2006 Software 500: Deep Concerns Over Security

by John P Desmond Revenue and employee head count flat; growth areas show opportunity for package markets, system integration services and infrastructure support

The 2006 Software 500 reflects deep concern over information security as 40 % more companies than last year identified information security as their primary business sector, and those companies increased employees 40 % over the previous year. Overall, total 2006 Software 500 revenue of $380.8 billion worldwide for 2005 represents just under a 1 % decline from the previous year, when total revenue was $383.3 billion. Total employees in the 2006 Software 500 declined just under 5 %, from 2,663,023 at the end of 2004 to 2,539,872 at the end of 2005. Outside of the security sector, employee growth was strong in human resource management systems (39 % increase), healthcare (23 % increase), content management (22 % increase) and customer relationship management (17 % increase). The top of the Software 500 saw few changes as IBM again took No. 1 with a 3 % increase in software and services revenue to $63.1 billion, and Microsoft placed second with 7.6 % growth to $36.5 billion in software and services revenue. EDS, Hewlett-Packard Co., Accenture and Computer Sciences Corp. were next at ranks three through six, reflecting the clustering at the top of the Software 500 of the largest system integration and services firms. Among the fastest growing companies with more than $2 billion in revenue this year, Wipro Limited, at No. 28, stands out with its 117 % growth rate on its strength in system integration services from its India base. The company competes in multiple markets including CRM, business intelligence, software engineering and complex global application projects, such as those implementing SAP applications. Another standout is Infosys Technologies Limited, at No. 38, with a 50 % growth rate from the previous survey year. Also based in India, Infosys is also strong in system integration services and positions with its “Win in the Flat World” and Global Delivery Model taglines. Most 2006 Software 500 companies grew up to 24 %, 231 of them, while only 17 % or 84 companies reported declining revenue, eight fewer than last year. Serena, at No. 126, shows notable growth among companies with between $100 million and $1 billion in revenue, registering 142 % growth. The privately held concern with mainframe roots is benefiting from its strategy to offers its change control capabilities across a range of platforms while keeping a strong technical focus on “Change Governance,” in its marketing parlance. Also growing at 142 % in this category by virtue of the merger of Concerto Software (last year at No. 144) and Aspect Communications, is Aspect Software, now at No. 82. The company is focusing its product portfolio strongly on the contact center. Privately held Infor moved up from No. 111 to No. 102 this year, on the basis of 126 % growth in revenue to $350 million, building on its core ERP applications to “Enrich, Extend and Evolve.” Growing rapidly in companies in the $30 million to $100 million revenue range was Recruitmax Software, up 216 % in revenue on the strength of its products for recruitment, compensation and performance management — the employee lifecycle. (Note: Recruitmax changed its name to Vurv Technology Inc. in the spring of 2006.) Also growing dramatically in this revenue range was Click Commerce, up 128 % thanks to its on-demand supply chain focus. (Note: The company announced in September an agreement to be acquired for a value of $292 million by Illinois Tool Works, Inc., a diversified manufacturer of engineered components with 700 business units.) Also, Omniture, with its business optimization product line, had a strong showing of 108 % growth; and Aztecsoft Ltd., showed 99 % growth, relying on its software and quality engineering services. Seeing strong growth among companies in the $10 million to $30 million range were: ActivCard Corp. (which changed its name to ActivIdentity in February 2006), growing 144 %, with its digital identity assurance products; NetQoS, Inc., supplier of network performance management products and services, growing 110 %; and Acronis, supplier of shrink-wrapped products focusing on storage management, growing 107 %. The following is a look at selected primary software business categories: Security Of the 29 companies who report security as their primary software business sector focus, Symantec is far and away the revenue leader with $2.58 billion in 2005 software/services sales, 38 % growth from a year earlier. Symantec is beginning to assimilate the acquisition of Veritas, extending its product line into storage management. With that now in place, the company is poised for continued growth with its offerings of products and services in anti-virus, email scanning, application performance management and personal firewalls. McAfee had a positive year with revenue growing 8.4 % and its products targeting marketing including the home, small/medium business and the enterprise. Via acquisitions, the company is also moving into intrusion detection, vulnerability management and wireless security. While ActivCard led the security segment in rate of growth, PatchLink Corp. was second with revenue increasing 88 %; the company’s effort to position within patch management and security is working. Growing at a 56 % rate was SafeNet Inc., with its products offering protection for identities, communities and applications. Control Break International (SafeBoot), with its focus on securing network-connected devices of all kinds, grew 49 %. The company’s two-factor, pre-boot access control and FIPS-certified encryption technologies help it win respect among IT buyers. Websense grew at a 33 % rate, continuing its focus on Internet management products, including Web filtering and control of workplace Internet surfing. Proginet, with a secure data integration focus, grew 25 %; and Internet Security Systems, the established