The Global Software 100

You can download the Infoconomist Software 100 (download size 176K), click here. It is in Acrobat Reader (PDF) format.

Alfred Chuang, like so many other software



industry veterans, has been through the best of times and the worst of times. And as founder, president and CEO of application server vendor BEA Systems, there is no question which of those descriptions fits today. “These are tough times,” he sighs. “IT budgets have come under a lot of scrutiny in the last 12 months, and instead of the wild spending spree we saw in 1998, 1999 and 2000, people are much more careful now.”

Jim Goodnight, chairman and CEO of SAS Institute, the business intelligence software company, agrees with his peer’s frank assessment. “It [2002] is going to be a very slow year for the industry.” Lindsey Armstrong, European senior VP of Veritas Software, adds, ruefully: “Two or three years ago this was a very buoyant market. Now it has become a very tough industry to be in.”

What these comments underline is that even some of the most senior figures in the software industry are prepared to admit just how difficult things are — people who normally carry the mantle of cheerleader rather than doomsayer. They have looked at their order books, talked to their customers and reached a gloomy conclusion. It may still be an era of largely positive marketing spin – but an epidemic of realism, even of resignation, is spreading. Executives who once assumed they had struck it rich now accept that harsh economic realities have left them holding fool’s gold.

The bare statistics do not lie: The software industry is in a recession, as demonstrated by the fact that the global Infoconomy Index has been in ‘negative growth’ since August 2001. Indeed, the worldwide industry is 14% smaller than a year ago, representing a $30 billion (€31bn) loss in revenue terms for the biggest 200 companies in the sector. More disturbingly, even the European version of the Infoconomy Index, which has remained surprisingly robust in the last 12 months, finally and inexorably slipped into minus figures in June 2002 — representing the first month in more than a decade that Europe’s software


The top 100 table

In an attempt to bring clarity to the true state of the market, and to identify those areas of the industry that continue to enjoy Internet boom-style growth, Infoconomist has compiled a list of the world’s 100 leading software companies, on the basis of their last full-year revenues. Adding value to the simple numbers, and reflecting events since the companies’ most recent annual results, our team of reporters and editors have passed judgement on the prospects of all 100 vendors.

Looking at the Global Software 100 table, one conclusion is inescapable: that Microsoft continues to cast a long shadow over a US-dominated industry. The Redmond, Washington-based systems and office software giant generated about $28.2 billion (€29.1bn) in revenues in the 12 months to the end of June 2002, up around 12% on 2001. The 99 next-biggest vendors in the industry brought in ‘only’ $67.1 billion (€69.2bn) between them.

Other key facts include :

  • One in three vendors suffered revenue falls. Last year, only one company in five had ‘negative growth’.
  • Last year, the revenues of 14 vendors more than doubled in size. This year, the revenues of only two did.
  • 16 companies notched up more than $1 billion in sales, down one on last year.
  • 78 companies are based in the US, up two on last year.
  • 17 companies are from Europe.
  • Six companies dropped out of the 100 in 2002: Entrust, Cincom, Corel, Brio, Northgate and SER.

There may be readers puzzled to find some big software industry names missing from the table altogether, such as IBM, Fujitsu, Hewlett-Packard, EMC, Invensys and Compuware.

However, the Global Software 100 is designed to show the 100 biggest ‘pure’ software vendors — that is, companies that generate more than 50% of their revenues from licence sales and directly-related IT services. This inevitably means that some technology companies with huge software divisions do not make it into the table.

IBM, for example, generated a massive $12.9 billion (€13.3bn) from software sales in the year to 31 December 2001, which would have been enough to easily knock Oracle from the number-two spot in our table. But software still contributed ‘only’ 15% of IBM’s consolidated sales.

Next year’s table is likely to look significantly different as the most damaging effect of the ongoing recession leaves its mark. “The top 30 or so won’t change much but the bottom 70 companies could look very different. I bet the 40th position will be worth half the revenues next year,” says Richard Mathews, senior vice-president of international operations for JD Edwards. This year’s 40th placed company is France’s Business Objects, with revenues of $415.8 million (€418.3m)



sector has shrunk in size.

The InfoconomistGlobal Software 100 table underscores this view. For example, the table shows that one in three of the 100 most successful vendors in the world sold less than last year — confirming that the recession is affecting the giants of the industry as well as the minnows.

Consolidation underway

Undoubtedly, however, it is the community of young software companies that is suffering the most. “If you are a start-up, this is a really tough market to play in,” says Richard Mathews, senior vice president of international operations for JD Edwards, the enterprise resource planning software vendor. “Every one of the big players is trying to broaden its applications, while all the economy has done is make customers more nervous about dealing with smaller players.”

