RESEARCH PUBLICATIONS

IT services companies: healthy growth

IBM is the largest IT services company in the world, according to the newly published Services Top 100, a new research production of the Top 100 Research Foundation. With IT services revenues of $39 billion, IBM Global Services still has a wide lead over HP, despite HP’s acquisition of EDS, which contributed considerably to HP’s services revenues. HP (27.7 billion) is followed closely by Fujitsu (27.1 billion), the largest Japanese IT services company, that grew by a strong 20% organically last year.
The rest of the Top 10 is a colourful list, with one-stop IT shops such as NEC ($9.1 billion), but also consultancy powerhouses like Accenture and Cap Gemini; and in 6th position Northrop Grumman, a supplier of computerized defense systems to the US army. NTT Data (9th position) is the first telco owned company in the list: it is the IT services arm of NTT, Japan’s largest telecom operator. With revenues in excess of 10 billion, it is significantly larger than BT Global Services (12th position) and T-systems (14th position), owned by leading British and German telco operators respectively.

Software companies in the Services Top 100
Most top software companies such as Microsoft (19), Oracle (30) and SAP (31) have significant service businesses to help customers implement and integrate their software into their IT infrastructure. With IT services revenues of $4.5 billion, Oracle is listed just below SUN Microsystems ($4.6 billion). Given the recent acquisition of SUN by Oracle, the combined companies is destined to jump to a position close to the Top 10 in next year’s edition of the Services Top 100. Telco suppliers Ericsson and Nokia Siemens Networks have substantial services businesses to assist telco's in the rollout of their specialized hardware and software; Ericsson ranks 11th in the Services Top 100, and Nokia Siemens Networks is a few places lower (17th position).
Large software publishers that are notably absent in the IT services Top 100 are CA (number 10 in the Software Top 100), one of the largest sellers of mainframe software, and Symantec, the largest security software maker (5th position in the Software Top 100).
Because of the consumer-oriented nature of their business, game publishers do not usually have any meaningful services department; all 13 game makers in the Software Top 100 are absent in the Services Top 100.

For more information on the Services Top 100, and a further discussion of the ranking, visit www.servicestop100.org.

The Software Top 100 and the Services Top 100 are research publications of the Top 100 Research Foundation.

RESEARCH PUBLICATIONS

Enterprise Software Top 10

Enterprise software is big business; the Top 10 enterprise software companies  generated 22.5 billion USD revenues in 2008, and some of the world’s largest  software companies are in the enterprise software business. German giant SAP continues to lead the market it has been leading for  over a decade. Oracle, that stepped into the enterprise software market in  a big way in 2004 with the acquisition of Peoplesoft and JD Edwards for $10.3  billion, is currently in second place in the Enterprise software Top  10.

The Market Leaders Nine large enterprise software companies made it to  the Software Top 100 of 2009. Most of these companies experienced revenue growth  in 2008, despite the challenging economic circumstances. CRM company Salesforce.com is a rising star, outshining the rest:  Salesforce software revenues were up 45% last year, after already achieving 51%  revenue growth in 2007. However, with 959 million USD they still have a few  strides to make before they can enter the Top 3: UK-based company Sage is currently in third position with revenues of 1,496  million USD.
History of enterprise software Actually the  enterprise software market is pretty young. It is a recent term that was  invented to encompass the related ERP, CRM and SCM markets. As ERP companies  started entering the SCM arena, and then started buying CRM companies to add to  their portfolio, a new market definition was necessary: enterprise software. SAP, the company that made ERP popular in corporate  business, was founded in 1972 by five former IBM engineers in Mannheim, Germany. They wanted to help  businesses link their processes and information, starting with production and  logistic processes. Modular design made it possible to change and add software  modules, while still keeping oversight in one central database. Businesses  embraced the new software as it ended the traditional ‘automation islands’  between business departments: back then, computer systems of different  departments could generally not communicate with each other, and data was stored  separately for every department, resulting in data discrepancies. Over time,  more functions were added in the fields of finance, HRM and CRM. This integrated  approach proved to be very useful for large enterprises and ERP soon became  popular. In the nineties almost every large corporation started adopting ERP  software, and SAP was their partner of choice.

Acquisitions As ERP proved to be a financially rewarding market,  ERP vendors started using their cashflow to buy competitors. Acquisitions were  so many in number, that most of the ERP vendors of the nineties now no longer  exist as separate companies. All companies in the Top 10 used acquisitions to  gain or strengthen their position. SAP bought Top Tier, Oracle spent lavishly on  PeopleSoft and Siebel, Sage bought a host of smaller players. Infor, which is backed by Golden Gate Capital, has bought so  many companies that they earned a position above Microsoft on the list. Microsoft did not originally make  enterprise software, but decided to get into this growing market by buying some  medium-sized players. As the Top 5 have been growing in the past few years  through acquisitions, number 9 and 10 on the list - Epicor and Visma - are now rumored to be targets themselves.  More consolidation is definitely expected for the future.
Future  developments: jumping the SaaS band wagon A relatively new development is  the increased interest in Software-as-a-Service. Both SAP and Oracle have  announced a shift of their activities in this direction, spurred by the strong  financial results of SaaS companies like Salesforce.com and Netsuite.  Despite others jumping the SaaS band wagon, we expect Salesforce’s momentum  to continue, and a Top 3 position is possible within two years time.

