System Integrators, Outsourcers Gain Again as IT Guards In-House Resources
Revenue Stays Flat
By John P. Desmond
Overall growth for the Software 500 companies was flat in the past year, with half the top 10 companies reporting revenue declines from the previous year as their customers continue to retrench and adjust to a challenging economy, suggest findings of the 2010 Software 500 ranking of the world's largest software and services companies, now in its 28th year.
Total 2010 Software 500 revenue is $491.7 billion - flat growth from last year, when total software and services revenue was $451.2 billion.
The trend of engaging outside service firms to perform critical IT functions continues. System Integration Services/IT Consulting, for the third consecutive year, outnumbers all other primary business sectors, with 31 companies selecting the category in the 2010 Software 500, which is based on performance in 2009. Outsourcing Services firms number 27; IT Services/Consulting/Staffing firms number 15, and Outsourced Product Development/Testing firms number four; all are indicative of the trend.
The total number of employees in the Software 500 was down by 3.92% to 3,562,407, compared to 3,707,957 in last year's Software 500.
In the top five companies, Oracle moved up to No. 4 ahead of Accenture, while IBM, Microsoft, and Hewlett-Packard Co. (HP) retain the top three positions, and Accenture goes to No. 5.
WHERE THE JOBS ARE — TOP EMPLOYERS
Total Software 500 Employees Growth
2009 3,562,407 4.1%
2008 3,707,957 25.6%
2007 2,953,016 1.3%
2006 2,914,480 14.7%
2005 2,539,872 -4.6%
Rank Company Employees
1 IBM 437,776
9 Hitachi 359,746
3 Hewlett-Packard Co. 304,000
5 Accenture 177,000
19 Tata Consultancy 143,761
10 Lockheed Martin Corp. 140,000
77 Emerson 129,000
21 Infosys Technologies Ltd. 104,900
18 Wipro Ltd. 100,000
2 Microsoft Corp. 93,000
IBM is No. 1 again, despite its software and services revenue trending down 7.5% from the previous year to $74.9 billion. Microsoft is No. 2, with its ranking revenue declining 2.8% to $50.8 billion. HP saw growth of 50.5% in software and services revenue to reach $38.3 billion. Oracle showed growth of 3.7% in ranking revenue to reach $23.3 billion, and Accenture saw a decline of 7.7% to go to $21.6 billion.
In employee terms, IBM is by far the largest employer, with 437,776 employees at the end of 2009, the ranking year. Hitachi is next with 359,746 employees, and HP is third with 304,000 total employees.
The public/private company breakdown of the 2010 Software 500 is 54% public and 46% privately held.
Number 1 in revenue per employee, for the second consecutive year, was Innodata Isogen, Inc., No. 218, which achieved $1.3 million per employee in revenue. Next was No. 61, Check Point Software Technologies, which reached just under $1.2 million per employee, and third, also for the second consecutive year, was ePlus Inc., which again reached $1.1 million per employee.
Leaders in R&D spending as a percentage of revenue, an important indicator of whether a software company is investing in the future, include No. 462, Bradmark Technologies, spending 77% of its $5.2 million on R&D, followed by No. 229, Phoenix Technologies, the operating system player, spending 59% of its $67.7 million in revenue on R&D, and No. 147, MindTree Ltd., spending 56% of its $222.7 million on R&D.
Average R&D investment for the entire 2010 Software 500 is 15%.
Companies acquired since the 2009 Software 500 include: Omniture, acquired by Adobe; NetQoS, acquired by CA; Perot Systems Corp., acquired by Dell; SPSS and ILOG, acquired by IBM; i2 Technologies, acquired by JDA Software; Borland Software, acquired by Micro Focus; and Vignette Corp., acquired by Open Text.
Revenue Growth Leaders
Number one in growth among companies over $1 billion in revenue is EMC Corp., which grew its revenue 64% on the strength of its VMware unit leading the charge toward virtualization of computing infrastructure. EMC is ranked No. 8 in this year's survey.
Next is HP, growing revenue 51% from its diversified portfolio of offerings, especially its services and software products. The services business grew 68% after the acquisition in 2008 of EDS, now called HP Enterprise Services. HP's software offerings include a collection of enterprise management tools formerly called OpenView and now called the HP Business Technology Optimization (BTO) suite.
Third in growth among companies with over $1 billion in revenue is Salesforce.com, which insists on continuing its "no software" marketing positioning even though the company sells access to its software through the Software-as-a-Service (SaaS) model. Ranked No. 53 this year, Salesforce.com, No. 53, grew its revenue 44%.
