In the News:
Software – by John P. Desmond
The 2005 Software 500 results reflect shifts in the U.S. and world economies towards companies offering integration services and software as a service, with the most successful companies concentrating on higher degrees of automation and customer self-service.
Overall, the health of the industry has improved. Revenue for the 2005 Software 500 overall was $383.3 billion worldwide for 2004, an increase of 16.5% over the previous year, which had increased 14.1% over the year before-showing that, in general, this industry continues to thrive.
Total employees in the 2005 Software 500 increased 13.7% to 2,663,023, from 2,342,973 in the 2004 Software 500 and 2,173,716 in 2003. Employee growth was strongest in the segments of collaboration/project management, system integration services/IT consulting, and the supply chain/manufacturing software segment.
The top of the 2005 Software 500 sees few changes, with IBM and Microsoft again at No. 1 and No. 2. Both companies show strong worldwide revenue growth from the previous year, IBM on the strength of its services business and Microsoft on the strength of its software license revenue.
Among the fastest-growing companies, with over $1 billion in revenue this year, is Google, which arrived ranked at No. 29, fueled by its search engine-driven advertising revenue and, increasingly, by software product revenue. Another notable is DST Systems, which moved from No. 40 in 2004 to No. 31 in 2005, registering 96% revenue growth with its financial systems for financial services, healthcare, and other industries.
Some 92 companies, or 18% of the total Software 500, reported declining revenue from the previous year. This is a big improvement on last year, when 46% of the Software 500 reported declining revenue. Some 48% of the 2005 Software 500 experienced revenue growth, with improvement in the 1% to 24% range.
Among companies with revenues between $100 million and $1 billion, salesforce.com saw revenue growth of 83% with its software-as-a-service and integrated-software model. Business Objects grew 65%, perhaps aided by its victory over Microstrategy in a patent infringement case, and perhaps as a result of the launch of a global program with more than 3,000 partners, not to mention its acquisition of Crystal Decisions, which cements its position in business intelligence and enterprise reporting markets worldwide.
Notable for growth among companies in the $30 million to $100 million revenue range were: EPAM Systems Inc., the leading provider of IT outsourcing and software services in Central and Eastern Europe, growing 83%; Intellisync, supplier of products to support wireless and mobile communications, growing 70%; and Unica Corp, now focusing on enterprise marketing management, growing 56%.
Seeing strong growth among companies in the $10 million to $30 million revenue range were: Cybernet Software Systems, providing services to enterprises and software product companies, growing 279%; PatchLink Corp., focusing on automated patch and vulnerability management, growing 157%; and Aztec Software, with its focus on software product engineering for software product companies, with growth of 146%.
The following is a look at selected primary software business categories.
This category was selected by 32 companies in the 2005 Software 500 as their primary business sector of focus, making it the top choice among the 44 categories tracked in this year's survey. The biggest player is Computer Associates, which grew its revenues 8% and its employees 52% to 15,300, helped in part by the acquisition of Netegrity, the identity management player. Juniper Networks was next, growing its revenues 91% and its employees 90% to 2,948, aided by the purchase of NetScreen Technologies to add virtual private network (VPN) and firewall products to its portfolio. Also growing dramatically was Citrix Systems, with a 26% increase in revenue and a 41% increase in employees to 2,656, much of it based on the 2004 acquisition of ExpertCity, now the firm's Citrix Online division.
Altiris, with a focus on IT lifecycle management, grew 68%; Keynote Systems, the Web site performance management player, grew its revenue 11% and its employees 58% to 250 after acquiring NetRaker and Vividence in 2004. Diversified, still focused on mission-critical job control language (JCL), grew 9%; TeamQuest, concentrated on IT performance management, grew 14%.
Security was selected by 30 companies in the 2005 Software 500, an increase of two over last year's list. Topping the list is Symantec, which counted among its acquisitions ON Technology and Brightmail in 2004, growing revenue 33%. The company is poised to grow dramatically again in 2005 after finalizing its acquisition of Veritas.
