The 2004 Software 500 results reflect a software and services market that showed mixed results overall but strong positive growth in segments that meet the needs of industry in system-integration services, infrastructure management and security.

Total revenue of the 2004 Software 500 companies is $330.7 billion, a 14% increase from last year’s Software 500 total of $289.9 billion. Total employees in the Software 500 increased 8% in 2003 over the previous year to 2,342,973. Systems integration services and IT sourcing firms reported the greatest employee growth.

IBM is No. 1 again, as it has been for nearly every year of this ranking. That IBM is now primarily a services company, instead of a software or a hardware company, is evident in the fact that 75% of IBM’s software and services revenue of $56.9 billion is from services. Microsoft enjoyed strong growth of 14% to $32.2 billion on the strength of Microsoft Office packaged software and its operating systems.

Fastest Growing

Among companies with more than $1 billion in revenue, Symantec and Intuit both registered strong growth of over 25% with their focus on security and financial applications, respectively, and SAP grew at 26% to total revenue of $8.8 billion. Overall, 46% of companies reported a decline in revenue from the previous year.

Among companies between $100 million and $1 billion in revenue: Aprisma grew at 133% with its focus on performance management applications for service providers and enterprise IT; and salesforce.com was notable for 128% growth to $51 million in revenue from sales of its software and services aimed at supporting salesforces and customer relationships.

In the category from $10 million to $30 million in revenue: TRIRIGA dominated with an 833% increase in revenue on the strength of its move to consolidate workplace management functions, such as facilities management and employee self-service, into an integrated Web-based application; TRIRIGA also acquired assets of Peregrine to help round out its product line; SafeNet acquired Rainbow and some assets of SSH Communications Security to grow 157% in the security market.  

Among companies with $5 million to $10 million in revenue, Diversinet saw growth of more than 1,100% from its concentration on secure wireless and identity management products. Among companies with less than $5 million, PatchLink distinguished itself with a 536% growth on the strength of its products that automate the process of staying current with software patches.

The following is a look at selected primary software business categories.

Financial Applications

More companies identified Financial Applications as their primary business sector this year than any other category. Notable players include: RoyalBlue Group, seeing 10% growth from its focus on trading applications tailored to various financial markets in Europe, North America and Asia; London Bridge Software Holdings, increasing 28% in revenue, and catering to debt management, banking and mortgage lending; and Jack Henry & Associates, increasing revenue 5% to $307.7 million by helping to automate transaction- and data-processing functions for small banks and credit unions.  

Geac distinguished itself by getting to $433.6 million in revenue on the strength of its business performance management software line; The Sage Group plc reached $933.7 million in revenue with its accounting and business management software aimed at small and midsize businesses, and from several acquisitions; and Intuit grew to $1.58 billion by also targeting business and financial management for small business, accounting professionals and consumers.

Infrastructure/Network Management/Performance

Players in the market to help manage the complexity of enterprise networks on the whole are growing steadily, with employee growth for the sector at 39%, for example. Computer Associates, which reported $3.07 billion in revenue, a 5% growth over the previous year, leads the group. Juniper Networks grew 28% to $701.4 million with the help of acquisitions including Netscreen, which had acquired Neoteris to win share in the Secure Sockets Layer VPN market.

Mercury Interactive, with roots in testing and having expanded into performance management, enjoyed 27% growth to $506.5 million. SupportSoft did well with growth of 29% to $53.3 million with its software to automate and personalize user support over the Internet. TeamQuest grew 10% to $20.8 million with its capacity planning and performance management focus, and Centivia grew more than 1,000% to reach $1.5 million on the strength of its product, which focuses on helping IT manage critical business-processes reliably.