SAS Institute’s Goodnight says that the only start-ups that will survive the shakeout will be those with a “rock-solid product that inspires people”. He has found compelling evidence of the long-awaited consolidation in the software market. “We are seeing a lot of acquisition requests from a lot of smaller companies. We get a request almost every day.” He says his company bought analytic management software vendor ABC Technologies in March 2002, and “we have another one in mind at the moment”.

Chuang of BEA Systems believes the consolidation will be good for the industry — but only up to point. “We have gone way too far in terms of funding mere ideas,” he explains. “Many start-ups are basically just an idea or a single product. They are not real companies. Those smaller companies just aren’t going to make it as a business.” But it is a state of affairs that he partly regrets. “We need innovation. We need entrepreneurs to keep creating new companies,” he says.

Cost conscious

In order to survive the downturn, cost cutting has become a priority for nearly all vendors, big and small. The most traumatic consequence of this has been the loss of hundreds of thousands of jobs in Europe and the US.

But leading industry figures are quick to play down suggestions that the software sector will be permanently damaged by the unprecedented cull of the last 12 months. Many people who have left the industry, says Chuang, were not particularly specialised in software engineering and marketing and have now returned to their previous sectors. “I have not seen a ‘brain drain’. Better talent is now being recycled back into the great companies.”

JD Edwards’ Mathews takes up this view that the software industry has become a true meritocracy – with the talented few having returning to the large, wealthy companies that they left behind in the late-1990s for Internet-boom start-ups. “The top 20 vendors are picking off the best talent,” he says.

But not all vendors have cut their staff. “We spent last year hiring people,” says Goodnight. “Our workforce has grown by 6%. Because SAS is a private company I have got the luxury of not having to lay people off to meet the target some guy on Wall Street has come up with.”

It is not all doom and gloom, even for publicly listed vendors. Governments in Europe and the US, for example, have never been keener to invest billions of euros and dollars in new technology. Initiatives such as electronic government and beefed-up national security – particularly in the wake of 11 September – are spurring demand for software, hardware and IT services and triggering a wave of unlikely partnerships between erstwhile rivals.

And many parts of the world, such as southern and eastern Europe, China, the Gulf States and South Africa remain relatively buoyant — albeit because technology penetration levels are invariably lower there than in the West.

“People everywhere have become addicted to information,” says Chuang, who sees this fuelling demand for broadband technologies and a myriad of Internet-compatible devices. “I think it is a very positive sign for us.” That cautious optimism may not quite be music to the ears of struggling vendors, but at least it is a start.

You can download the Infoconomist Software 100 (download size 176K), click here. It is in Acrobat Reader (PDF) format.


Fastest growers
Company   Revenues   Growth  
Divine Inc $199.6 353%
NetIQ Corp $166.9 248%
Retek Inc $179.5 79%
Micromuse $212.5 72%
Unit 4 Agresso NV $186.5 72%
Seebeyond Technology Group $185.9 62%
Interwoven Inc $202.7 53%
Jack Henry &Associates Inc $345.5 53%
Quest Software Inc $245.4 48%
Ariba Inc $408.8 47%

Fastest growers

In spite of the worsening economy, some software companies achieved dramatic headline growth in 2001, mostly through acquisition or big one-off partnership agreements. The fastest-growing company in software in 2002 was Divine, the Internet incubator turned software company. Founder Filipowski copied the same business model that worked so well at Platinum Technology: make a string of low value acquisitions and push these products out through a well-trained sales force.




Most profitable
Company   Revenues   Net prof margin  
Checkpoint Software $527.6 61%
Microsoft Corp $28,220.0 31%
Oracle Corp $9,672.6 23%
Advent Software Inc $170.2 18%
Citrix Systems Inc $591.6 18%
Sage Group Plc $697.5 17%
Adobe Systems Inc $1,229.7 17%
Jack Henry &Associates Inc $345.5 16%
Exact Holding NV $184.8 15%
Siebel Systems Inc $2,048.4 12%
Dassault Systemes Inc $668.5 12%

Most profitable

Software industry wisdom says that the way to make good profits is to dominate a whole sector with a 'gorilla' product. The presence of Microsoft, Oracle and Siebel in among the most profitable is therefore no surprise. Check Point Software, the Nasdaq-listed, Israeli-born software company is, however, the real star: it has built a near-monopoly firewall around its firewall software.




Worst performers/Least profitable

Even the worst performances in 2001 are likely to be overshadowed by some dreadful figures in the current year, 2002. But there were some early signs of the trouble spots: high-flying content management companies Vignette and Broadvision, for example, both ran into trouble. Meanwhile, Divine and Ariba earned the distinction, for different reasons, of being in two lists – the least profitable and the fastest growing.

Worst performers Least profitable New entries
Midway Games
Portal Software
Computer Associates
Epicor Software
Wind River Systems
Wind River Systems
Portal Software
Commerce One
Crystal Decisions
Advent Software
Unit4 Agresso



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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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