The European Software 50

The Infoconomist European Software Top 50 is available for download. You will need Acrobat Reader to read it.

John Olsen, the US-born president and chief operating officer of Business Objects, the French business intelligence tools vendor, has a sobering thought for other bosses of European software companies: “I think the software industry here is hurting much more than it ever was in the US.”

Olsen spends part of the year in France and the remainder at Business Objects’ California office, and so is well qualified to compare economic indicators across both continents.


Table highlights

Sales up: Combined revenue of the current top 50 in their previous year was €15.7bn; now it is €18.4bn, a rise of 17%.

Poor saps: Sales at SAP were €7.3bn; combined sales at the remaining 49 companies were ‘only’ €11.1bn.

Less profitability: Only 26 companies posted a net profit; last year’s table had 33 companies trading in the black.

Stunted growth: Only 25 companies grew more than 10%; 14 companies shrank.

Thinning margins: Check Point Software is the only company with net margins of more than 20%.

Off a cliff: Companies with the steepest revenue falls were Intershop (down 44%), Kewill (-30%) and Autonomy (-20%).

Geographical split: A total of 22 companies are from the UK, eight are from Germany and seven from France; no other country fielded more than four.



Most of all, he cites a far wider sense of foreboding among clients on this side of the North Atlantic. “We are still getting lots of calls, lots of interest,” he says, “but it is taking so much longer to approve deals. What used to take two signatures now takes 27. No one wants to make any kind of commitment.”

These are views and experiences that resonate throughout Europe’s software sector. But it gets worse. Olsen also supports the increasingly popular notion that an eventual recovery in Europe will lag far behind a similar upturn in the US.

The Infoconomy Index, which measures the overall growth rate of the information technology industry by tracking the most recent financial results of the world’s most important publicly listed IT companies, found that the European industry plunged into recession as recently as June 2002 — some 10 months after the US industry. Many executives believe that there will be a similar time lag when it comes to recovery too. “The European market has always tended to trail the US by six to nine months,” says Greg Brown, CEO of Micromuse, the network management vendor that enjoyed the biggest growth (72%) of any European software company last year.

One of the most striking features of Infoconomist‘s European Software 50 (see table) is how it compares with the worldwide picture (see The Global Software 100 feature). At €18.4 billion, the combined annual revenue of Europe’s top 50 is equivalent to only about eight months’ sales at US giant Microsoft, the world’s biggest software company. And only the top 20 from the European software industry made it into the Global 100.

The table also highlights the poor record of profitability in the software sector during 2001/2002, with almost a third of Europe’s 50 most successful companies actually trading in the red. For most vendors, big and small, profitability is now firmly at the top of the agenda — a fact underlined by widespread restructuring and cost-cutting programmes.

The most traumatic consequence of this has been the loss of hundreds of thousands of jobs across the industry. But many leading figures in the industry

Fastest growers
Company Main business Rev (€) Growth
Micromuse Network mgmt s/w 238.0m 72%
Unit 4 Agresso Business apps s/w 208.2m 72%
Systems Union Accounting s/w 126.2m 46%
GL Trade Financial trading systems 102.1m 46%
Ubi Soft Entertainment s/w 369.0m 42%
Software AG Database, integration s/w 588.5m 41%
IFS Business apps s/w 334.8m 40%
Marlborough Sterling Fin svcs &CRM s/w 112.3m 39%
London Bridge Credit/customer mgmt s/w 119.3m 31%
Infogrames Entertainment s/w 674.3m 29%

dismiss suggestions that there has been a substantial ‘brain drain’.

What’s more, Pierre Gatignol, president and CEO of GL Trade, the French financial software company, goes so far as to suggest that the job cuts have “helped to stabilise the market”. “Two years ago it was very difficult to find people. You needed to find many people when growing fast and people [in demand] are very expensive. Now it is much easier.”

Yet morale generally is at such a low ebb that some pessimists are now questioning whether the European software industry can ever enjoy double-digit growth again. But Brown is keen to play down such fears. “The software industry is not just like any other industry,” he says. “I look to IT to regain its reputation for strong growth.”

This may be a time of a deep and lasting bear market; but it is reassuring to note that some bulls still survive.


The methodology

In order to compile the European Software 50, Infoconomist defines a software company as a business that generates more than 50% of its revenue from licence sales and directly-related services. This has disqualified a number of companies that are focusing on IT services to offset declining licence revenues during the recession. Eligible companies have then been ranked by their last full-year revenues.

Infoconomist has also given its verdict on the performance of all the companies in the table. As part of this evaluation, we have awarded a ‘racing car’ logo to those companies that we believe will outperform direct competitors in terms of growth; software vendors that we expect to fall below the average growth in a particular sector get a ‘bus’ logo.



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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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