McAfee, Inc. saw its software revenues stay flat, but grew with the acquisition of Foundstone in 2004. Trend Micro, offering antivirus, Internet content security, and outbreak management software and services, saw 39% growth in its 2004 software and services revenue.
Websense saw 37% revenue growth and 25% employee growth (to 500 employees) on its Internet management software products, which include Web filtering and industry-specific solutions to control practices such as instant messaging, porn site viewing, and peer-to-peer networking to music sites in the workplace. St Bernard Software grew revenue 5% and employees 325% to 191, with its emphasis on perimeter security and system security.
PatchLink Corp.'s dramatic revenue growth of 157% reflected a focus on execution and marketplace demand for automated patch and vulnerability management products.
Synnex Corp., the product distribution and contract manufacturing player, leads the group at No. 15 with $5.31 billion in revenue. The company saw revenue increase 29% from the previous year and its employee head count increase 61% to 1,664. In 2004, SYNNEX acquired BSA Sales, a marketing services provider, and EMJ Data Systems, a Canadian-based distributor. Ariba, offering spend management products, increased its head count 100% to 1,686. In October 2004, the firm's supplier network reached 100,000 registered suppliers; members of the network can now manage transactions from order to payment. The company acquired Softface, Inc., which offered performance management products, in March 2004, and FreeMarkets Inc., supplier of global supply management software, in January 2004.
Manhattan Associates, the supply chain execution player, grew 11% and grew employee head count 25% to 1,400. Among customer wins in 2004 was KLLM Transport Services, the sixth largest temperature-controlled truckload carrier in North America, extending Manhattan's reach in the carrier market, where it has more than 40 customers. In 2005, Manhattan announced the acquisition of Evant Inc., a supply chain management and replenishment product supplier.
Agile Software, offering product lifecycle management products, grew revenue 266% to $96.3 million, reaching No. 209 on the Software 500. The company was aggressive in selling into China in 2004, and it also announced an initiative to penetrate the SMB market. Customer wins in 2004 included Synthon, a developer of advanced pharmaceuticals based in the Netherlands, which bought Agile's quality management system.
Customer Relationship Management
Siebel Systems, at No. 42, leads the category; Siebel saw flat revenue in 2004 but continued to add customers and products and started a unit to focus on small and medium-sized businesses; the Siebel OnDemand hosted CRM unit was launched as, perhaps, a defensive move against salesforce.com, in particular (see below).
Concerto Software dramatically added to its employee base-up 120% to 500 employees in December 2004 via a series of acquisitions, including contact center player Melita International, Positive Software Systems, Rockwell FirstPoint Contact (which combined inbound and outbound contact center products), and applications from CenterForce Technologies. The growth of Internet phone systems and Web and email-based customer service systems bodes well for the future. Concerto Software announced the $1 billion acquisition of Aspect Communications in July; in August the two announced that the combined company will be named Aspect Software.
Salesforce.com was also extremely busy, with revenue growing 83% and employees 73% to 767. The company is trying to build on its base of small to medium-sized businesses and penetrate the enterprise, aided by its announcement of its MultiForce on-demand operating system; one recent win was the Staples Contract Division, which added 15,000 subscribers. When the company wins a customer away from Siebel, as it did in 2004 with Vocus, it issues a press release.
Witness Systems, also a contact-center player with a concentration on performance optimization, experienced 29% revenue growth and 27% increase in employees to 635. In December, the company announced the acquisition of Blue Pumpkin Software, a supplier of workforce management software.
Vocus Inc., which focuses on corporate communications and public relations, saw a 31% increase in revenue and a 59% increase in number of employees, to 170. The company acquired Gnossos Software in 2004, boosting its government relations business.
This category saw seven fewer players in 2005 than in 2004, while the new category of Lifecycle Management is populated by seven companies this year. Mercury Interactive is at the top of the group, after seeing 35% revenue growth and a 15% growth in employees to reach 2,659. The company is extending from its roots in software quality via testing and performance testing to application management and, most recently, IT governance.