The top companies in the hardware industry - a new list

Hardware is big business; all of the companies in the Hardware Top 100 post revenues higher than 1 billion USD. The Hardware Top 100 is an overview of the world’s largest makers of computer- and communications hardware, published by the Top 100 Research Foundation.
The largest companies in the list are computer- and printer-giant HP, electronics company Samsung and high-tech contract assembler Foxconn. While mobile phones tend to get smaller and thinner every season, cellphone giant Nokia is not losing much weight: US$ 46 billion in hardware revenues brought it to the 4th spot in the list.

Diversification Roughly half of the companies in the hardware list also produce software, and two-thirds of the companies also offer IT services to their customers. Very large IT companies like HP, IBM, Cisco and Microsoft tend to have an all-round product palette, including hardware, software and services, although each has its specialties and its own accents.

Who actually makes PCs? As the list shows, the hardware industry is not just a bunch of PC makers. In fact, most of the hardware companies don’t make PCs; they only produce certain components. An ordinary PC bought from the store may be composed of a processor from Intel (7th position), a DVD-player from Toshiba (6th position), a hard drive from Seagate (28), a graphics card from Nvidia (66th position), a mainboard from Asus (18) and memory from Kingston (63). The parts might have been assembled into a computer casing by Foxconn (3), and packaged with a printer from Canon (10), a mouse and keyboard from Logitech (84) and a screen from LG (8). All the mentioned companies have specialised in delivering one or more components. A small minority of the companies actually sells full-fledged PCs. The largest PC makers (HP, Dell Acer and Lenovo) all rely heavily on a network of suppliers.

The main success factor: branding Because IBM invented the PC to be an open system, every willing company can start making and selling components that fit in PCs around the world. Hence, margins are often razor-thin in the hardware industry, and competition can be very intense. Eventually, the companies that receive some kind of brand recognition from the public are the ones that succeed in making a profitable living from their produce. When people buy a brand they are less sensitive to pricing. Now you understand why Intel started putting that sticker on PCs years ago.

The rise of Asian hardware companies During the last decade, the Taiwanese and Chinese suppliers and assemblers have looked at the profits made by the big Western brands that were often their customers, and they have boosted their branding efforts in order to get known themselves among the worldwide public. This has paid off handsomely for Asian companies such as Acer, BenQ, Samsung and LG. A low labour cost-base, and excellence in manufacturing will likely bring Asian companies higher up the ranks in coming years.

Software or hardware: where is the most money? Clearly, the top 100 hardware companies are several times larger than the top 100 software companies in terms of revenues. Profit margins however, are substantially higher among software companies. Any choice would be an arbitrary one; there is a lot of money made in both industries.

The full list of largest hardware companies in the world can be found here. The Hardware Top 100 is a publication of the Top 100 Research Foundation. The list was made according to a methodology that can be found here.

RESEARCH PUBLICATIONS

 Strong growth for Security Software Top 12

   Large security software companies have shown remarkable growth during the economic crisis. While corporations worldwide were cutting their IT budgets, security software spending was spared. In 2008, the weighted average revenue growth was 16% for the major security software firms.

The security software market is worth 16 billion USD, according to the Top 100 Research Foundation. The Top 12 security software companies account for over 10.5 billion USD, about two third of the total market. The market is expected to grow 12% this year and 17% in 2010 to 21 billion USD. The table displays the Top 12 Security Software Companies, ranked by software revenues from 2008 in millions of US dollars.

Several acquisitions have taken place last year. McAfee bought Secure Computing, Sophos took over the German Utimaco and Symantec acquired MessageLabs. More consolidation is likely, as the sector grows rich and large software companies buy smaller competitors for market share and additional growth potential. Security software is a very international sector. Though US companies are leading, they are not as dominant as they are in the rest of the software industry. The fastest growth takes place outside the US. Various successful antivirus companies come from Eastern Europe, with Russian Kaspersky as a frontrunner. AVG, the fastest growing company in the list, has its roots in the Czech Republic. Among the runners-up, just below the Top 12, are Softwin from Romania (the maker of BitDefender), ESET from Slovakia and Czech ALWIL Software (the maker of Avast). The antivirus market is growing substantially faster than the firewall- and intrusion detection market, driven by volume contracts with PC makers and increasing public awareness of virus threats.