40 Fastest-Growing Software Companies

June 11, 2007 from DevSource – “The biggest public software companies are increasingly relying on acquisitions for growth, as they pick off weaker competitors or startup companies that have decided not to go it alone.

Most software companies that grew more than 20% last year were helped by an acquisition, a Baseline survey shows. The acquisition trend is putting more control, and power, in the hands of a few relatively well-known companies.

For instance, Oracle has spent well in excess of $20 billion making acquisitions over the last few years, from its $11.1 billion buyout of PeopleSoft to its $6.1 billion pickup of customer relationship management giant Siebel Systems. Oracle has continued its acquisition binge this year, buying Hyperion, a maker of business intelligence software, for more than $3 billion in April...

From a profit perspective, too, the industry looks healthy. Aggregate profit at the 49 biggest software companies last year was $22.4 billion, for a profit margin of 20%. But the profitability was concentrated in the three biggest companies, Microsoft, Oracle and SAP.

Microsoft alone which has typically emphasized organic growth over acquisitions accounted for 40% of the revenue and 56% of the profits among the companies we considered…

Baseline's ranking of the 40 fastest growing software companies—those with sales of at least $150 million in 2005 — is intended to provide a health check on the enterprise software industry. What you won't find: companies that aren't purely in software such as IBM or Sun. Or for that matter, Google is not included because it derives most of its revenue from consumer services.”

180 View – Take a look at the list of the fastest growing companies. Many of them you will not recognize. The software business can be extremely lucrative not just for the huge firms like Microsoft, SAP and Oracle, but also for the smaller ones that pick a niche and run with it.