Application Development/Testing

Compuware leads the category at $1.38 billion in revenue, but had a tough year with revenue declining 21%. Still, the company is profitable and is generating cash; currently Compuware is locked in battle with IBM in a software piracy case. Borland grew 21% to $295.2 million with a widened position in application lifecycle management and bets on Java, Linux and Web-based application integration. Serena grew 10% to $105.6 million, proving that managing change in the software lifecycle has legs. The firm’s acquisition of TeamShare in June 2003 and Merant in April 2004 solidify the company’s standing in enterprise change management.

Magic Software Enterprises, founded in 1983, reached $63.4 million in revenue on 6% growth on the strength of its extension from software development and deployment tools, into business integration through a partnership with iWay Software, an Information Builders company. MKS, with its focus on software configuration management to better control the process of software development, grew 13% to reach $31.9 million. Statera grew 56% to reach $8.1 million on the strength of a consulting business based on achieving a balance between technology, process and personnel. Surgient Software established a beachhead in the Software 500 with revenue of $1 million, an increase of more than 1,100% from the previous year, from sales of its on-demand applications for sales, marketing, training and quality assurance.  

Security Tools/Systems

Symantec leads the category at $1.7 billion, a 28% jump in revenue, with help from 2003 acquisitions including SafeWeb, PowerQuest, GoBack and Nexland. The company now has offerings in enterprise security, enterprise infrastructure support and consumer products, with a focus on Internet security. McAfee stayed flat at $933 million but has organized its product lines into Network Protection Solutions and System Protection Solutions, with a focus on preventing intrusions and protecting from the latest security threats and attacks.  

Trend Micro grew 11% to $435 million on the strength of its anti-virus and content security products, supplemented by vulnerability and outbreak assessment services. RSA Security grew 12% to $259.9 million on the strength of its secure authentication products, and its move into identity and access management markets. SurfControl grew 25% to reach $79.7 million, finding success with its focus on helping businesses manage employees who surf the Internet at work with its content filtering and policy management offerings.  

Netegrity grew 14% to $75.6 million with a focus on identity management, which is having a wide impact on a security market as corporations seek to automate more of the work involved with provisioning and de-provisioning employees and contractors. Sophos is finding success with its anti-virus and anti-spam focus, growing 30% to reach $65 million. F-Secure is finding success with its products in anti-virus, network encryption, desktop firewall and intrusion prevention, reaching $47 million in revenue on 17% growth. CyberGuard grew 48% to reach $33 million; the firm concentrates on firewalls and VPNs. Guidance Software, which focuses on computer forensics and incident response, grew 147% to reach $21 million.

Vertical Industry Applications

The Software 500 is seeing more companies whose primary business focus is applications for vertical industries, with 18 companies indicating the focus compared to nine a year ago. Chief among these is Affiliated Computer Services, which grew 24% to reach $3.8 billion in revenue. The company primarily targets federal, state and local governments and generates 100% of its revenue from services. Atos Origin, which offers consulting, systems integration and managed operations for a range of industries including automotive, chemical and oil and gas, stayed flat at $3 billion in revenue. Dendrite, which targets the pharmaceutical and life sciences industries with productivity software, grew at 42% to reach $321 million.

360Commerce, which supports retailers with its software applications, grew at 127% to reach $16.3 million in sales. Lighthammer, which targets manufacturers with Manufacturing Intelligence and Collaborative Manufacturing software, grew 83% to reach $4.3 million. Merrick Systems, which targets the energy industry, grew 20% to reach $3.7 million.

Business Process Management

Many more Software 500 companies identified business process management as their primary business focus, 15 this year, up from five last year. The largest firm is Fiserv, which grew 22% to reach $2.7 billion, with a focus on the financial services industry. Hyperion Solutions grew 4% to reach $510.5 million, with its focus on business performance management. Pegasystems, focusing on ROI and “smart” business process management, grew 2% to $99 million.

ProSight, concentrating on managing the software application portfolio, grew 82% to reach $9.2 million in revenue. Proforma, which delivers model-driven business software, grew 35% to reach $6.9 million.

John P. Desmond is editor of Software Magazine and Softwaremag.com. He can be reached at jdesmond@softwaremag.com