Telelogic saw revenue increase 21% and employees 13% to 719 by the end of 2004. The company offers Doors for the requirements management market, Tau for systems development and testing, and Synergy for software change management. In 2004, Telelogic established a product development lab in Bangalore, India; the firm also has labs in Sweden, the U.K. and the U.S.
Serena Software saw revenue increase 10% and employee count 118% to 744. The company positions itself in markets for application lifecycle, change management, and business process management, as well as IT governance. In 2004, Serena completed the acquisition of Merant, extending its change management reach to mainframe and distributed platforms.
Tririga, the enterprise workplace management player, saw its revenues increase 61%, to solidify its position in the market. The company has parlayed its experience in the Las Vegas construction business to move into Web-based real estate and project management products that address a range of processes related to facilities, including space planning, operations and maintenance, and lease administration.
System integration services
Notable for its employee growth was Infosys Technologies Ltd., which saw head count increase 59% to 36,800, and revenue increase 41% in 2004. Customer wins in 2004 included China Bank, a leading commercial bank in the Philippines, which bought Infosys' Finacle banking application for its Internet banking initiative. Infosys also delivered a bus contract management system to the Victorian government in Australia, a $4.5 million project to deliver a system managing over 1,700 bus contracts.
Sapient Corp., offering business consulting and technology services, saw its revenues increase 37% and employee head count 56%. Customer wins in 2004 included energy company BP, which acquired a global Internet platform to help build its brand consistently worldwide. BP operates over 200 Web sites. Sapient also delivered a warfare logistics system to the U.S. Navy last year that employs Web services technology.
EmbeddedPlus Engineering, offering custom development services, saw its revenues increase 22%. The company committed to the Eclipse Foundation's Business Intelligence and Reporting Tools (BIRT) project in 2004.
Enterprise Resource Planning
Intentia, which announced its intention in June to merge with Lawson Software, in 2004 increased its revenues 24% to reach No. 91 on the 2005 Software 500. Lawson Software increased its revenues 6% in 2004 to reach No. 104 on the list. The combined company will focus on medium and large enterprises with ERP, performance management, supply chain and asset management products. Lawson products focus on financial, NR, procurement and retailing, while Intentia's focus on manufacturing, distribution and maintenance applications. Lawson's strong presence in the U.S. complements Intentia's strength in Europe and Asia-Pacific.
Epicor Software, which targets SMBs and the divisions and subsidiaries of large companies, saw its revenues increase 45% and its head count 52% to 1,450. In addition to manufacturing software, the company (via its acquisitions) now offers products for distribution, hospitality and entertainment, supply chain management, and CRM. Customer wins last year included Shavlik Technologies, supplier of security software and services, which acquired the Epicor CRM suite.
Syspro, targeting the mid-market with its manufacturing software suite built on Microsoft's .NET architecture and XML standards, grew its revenues 12% in 2004 and was positioned in the "Visionaries" quadrant in the midsize ERP market by Gartner. The criteria included core functionality and a range of coverage, including rapid deployment, an integrated product line versus a best-of-breed approach, tightly integrated CRM, multicurrency support, ongoing maintenance of ERP, and a single, global code base.
The content management category was marked by impressive growth from a number of firms. Open Text, the enterprise content management and digital rights competitors, increased revenue 64% in 2004 to reach No. 122 on the 2005 Software 500. Macrovision, with its digital rights management and software licensing support technology, grew revenue 42% to reach No. 160 on the list (Macrovision completed the acquisition of InstallShield in 2004). Stellent, content management software suppliers, grew its revenues 16% to reach No. 230, and Innodata Isogen Inc., offering content-related services and vertical industry focus, increased revenue 47% to reach No. 271 on the list. Ecopy Inc., which concentrates on integrating paper-based processes into digital-based business processes, saw revenue growth of 44% and reached No. 313 on the list. Omtool, focused on document routing, grew revenues 35% to reach No. 383; and Top Image Systems, focused on managing and validating content entering a company from multiple source points, grew its revenue 35% to reach No. 408 on the list.