In companies at $100 million up to $1 billion in sales, the growth leader is NetScout Systems, at No. 129, with growth of 58%. The company offers application and network monitoring products to optimize traffic and network performance.
iSOFT Group is, for the second consecutive year, second in this category, moving up to No. 91 this year, showing more success for its healthcare software, which manages patient and clinical information, lab and radiology results, and financial records. The company grew its revenue 50%.
Third in the category is AsiaInfo Holdings, Inc., the Beijing, China-based supplier of software and services to telecommunications carriers for activating services, billing, and customer relationship management. The company grew at a 48% clip to reach No.143.
In companies from $50 million to $100 million in revenue, the leader is No. 234, Meta4 Spain, showing 143% growth from the previous year. The company offers software supporting what it calls "human and intellectual capital management." Second in the group is AMICAS, Inc., at No. 208 with growth of 77%; the firm's products support cardiology and radiology. Third in the group is Longtop Financial Technologies, now at No. 206 with growth of 61%. Longtop focuses on the IT needs of financial institutions in China and is the first Chinese software company to be listed on the New York Stock Exchange.
Among companies in the $30 million to $50 million revenue range, Softscape, No. 277, is the leader with growth of 91% from its human capital management offerings. Second is QNX Software Systems, No.272, with growth of 38% from its real-time operating system offerings. Third is eGain Communications Corp., with growth of 37% to reach No. 283, from its customer service and call center products.
The growth leader among companies in the $10 million to $30 million revenue range is Tableau Software, with dramatic growth of 524% to reach No. 335 from its browser-based data visualization, analytic, and business intelligence products. The firm's tecnology has roots as a Stanford University research project funded by the U.S. Department of Defense. Second in the category is Altum, at No. 375 with growth of 487% from its grants and performance management software targeted to philanthropic and government organizations. Next is Artisan Software Tools, at No. 361 with growth of 138%. The company offers developers industrial-grade, collaborative modeling tools for complex, mission-critical systems and software.
Finally, the growth leader among companies in the $2 million to $10 million revenue range is DatamanUSA, offering software development and business process outsourcing services tailored to each client's requirements. The company grew at a 766% rate to reach $3.4 million in revenue and No. 481. Second in the category is Allegiance, at No. 461 with growth of 151% to reach $5.2 million. The company calls its offerings "voice of the customer and enterprise feedback management tools." Third in the category is Monolith Technology Holdings, supporting fault tolerance, availability, and reliability for telecommunications networks, data centers, and IT infrastructure. The company grew at a 128% pace to reach No. 472 with $4.1 million in revenue.
System Integration Services/IT Consulting
Accenture, at No. 5, saw an 8% decline in revenue, a reflection of clients cutting back in the tight economy. Not standing still, however, in late 2009 Accenture acquired the Symbian professional services unit of Nokia, which makes the Symbian smart phone operating system, positioning Accenture to provide services for mobile devices. SAIC, at No. 13, saw a 13% increase in revenue; the company, a leading U.S. government services contractor, works closely with the U.S. Army and U.S. Air Force. Among its acquisitions in 2009 was R.W. Beck Group, provider of business and technical consulting services in engineering, energy, and infrastructure; and Atlan, known for its cybersecurity product testing.
Other growth leaders in the category include: Logica, No. 16, growing at 12%; Infosys Technologies, No. 21, growing at 12%; and Cognizant Technology Solutions, No. 26, growing at 16%.
Application Development/Testing/Lifecycle Tools
The leader in this category is Dassault Systemes (DS), at No. 43 showing a decline of 7% on $1.7 billion total software and services revenue for the ranking year, although its three-dimensional (3-D) and product lifecycle management (PLM) software and services are proving popular. The offerings allow customers to digitally define and simulate products, as well as the processes required to manufacture, maintain, and recycle them while being sensitive to the environment.
Micro Focus, at No. 127 with revenue increasing 20%, shows lasting power; in 2009, the PC Cobol products company acquired Borland, the development tools company founded by Philippe Kahn (who is also credited with inventing the camera phone), the application testing and quality assurance products of Compuware Corp. (itself No. 51 on this year's list), and application modernization firm Relativity Technologies.
DefenseWeb, No. 292, offering healthcare products serving the needs of military service members and their families, saw 25% growth. At No. 379, Black Duck Software, which helps companies accelerate development with products and services for finding, deploying, and managing open source software, saw strong growth of 37%.
Klocwork, No. 400, saw 5% growth on the strength of its source code analysis tools for boosting development productivity, identifying security vulnerabilities, and optimizing the peer code review process.
