Wednesday, November 10, 2010

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 SAPcontinues 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.
Top 10 Enterprise Software Companies
revenues (mln)
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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 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.
Enterprise Software Acquisitions
1.SAPTop Tier
2.OraclePeoplesoft, Siebel
3.SageTekton, Emdeon
4.InforSSA, GEAC
5.MicrosoftDynamics, Navision
8.Unit4 AgressoCoda
9.EpicorScala, NSB Retail
10.VismaAccountview, Volym

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 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.

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