player targeting the enterprise, saw 14 % growth to $329.8 million; Check Point Software Technologies grew at a 12 % clip to$579.4 million, seeing continued success with its offerings for perimeter, internal and Web protection. Application Development Serena was the growth leader in application development among companies with more than $100 million in revenue. The following companies also showed remarkable growth: Telelogic, extending its product range to enterprise lifecycle management, showed 21 % growth to reach $171.5 million; Micro Focus, focused on legacy development and deployment, grew 20 % to reach $150.6 million; and ILOG, with business rules, optimization and visualization components, grew 22 % to reach $125.3 million. In the niche market for workplace/facilities management software, TRIRIGA and Manhattan Software are both showing growth: TRIRIGA at 19 % to reach $27.5 million in revenue, and Manhattan at 21 % to reach $22.7 million in revenue. Both TRIRIGA and Manhattan Software have won recognition from Gartner Group as a leaders in Integrated Workplace Management Systems. Gartner rated 11 software suppliers on “Completeness of Vision” and ”Ability to Execute” in the market, which combines disciplines around managing facilities, real estate, maintenance and projects. Also notable in the application development category were: DefenseWeb Technologies, growing 116 % to reach $8.8 million, on the strength of its secure online information system development specifically to assist the U.S. Department of Defense service branches and health and family applications; Pathfinder Associates, growing 29 % to reach $4.5 million in revenue, leveraging its strengths in user experience design and application development; and DatamanUSA, growing 136 % to $2.4 million, with a focus on IT staff augmentation and software design and development. Financial Applications The financial applications category was cited as the primary business sector of more than 30 firms, an indication of the continued vitality of the market for collections of software functionality in packages. In companies with more than $1 billion in revenue, Intuit gained 13.4 % to reach nearly $2 billion in revenue. Taxpayers, consumers and small businesses are the firm’s core markets. Growing 13 % to reach $4 billion, SunGard Data Systems targets financial services, higher education and the public sector. The company counts among its customers 50 of the largest financial institutions and 1,600 colleges and universities. Also impressed with growth of 11 % to reach $1.4 billion is The Sage Group, which counts among its properties Peachtree Software and other brands throughout the world supporting accounting, payroll, CRM and certain vertical industries. Between $100 million and $1 billion in revenue, CheckFree Corp. grew 20 % to reach $728 million. The firm’s electronic commerce products for paying household bills online account for approximately 75 % of revenue; its investment services arm serving financial institutions accounts for 14 %, and its software applications unit, 11 %. Jack Henry & Associates, technology provider for the financial services industry, grew 19 % to reach $446.5 million. Blackbaud Inc., supplier of software and services for nonprofit organizations, with 15,000 entities as customers, grew 20 % to $161.1 million in 2005 software and services revenue. Fair Isaac Corp., the decision management player founded in 1956, whose software underlies the credit rating system (FICO® scores), grew 13 % to $798.7 million. In the $10 million to $100 million revenue range, Bottomline Technologies, offering products supporting the payment process, grew 23 % to reach $81 million. Kingland Systems, which operates data centers and offers applications developed in Java for its customers in financial services, grew 39 % to $11.4 million. CODA plc, offering packages to support accounting, procurement, reporting, analysis, compliance and governance, grew 13 % to $86.2 million. Alogent Corp., which aims to deliver technology efficiency for paper payments processing, grew 4 % to $15.5 million. In companies with less than $10 million in revenue Stockgroup Information Systems, which aims to help investors create and manage wealth, grew 27 % to $6.1 million; and Envision Financial Systems, supplier of packages to the institutional and mutual fund asset management markets, grew 19 % to $5.9 million. System Integration Services Moving the IT intelligence outside the organization is the competence of the successful system integration services outfits. It’s a huge growth area as companies try to figure out where in the world to grab resources. The services firms benefit as IT organizations fight to retain their own core competence and differentiation, while at the same time searching for the lowest cost alternative anywhere in the world for delivering needed application components. The next most dramatic growth among billion-dollar-plus revenue companies in this category after Wipro at 117 % and Infosys at 50 %, is Hewlett-Packard Co., which grew 26 % to reach $17.4 billion. HP’s software portfolio includes operating systems, print management tools and OpenView, now extending beyond network infrastructure to product lifecycle management. HP’s IT service organization is among the largest in the world, partly by virtue of the acquisition of Compaq, which had acquired the Digital Equipment Corp. service arm. Anteon, now part of General Dynamics, also showed respectable growth at 18 % to reach $1.5 billion in revenue. The firm targets defense, intelligence, homeland security, and federal, civil and commercial sectors. Among leaders in companies between $100 million and $1 billion in revenue, Cognizant Technology Solutions, which Gartner named a leader in offshore applications services, rose 51 % to reach $885.8 million. SRA International, targeting national security, civil government and healthcare, grew 43 % to reach $881.8 million. Satyam Computer Services Ltd., named a North American ERP challenger