ACS, No. 14, leads this sector, growing 6% to reach $6.5 billion in revenue; ACS is known for its business process outsourcing focus and IT outsourcing services. These range from processing more than one million credit card applications and 12 million student loans each year, to providing human resource services for more than four million employees and retirees annually. ACS was acquired by Xerox in February and helps Xerox diversify its information management offerings and become less reliant on printed documents.
Wipro Ltd., No. 18, grew 17% to reach $5 billion in revenue; the company is one of India's leading providers of system integration and outsourcing services. Outsourcing services in the U.S. account for about half of the firm's business, as U.S. firms seek to cut IT costs and boost profits. But a soft U.S. market last year caused the company to focus on expanding in Asia, Europe, and the Middle East.
Other growth leaders in the category include: Headstrong Corp., No. 159, growing at 13%; Rose International, No. 164, growing 38%; Yash Technologies, No. 202, growing 23%; Merge Healthcare Inc., No. 231, growing at 18%; IBA Group, No. 232, growing 15%; BPO Management Services, No. 275, growing 28%; Walz Group, No. 304, growing 58%; Allegient Systems, No. 360, growing 25%; and Intetics Co., No. 438, growing 30%.
Vertical Industry Applications
The leader is Lockheed Martin, No. 10, growing 5% to reach $12.1 billion in software and services revenue, a fraction of its total corporate revenue of $45.2 billion. The company's U.S. government contracts account for 85% of sales, which help the firm avoid downturns in the commercial aerospace sector while remaining vulnerable to military spending cuts. The electronic system and information systems & global services segments account for more than half of the firm's sales.
Second in the category is Synopsys, No. 48, growing 2% to reach $1.4 billion in ranking revenue, a leader in electronic design automation supplying the market with software and services used in semiconductor design and manufacturing.
Constellation Software, No. 100, grew an impressive 33% to reach $438 million in software and services revenue. The company was founded in 1995 to assemble a portfolio of vertical market software and services companies with the potential to be leaders in their markets. Today the firm has six operating groups servicing customers in more than 30 markets worldwide, dividing its focus into the public sector segment and the private sector segment.
Also notable is the performance of Tyler Technologies, No. 132, growing 11% to reach $264 million in revenue. The firm provides information management products for local governments, aiming to empower cities, counties, schools, and other government entities to become more efficient and responsive to the needs of citizens.
DemandTec, No. 223, serving retailers and consumer product manufacturers, grew an impressive 22% to reach $75 million in software and services revenue. Customers include: Ace Hardware, Best Buy, Office Depot, PETCO, Radio Shack, and Walmart in retail; Alcoa, Bic, Clorox, Coca-Cola, Del Monte, General Mills, and Kellogg's in consumer products.
Other growth leaders in the category include: Thunderhead Ltd., No. 295, growing 27% to reach $29.1 million in revenue; SofterWare, No. 326, growing 26% to reach $19.6 million in revenue; Dyadem, No. 332, growing 27% to reach $18.5 million; OmniComm Systems, No. 407, growing 52% to reach $9.6 million; Park City Group, No. 452, growing 78% to reach $6 million; and Mintek Mobile Data Solutions, No. 454, growing 26% to reach $5.8 million.
Of the 22 companies selecting Financial Applications as their primary target business sector, Fiserv, No. 24, is number one with a decline in software and services revenue growth of 4%, but still at $3.5 billion. Fiserv's clients for its information management and e-business services include banks, lenders, credit unions, insurance firms, merchants, government agencies, and leasing companies. Fiserv offers financial institution services and payment and industry products via the CheckFree business it acquired in 2007. The company has shed assets in the insurance and healthcare industries to better focus its overall business.
Second in the category is Fidessa Group, No. 109, with 36% growth in revenue to reach $373.5 million. Fidessa's trading platform suite of applications manages and automates operations for financial institutions. The software routes and monitors equity trade from stock exchanges in Europe, North America, and Asia - a total of 400 clients.
Another notable company is VSoft Corp., No. 357, which grew 32% to reach $15.2 million in software and services revenue. The company offers check and payment processing software and imaging technologies used to scan paper checks into electronic images. More than 17,000 banks, credit unions, and other financial institutions use the product. VSoft's branded software products include VSoft Agile and VSoft Centrum.
Other growth leaders in the category include: NetSuite, No. 163, growing 9% to reach $166.5 million in revenue; Bottomline Technologies, No. 181, growing 9% to reach $128.7 million in revenue; and Synygy, No. 222, growing 9% to reach $76 million in revenue.
Nov2010, Software Magazine