For 2010, Information Management commissioned a ranking of the top 50 revenue-producing product vendors in information management - those that supply the tools and knowledge used by organizations to collect, distribute, analyze and report on data. (To review an interactive list of the IM 50, click here.)
Our examination of these influential hardware, software and service providers (see: Methodology sidebar at end) found that more than half suffered revenue declines in 2009, when the world economy was reeling and the U.S. economy contracted by 2.4 percent.
Among the top 10 companies in the IM 50, only Google, which earns most of its revenue from search advertising, and NetApp, a provider of enterprise storage, reported sales gains. The median revenue change among the IM 50 was a decline of 1.1 percent.
Large software companies that have effectively modularized enterprise applications for standalone use and offered flexible deployment models held up best during the economic turmoil.
Analysts who were surveyed for the report agreed that the ability to accommodate existing infrastructure was a key to vendor success. Current enterprise priorities call for discrete applications to help fill a core business mission, said Mike Fauscette, head of the software business solutions group at IDC. Large customers have prioritized best of breed products in individual modules, whether the product is a customer relationship management solution or middleware to connect heterogeneous systems, he said.
Oracle is well positioned in this world of best-of-breed software procurement, with customer-centric products like Fusion middleware and Hyperion for business analytics, Fauscette said. Revenue at the company (No. 5 on the IM 50) fell just 1.3 percent in 2009 and is rebounding sharply this year.
In a very different model based on hosted application services, Salesforce.com (No. 19) is riding the success of a deep network of providers based around a straightforward CRM application. Salesforce's revenue surged 24 percent in 2009, making it the fastest growing of the $1 billion-plus companies on our list.
During a year when companies were cutting back, Salesforce benefited immensely from the "no software" model that sidesteps license fees at a time when operating budgets are driving new project spending. Indeed, software companies that rely on license fees - which are booked by buyers as capital expense - were walloped in 2009 as cap-ex budgets were frozen during the financial crisis and wider recession.
To some extent, the biggest companies in the IM 50 (No. 1 Hewlett-Packard, No. 2 IBM and No. 3 Microsoft) all suffered from capital spending cutbacks. SAP (No. 6) paid the biggest penalty among leading companies as its revenue fell 7.7 percent. "They aren't necessarily seen as a best-of-breed provider," Fauscette said, and "they don't really have a strong SaaS story. Their new license growth really dropped off."
Enterprises' need-based approach to software procurement - and their growing willingness to integrate multiple deployment models of on-premise software as well as hosted services - has created rich functionality at the application level but has made data environments harder to manage, Fauscette said. That created a window of opportunity for vendors that can unify or correlate data environments in master data files in which all of an enterprise's other systems are in agreement. In early 2010, this was reflected in acquisitions of leading master data management vendors by IBM (Initiate), Informatica (Siperian) and Oracle (SilverCreek). Fauscette cited IBM, despite its 2009 revenue decline, as a "thought leader" in MDM and potential beneficiary of the trend.
Heterogeneous information environments also create an opportunity for integration providers whose products do the best job of applying the principles of service-oriented architecture, analysts said. Forrester Research analyst Andrew Bartels put Oracle, IBM and TIBCO (No. 32) in this category. "A lot of companies correctly say, 'SOA is something we want to protect and preserve,'" Bartels said. "They think if they don't do this, they're going to be competing at a disadvantage for a very long time."
In general, companies whose products are easiest to cost-justify are doing the best. Business intelligence is one such product area, and the strong BI offerings of Oracle, Informatica (revenue up almost 10 percent), MicroStrategy (up 4.8 percent) and SAS Institute (up 2.2 percent) ex
plain the relatively strong performance. "There's a very strong focus on real-time analytics - how you can use what's happening to your business to respond more effectively and rapidly," said Bartels.
Vendors that help companies get by with less - cheaper hardware, fewer data centers, lower staffing levels - arguably had the smoothest ride in the decidedly bumpy environment of 2009. "The recession has meant that companies need to manage their infrastructures more efficiently," said Rene Millman, a senior research analyst at Gartner Research. That meant relatively strong results at VMware (No. 15, sales up 7.6 percent) and Citrix (No. 18, up 1.9 percent), two companies with virtualization products that allow companies to consolidate hardware and reduce management costs. Revenue at BMC Software (No. 16), which sells infrastructure management and IT service management software, rose 2.1 percent.
"All of these are vendors that are very active in the IT management space," said Forrester analyst Bartels. Customers have continued to do business with them because their products have a history of reducing IT overhead, he said.
Usually, when vendor sales decrease, their profits also fall - or evaporate altogether. That did not happen for several of the companies in the IM 50. IBM, CA Inc. and TIBCO reported profit gains of 8.8 percent, 7.1 percent and 32 percent, respectively - despite lower sales.
Like their customers, vendors endured the downturn by cutting costs. IBM, for instance, cut its sales, general and administrative costs by $2.4 billion in 2009 and its research, development and engineering expenses by $517 million.
That may not be the best news for customers, but it augers well for a rebound year for vendors. After all, it's not so much that software deals "got lost as they got deferred into 2010," Bartels said. "We expect to see a rebound in many of these cases."
Click here to view our interactive table of the IM 50.
The IM 50 looks at the 2009 revenue and profit of the largest publicly held information management companies.
In defining this universe, editors at Information Management made some judgment calls to winnow the IM 50 list. To avoid pitting U.S. company financials against European and Asian accounting practices, we eliminated companies not based in the U.S. The exception was SAP with its very large domestic presence, but other global players with notable but lesser revenues were left off the list. We also excluded domestic and foreign-based consulting/system integration service firms and focused on product-based vendors.
Large diversified companies such as Hewlett-Packard and IBM were ranked according to total corporate revenues. Had we ranked those companies by their reported software revenues and ignored their sizable consulting businesses, IBM, with $21.4 billion in software revenue, would have dropped to the position after Oracle. Hewlett-Packard, with $3.57 billion in software revenue, would have sunk to the No. 10 spot on our list. (Microsoft would have been first.)
Our decision to include Google - which earns the vast majority of its revenue from search advertising - reflects our judgment that the company is exerting an increasing amount of influence not only on how information managers think about the challenges they face but on the way that virtually every company on our list thinks about creating and delivering software.
For this report, we used a cut-off date of March 10, and looked at trailing 12-month results available at that time. For the most part, that ensured that we were getting, and comparing, results for each company's 2009 calendar year. In the case of companies whose quarters do not end in December 2009, revenue and profit data may actually reflect results for a slightly different 12-month period, for instance, the 12 months ended Nov. 30, 2009, or the 12 months ended Jan. 31, 2010.
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