ARC Advisory Group (www.arcweb.com) monitors and analyzes the enterprise software market on a quarterly basis. We track the revenues of thirteen prominent publicly traded enterprise software companies and translate financial results reported in foreign currencies to US dollars using an average exchange rate for the given reporting period. Many of these companies are supply chain technology vendors such as Descartes Systems, Manhattan Associates, and Logility. Others have a broader focus that includes logistics software. These companies include Oracle, SAP, Infor, QAD, and others. The suppliers’ reporting period for this analysis is the quarter ended June 2016, unless stated otherwise.
The suppliers included in this report recorded combined quarterly revenue of $19.9 billion, representing an increase of 5.4 percent from the same period in the prior year. This represents the first quarter of aggregate year over year growth since the third quarter of 2014. Much of the decline in revenues recording in 2015 were a result of a strong US dollar reducing the conversion of overseas revenues. However, that foreign currency trend changed in the third quarter of 2016, as well.
Many suppliers are transitioning from perpetual to subscription licensing models and the delayed revenue recognition from subscription pricing is decreasing revenue growth rates. Other industry trends affecting revenues include corporate technology investment cycles and software industry mergers and acquisitions. The year-over-year change in supplier revenues ranged from a reduction of 9.6 percent by Autodesk to growth of 11.7 percent by Descartes. Eight of the thirteen suppliers achieved growth. They are Dassault Systemes, Descartes, IBM’s software segment, IFS, Infor, Manhattan Associates, Oracle’s software segment, and SAP.
Conclusion
Enterprise software suppliers, on average, experienced a return to historical long-term growth rates in the second quarter of 2016. Stabilization of the US dollar with respect to foreign currencies has largely removed the currency translation headwinds. However, reported revenues are still being hindered by the widespread transition from perpetual to subscription software licensing. These effects will subside as suppliers build their base of recurring revenues. ARC believes that the market will continue with quarterly growth for the remainder of 2016.
Enterprise software suppliers, on average, experienced a return to historical long-term growth rates in the second quarter of 2016. Stabilization of the US dollar with respect to foreign currencies has largely removed the currency translation headwinds. However, reported revenues are still being hindered by the widespread transition from perpetual to subscription software licensing. These effects will subside as suppliers build their base of recurring revenues. ARC believes that the market will continue with quarterly growth for the remainder of 2016.
This is a quarterly report, published after all the companies on the list release their revenues. If you would like a complete copy of this analysis, including the results of the thirteen enterprise software companies covered, please contact chanf@arcweb.com.
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