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Jun29
Software Industry
Linda Chan June 29, 2006
Know More: Technology 1-800-Flowers.com, Technology
On June 15, 2006, David Roux of Silver Lake Partners spoke in Palo Alto, CA on the growth of the software industry. Roux currently serves on the boards of Symantec Corporation, and is Chairman of the Board of Serena Software, Inc. Previously, he served as a director of Business Objects S.A., Gartner, Inc., and Chairman of the Board of Seagate Technology.

Roux indicated that the revenue party was over for software. Sales growth has been slowing down as the revenue growth rate from license and maintenance services have declined since 1986. Though, revenues are still twice that of projected GDP.

Roux mentioned that revenues for application service providers have been declining due to marginal utility for incremental users, reduced costs in development from increased standardization, cost amortizations over larger volumes, and competition from open source alternatives available at no charge.
The new party appears to be profits. Software industry profitability has been growing since 2001. Increases have been driven by cost saving measures.

Customers today seem to want to buy more products from fewer vendors. This offers industry specific software, increased vendor accountability, customized licensing options, and reduced complexity in implementation and operation.

This leads to software industry consolidations. This past year, 23 of the 90 largest software companies have engaged in mergers and acquisitions, including Symantec Corporation with VERITAS Software Corporation, Adobe Systems, Inc. with Macromedia, Inc., and Siebel Systems, Inc. with Oracle Corporation. The average deal size has been $1.4 billion, and the median deal size has been $400 million.




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