By a News Reporter-Staff News Editor at Computer Weekly News -- Small and mid-sized companies in the U.S. software industry are thriving in the post-recession economy, with software-as-a-service (SaaS) firms consistently experiencing the greatest revenue growth and hiring expectations, according to a study released by the Software & Information Industry Association (SIIA), the principal trade association for the software and digital content industries.
The 2013 Software & SaaS Financial Benchmarking Industry Report was produced by SIIA partner OPEXEngine, the leading aggregator of financial and operating benchmarks for small- and mid-sized software companies. To complete this seventh annual report, OPEXEngine surveyed several hundred private and public U.S. firms with revenues between $1 million and $450 million.
The report finds that the entire small and mid-sized U.S. software industry continues to experience strong growth, however SaaS firms are consistently experiencing the greatest revenue growth and hiring expectations in today's post-recession economy. According to the study, private SaaS firms experienced average revenue growth of 35 percent in 2012, edging higher than the 30 percent achieved by private software firms. In addition, 2012 revenue growth for private SaaS companies was more than twice that of on-premises software companies. Public SaaS firms averaged 25 percent revenue growth in 2012, but the top quartile had a median of 48 percent growth.
While hiring expectations were also strong for private small and mid-sized firms, SaaS companies demonstrated a slightly more significant commitment to job growth. According to the study, private companies plan to increase employee headcount in 2013 by an average of 26 percent - continuing a positive hiring trend benchmarked at the same rate last year - with private SaaS companies averaging closer to 30 percent planned growth in headcount for 2013.
"The software resurgence continues, with small and mid-sized software firms exhibiting some of the strongest post-recession growth rates of any sector in the U.S.," said Rhianna Collier, Vice President of SIIA's Software Division. "The study also demonstrates that the face of the industry is shifting, now more than ever, from on-premises firms to SaaS. The greatest gains now unquestionably belong to SaaS firms, which are leading a software industry expansion across the U.S."
OPEXEngine also noted that more companies outside traditional tech centers on the East and West coasts participated in this year's study. This data allowed OPEXEngine to, for the first time, compare software firms based in the Central and Mountain regions to their counterparts based in Silicon Valley, Boston and elsewhere. The increased participation also offers a strong indication that there is considerable software industry growth taking place in these non-traditional regions.
"The rise of SaaS, with its remote cloud-based access, appears to be allowing for the establishment of more firms outside major tech centers," said Lauren Kelley, CEO and founder of OPEXEngine. "For the first time in seven years conducting this report, we see clear indications that companies are no longer restrained by proximity to the traditional coastal centers of human or financial capital. The expansion of SaaS appears to be contributing to a geographic expansion for the software industry."
In comparing software firms in different geographic regions, OPEXEngine found that private West Coast firms experienced an average revenue growth rate of 53 percent in 2012, compared to 30 percent for East Coast firms and 25 percent for those in the Central and Mountain regions. Venture-backed firms had the highest growth among private firms, regardless of location with median 47 percent revenue growth last year, versus 13 percent for the non-venture backed firms. Profit metrics, however, were better for Central and Mountain companies than for companies located on the East Coast, but not as strong as profit metrics for West Coast companies.
Keywords for this news article include: Software & Information Industry Association.
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