Software rankings: Microsoft in 1st, then IBM and Oracle

IDC recently published its annual report on software industry market share, which ranks software companies by revenue. According to IDC, despite Oracle's string of large acquisitions, including its pending acquisition of Sun, it will remain in third place behind Microsoft in first and IBM in second.

I received some interesting data points from the IBM PR team:

• IBM's software revenue in 2008 totaled $22 billion.
• Software represents a whopping 40 percent of IBM's overall profit, and 20 percent of its revenue.
• In 2008, more than 90 percent of IBM's segment profit was from software, services, and financing.
• IBM has acquired 81 software companies since 2003 and more than 100 software companies in the past decade (including Cognos, Filenet, Telelogic, Micromuse, and MRO Software).
• The R&D focus at IBM has shifted more toward software and services. More than 70 percent of the U.S. patents IBM received in 2008 (IBM's 16th straight year of patent leadership), were for software and services.
• IBM has been driving a shift to higher-profit segments (versus the low-margin commodity parts, which is why it got out of the PC, hard drive and DRAM businesses.)
• IBM is also getting greater margins from creating offerings that exploit the blurring of software and services, such as cloud computing and SOA.

A more difficult but possibly more interesting metric would be to understand the levels of adoption--that is, servers, users, etc., versus revenue--to get a better picture of the market. Of course, revenue and profit are all that really matters, but I'd like to know if IBM makes more money than Oracle on a potentially smaller installed base.

The big mystery is who else can Oracle buy in order to overtake IBM? It seems like industry consolidation has taken out most of the obvious candidates. Maybe this is where we'll start seeing Oracle acquire SaaS providers in order to gain fast-growing market share?

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