|Global Software Top 100 Edition 2011: The Highlights|
|Written by Michel van Kooten|
|Tuesday, August 23 2011 14:15|
The largest software companies in the world together generated software revenues of over $235 billion in 2010, an increase of 7% compared to 2009 ($220 billion). The top 10 companies, lead by Microsoft (#1), accounted for over 60% of that huge amount. Microsoft is by far the largest software company in the world, as it has been ever since the first publication of the Global Software Top 100 list in 2003. Last year, Microsoft alone increased its software revenues another $5 billion to a world record of $54.3 billion.
The Top 10
In 2010, SAP (#4) decided in February 2010 not to extend the contract of CEO Leo Apotheker. SAP’s software revenues grew 11% compared to 2009. Apotheker signed on as CEO of HP (#6 on our list) in November 2010.
Ericsson is still the fifth largest software company in the world, despite 4% lower software revenues in 2010. Other telco software companies like Nokia Siemens Networks and Alcatel-Lucent experienced similar software revenue decreases due to lower telco network investments. Nokia Siemens Networks dropped out of the top 10 because of this decrease. Storage giant EMC took over its postion in the top 10.
Gaming powerhouse Nintendo lost a few places and is now 8th on the list. Nintendo saw the largest revenue decline of all companies, this was however not unexpected and not uncommon in the highly cyclical gaming market. Nintendo grew amazingly in 2008 and 2009 because of the Wii successes. This trend could not be continued, but Nintendo remains the largest gaming company in the world.
Companies from developing economies play a minor role in the global software industry, but signs of fast growth are clearly visible in China, Russia and Brazil. South Korean software companies also made great strides on the path towards Global Software Top 100 recognition.
Arrivals and departuresEight new entries made it to the Top 100 this year; Informatica is the highest new entry of the list at position 74. Other new companies include Tibco (#89), Emerson (#93), Blackboard (#94), Micro Focus (#95), and Constellation Software (#98).
Among the departures are Sun Microsystems and Sybase after being acquired by Oracle and SAP respectively. Real, PGi, Acision and FICO did not make the revenue threshold this year.
A few acquisitions have taken place recently that will affect next year's Software Top 100, but the companies remained in this list because the deals were closed after year-end 2010. Intergraph (#69) for instance was recently bought by Swedish company Hexagon, and will not return in the 2012 list.
Fast growing software companies
Intel is of course primarily a hardware company (see: hardware top 100). The company entered the software top 100 last year as a result of the Wind River acquisition. This year, Intel is the fastest growing company in the top 100. The acquisition of security software maker McAfee (closed on February 28th 2011) will boost software revenues even further.
Google has also expanded the activities beyond internet search. Advertising provides the bulk of total revenues, other revenues, including software revenues have risen sharply in the last 3 years.
NetEase.com has been one of the fastest growing software companies in recent years, as online gaming became very popular, especially in Asia. Last year, growth halted for NetEase, and the company did not make the threshold for the top 100. In 2010, NetEase got back on the growth path and re-enters the fast growth list and the global software top 100 as #100.
OutlookAs financial institutions are by far the largest customer segment for the software industry, generating an estimated 30% of all software industry income, the credit crisis impacted software companies around the globe. However the impact was not as severe as some analysts expected.
The general assumption that the software industry is a very cyclical industry implies that software companies would see a decline even bigger than the financial industry, but that assumption is wrong. Software companies nowadays depend mostly on recurring subscription, support and maintenance revenue streams.
The maintenance/subscription revenue stream is generally based on multi-year contracts and hence a very stable source of income. This explains why the credit crisis did not cause much mayhem among the Software Top 100, although there were many instances of modest single digit revenue declines due to decreased license sales.
With a looming dollar crisis ahead, we expect to see a similar financial picture in the coming two years as we did during the credit crisis.
During the past 12 months we've seen an increase in software patent deals and software patent battles. As most of the new patent requests being filed at the US Patent Office are software patents, patents have become a business themselves.
As the industry has matured, and innovation has become incremental instead of disruptive, new patents generally have less meaning then the ones posted in the early days. Hence the patent war has shifted from filing as many patents as possible to buying as many patents as possible.
Recent multi-billion dollar patent deals can be seen in this light, and we expect them to be only the beginning. Buying patents will become a regular item in the software industry, and it will be a major cash outflow in coming years. As patents are seen as investments, they will not have an immediate effect on company profits, however in the long term this effect will be undeniable.
More informationThe full 2011 list of largest software companies in the world >>
The previous (2010) list of largest software companies in the world >>
A list of top US software companies can be found here >>
A full research overview can be found here >>