In the past, traditional software companies produced programs that it placed on discs and sold to consumers who then installed the programs on their own machines. Software companies today operate on many different business models and provide a wide array of products and services. These include software license sales, maintenance services, subscription fees, and other support services. Companies are increasingly turning to software-as-a-service (a concept known as SaaS) where customers never possess or install the software. Instead, customers pay a subscription fee to access the software through the Internet on the provider’s server.
This article lists the top 10 companies deriving revenue from software. Some of the companies are software focused while others derive their primary revenue from other areas while also selling software. The companies are ranked in decreasing order by software-only revenue as reported in the companies’ respective 2013 official annual reports.
What Are the World's Top Ten Software Companies?
- Microsoft (MSFT): The world leader in software companies, Microsoft continues to maintain its dominance with total revenues of $77.85 billion in 2013. Of this, $65.7 billion, or 84 percent, was from its software stream. Microsoft’s software revenues exceed those of its next two competitors combined.
- Oracle (ORCL): Oracle surpassed IBM in 2013 to gain the number two spot in software revenues. Its software revenues were $29.7 billion in 2013, out of a total revenue of $34.74 billion.
- International Business Machines (IBM): The large conglomerate offers a wide range of products and services, including both hardware and software. It consistently derives 25 to 30 percent of revenue from software. Of the total revenue of $99.75 billion for 2013, software contributed $29.1 billion.
- SAP (SAP): The Germany-based multinational software giant generated $18.9 billion in revenue from its software stream, out of the total revenue of $22.87 billion. Software represents 83 percent of its business. (SAP’s official report gives revenues in euros. For this article, we converted euros to U.S. dollars using the December 31, 2013 exchange rate of 1.36.)
- Symantec (SYMC): Nasdaq-listed Symantec, the global leader in software security solutions, generated $6.4 billion in software revenue from total revenues of $6.9 billion.
- EMC (EMC): NYSE-listed EMC takes the number six spot with $5.6 billion of software revenues out of total revenues of $23.2 billion. (EMC also owns the software company VMWare which is number eight on this list. The companies are listed as separate entities on the New York Stock Exchange. For that reason, this list treats EMC and VMWare as two separate entities.)
- Hewlett-Packard (HPQ): The global giant is mainly known for printing products and solutions. From its total revenue of $112.298 billion, it derived just $4.9 billion from software. Although this is a small percentage of Hewlett‑Packard’s total revenues, it still makes the company the seventh largest software company.
- VMWare (VMW): VMWare, owned by EMC, remains separately listed on the New York Stock Exchange. Its software stream revenues for 2013 were $4.8 billion, out of total revenues of $ 5.2 million. If the software revenues of EMC and VMWare considered together, the company would be the fifth largest software company in the world.
- CA Technologies (CA): Nasdaq-listed CA Technologies has $4.2 billion from its software stream, out of total revenues of $4.643 billion.
- Salesforce.com (CRM): Ironically, the NYSE-listed salesforce.com promotes itself with the motto, “No Software.” The company sells software through the software-as-a-service model. In 2013, it saw $3.8 billion in revenues from software, out of total revenues of $4.07 billion.
The Bottom Line:
The 10 companies listed above are the top players in the software category. Software stock investors should note that some of these companies are large conglomerates that derive a majority of their revenues from nonsoftware products. Microsoft, Oracle, SAP, Symantec, VMWare, CA Technologies, and Saleforce.com derive most of their revenues from software. IBM, EMC, and Hewlett-Packard have lower percentage of total revenues coming from software sales and are not traditional software companies.