Choose the Right NAICS Code

Your NAICS code is more than just an identifier—it determines where your business fits within federal procurement (and you need it for tax preparation—you’re welcome). If you’re a GSA Schedule contractor or considering selling to the federal government, taking the time to assign the correct NAICS code (or multiple codes) is a critical step in building a successful government sales strategy. 

Use the tools available, research agency spending habits, and make sure your classification accurately reflects what you bring to the table.

At Summit Strategy, we leverage our extensive resources, industry connections, and deep experience to help you navigate the complexities of the government market—everything from helping you determine your NAICS code to writing proposals that help you win federal, state, and local contracts in your industry. 

Let us guide you in finding the right fit for your business, ensuring you’re positioned for success. Contact us today to get started and discover how we can help you secure the contracts you deserve.