by Gartner, grew 40 % to reach $793.6 million. Patni Computer Systems, optimizing customer IT investments from offshore, grew 38 % to $450 million; and Ness Technologies, focusing on government and defense, financial services and telecommunications, grew 27 % to $370.7 million. Among companies grossing up to $100 million in revenue, Edgewater Technology, targeting the middle market with premium IT services, grew 61 % to reach $39.8 million; Collaborative Consulting, adding value to the technical abilities and business processes of clients, grew 32 % to reach $33.4 million; and Prelude Systems Inc., offering offshore services from a base in Southern California, grew 69 % to $5.3 million. Customer Relationship Management In this category, know the customer and keep the customer is the game. Being able to identify the customer no matter how the interaction occurs—in person, on the Web, phone, fax or e-mail—is a desired feature. More than 30 companies selected CRM as their primary business sector; the group has few at the top and more in the middle and lower ends of the Software 500 revenue ranges. In the more than$1 billion range: CRM revenue leader Acxiom Corp., focused on customer data integration, grew 21 % to reach $1.2 billion in revenue; Harte-Hanks, the direct marketing and publishing company, grew 10 % to reach $1.1 billion. In the $10 million to $100 million revenue range, achieving fastest growth was Knova Software. The newly-named company is the combination of ServiceWare Technologies, with its knowledge management systems for service and support, and Kanisa, with its service resolution management applications, grew 89 %% to reach $23.6 million. Next fastest growth in the category was RightNow Technologies, offering on-demand products for service, sales and marketing, growing 41 % to $87.1 million in software/services revenue. Exstream Software, offering products to streamline document creation processes, grew 37 % to reach $59.7 million; Alorica, customer service management product supplier, grew 34 % to $78.2 million; and Astea International, supplier of service management software, grew 18 % to reach $22.8 million. Among CRM companies earning up to $10 million in revenue, ServiceBench, offering Web-based service management products, grew 42 % to $8 million. Content Management Support for the process and infrastructure around managing content—be it website content, catalog content or the documentation critical to regulated industries—is an expanding space. Since this data was collected, the category has lost a market leader, Filenet, to acquisition by IBM. In companies with more than $100 million in revenue, the fastest growth was achieved by Open Text, an enterprise content management market leader, with 42 % growth to $414.8 million. Next Stellent, emphasizing fast implementation of content management, saw that message resonate with 41 % growth to reach $106.8 million. First in revenue between $10 million and $100 million, Autonomy, finding meaning in unstructured information, grew 48 % to reach $96 million. eCopy, focused on capturing digital data from paper documents, grew 46 % to reach $43.9 million. Document Sciences Corp., supporting personalized enterprise communication, has grown 28 % to $29.6 million. KnowledgeStorm, a search resource for IT buyers trying to reach technology suppliers, has grown 26 % to reach $13 million in revenue. In firms below $10 million in revenue, Nstein Technologies—offering content management, market intelligence and information access and search—grew 95 % to reach $7.8 million in revenue. Supply Chain/Manufacturing This segment is host to maturing ERP and other manufacturing software suppliers and newer firms with Internet-related roots that continue to grow at healthy rates. Of firms with more than $100 million in revenue, the fastest growing was Ariba, focused on “spend management” as in procurement, with a 31 % increase to $323 million in revenue. Next, Manhattan Associates, building on roots in warehouse management to a suite supporting the supply chain, grew 17 % to $223.2 million. Among companies with revenue between $10 million and $100 million, fastest growing was Click Commerce, on-demand supply chain management supporting real-time collaboration among business partners, up 128 % to reach $58.7 million. Logility, offering collaborative solutions for supply chain partners, grew 63 % to $37.3 million. Kewill Systems, with a supply chain execution focus on ordering, shipping and international trade and logistics, grew 24 % to $50.1 million. Provia Software (acquired by SSA Global in March 2006), supply chain management supplier, grew 21 % to $20.6 million. IT Infrastructure The software that holds together the production operation, the back room data center, the Internet nerve center—network management, operations support, “geek stuff”—has always been a strong category of software because it is needed no matter what advances are made in computing technology. Leading the growth in this category is Juniper Networks, positioned to enable secure, assured communications over a single IP network, grew 54 % to reach $2.1 billion in revenue. Between $100 million and $1 billion in revenue, fastest growing was Secure Computing Corp., concentrating on providing customers with a trusted Internet environment, with an increase of 17 % to reach $109.2 million. Between $10 million and $100 million in revenue, fastest growing was NetQoS, Inc., focused on improving application delivery over wide-area networks, growing 110 % to reach $22.3 million. Next, NUVO Network Management, offering managed services to boost IT performance, saw 39 % growth to reach $13.9 million in revenue. F5 Networks, concentrating on application security, optimization and availability, grew 37 % to $61.8 million. NetPro Computing, focused on the health and control of Windows-based networks, saw 27 % growth to $18.6 million in revenue. And InfoVista SA, positioned for service-centric performance management, saw 19 % growth to $41.4 million.