“The third quarter marks the worst of the recession for SBQ Vendors, but there is no expectation of a speedy return to double-digit revenue growth,” notes SBQ Senior Analyst Allan Krans. “Until a recovery is well underway, vendors will remain conservative with new investments. Increased levels of profitability, driven by cost reductions, and rising valuations have spurred a new wave of industry consolidation, but vendors remain cautious with organic headcount and R&D investments. Cost-saving technologies such as cloud, SaaS, and virtualization remain top of mind for customers, and will be focal points for investment as software vendors capitalize on these attractive growth opportunities”

Headcount among SBQ companies stabilized sequentially in 3Q09, as vendors completed headcount reductions and began to invest both organically and via acquisition. After reaching 489,000 during 4Q08, the total headcount for the SBQ companies declined by nearly 5% during 1H09 as vendors reacted to the recession. In the current environment, however, it should be noted that most vendors remain conservative regarding operating expenses, continuing to seek profit over large investments in sales and development.

In another sign that a recovery is underway, vendors of all sizes are using acquisitions to kick-start growth. With valuations increasing and the economy stabilizing, vendors with cash are returning to pre-recession acquisition activity levels. Smaller vendors such as McAfee and Software AG are driving industry-leading growth through acquisitions, while large vendors such as HP, IBM, EMC and Oracle are investing to round out the offerings in their respective diverse portfolios.

While most software segments declined due to the recession, SaaS and cloud computing actually gained strength. Cloud computing was a leading growth category during the recession, and is poised to build on that momentum moving into 2010. TBR expects 95% of businesses to purchase cloud services by 2015, forcing all software vendors to either react to the trend or miss a large growth opportunity.

Although Microsoft’s revenue declined sequentially, it retained its grip on the top revenue spot by delaying capital expenditures and headcount expansion in order to maintain profitability. IBM Software managed to surpass Oracle for the No. 2 position, with revenue driven by demand for branded middleware, particularly in business integration software. In terms of revenue growth, Software AG surged to the lead, benefiting from large customer deals and acquisitions. Salesforce.com and McAfee dropped to second and third, respectively, despite each increasing its sequential growth rate. McAfee has recorded consecutive double-digit growth rates for the past 15 quarters.

TBR’s SBQ Benchmark report provides expert commentary on market trends, effective business models, resource investments and geographic differences, using almost 30 standard and proprietary metrics to analyze the performance of 34 companies. Companies covered by the SBQ Benchmark are: Adobe, Autodesk, BMC, CA, Check Point, Citrix, Compuware, CommVault, Epicor, EMC, HP Software, i2, IBM Software, Informatica, Intuit, JDA, Lawson, McAfee, Microsoft, NetSuite, Novell, Open Text, Oracle, Red Hat, Sage, Salesforce.com, SAP, Software AG, Sybase, Symantec, Tibco, Trend Micro, Verisign and VMware.

Technology Business Research, Inc., headquartered in Hampton, N.H., is recognized as one of the leading high-tech market research and consulting firms specializing in the analyses of computer, software, networking equipment, wireless, portal and professional services companies, as well as customer satisfaction studies. Serving a domestic and international clientele of high tech manufacturers, IT professionals, end users and financial executives, TBR provides timely and accurate market research and business intelligence in a format that is uniquely responsive and tailored to clients’ needs. TBR analysts are available to further address client specific issues or information needs on an inquiry or proprietary consulting basis.