Looking for the Next Google or Salesforce.com

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In the process of doing research to watch for the next Google or salesforce.com from an IT investment-research point of view, I take a look at Inc. magazine's annual listing of fastest growing U.S. software companies.


This list amazes me every year because of the fact that hundreds of software developers and entrepreneurs are still forming new software companies, turning their ideas into an entity that fills a business-process need and makes a payroll. That's amazing to me because the software industry, 50-plus years in, has still not reached the plateau where the needs are exhausted and automating them and selling the result is not economically prohibitive except for the top 25 leading software suppliers.


The largest of the fastest-growing, according to Inc., topped $500 million in revenue but most are in the $10 to $20 million range. (I did not dig deep enough to see if Inc. backcasts to account for mergers that might spike growth in a given year.) Newsgator and Jive were the most well known on the list to me but only ranked 29th and 52nd, respectively.


Usually, the needs are industry-specific. If I were Steve Ballmer, I would be happy, because some quick secondary searches found many of the fastest-growing suppliers identifying themselves as Microsoft and Microsoft Dynamics partners. Still, most stick to their industry-specific knitting, either letting you presume you have the hardware to run their software on-premise or increasingly selling it as a service so that it doesn't matter.


I didn't do it this year but in past years I have found that many of these fast-growing software suppliers use open source software in their development efforts, but few offer their software under open source terms and conditions.


The list also amazes me in that we navel gazers on the peripheral highways around Cambridge, MA, and on CA Route 101 between San Mateo and San Jose so often fail to see these guys. Out of the 99 software suppliers that made the 2009 Inc. list, I saw only about 20 from around "Route 128," Silicon Valley, RTP, Austin or Redmond. An Alaskan software supplier makes the list, as do guys from Cedar Rapids, Sarasota, Providence and Moscow, Idaho.


Still, this research doesn't change my opinion as noted in March 2009 that the enterprise software market is much more consolidated than 10 years ago and that market dynamics (that is, how you spend your IT budget) indicate you prefer to deal with fewer, larger suppliers. But it does say that the game is not over; there will be another major software player to emerge in the decade that begins tomorrow the way that Adobe, Autodesk, Microsoft, Oracle and SAP emerged as public companies in the 1980s, Citrix, Intuit, McAfee and Symantec (actually 1989) in the 1990s, and Google and salesforce.com during the decade just ending.


And the industry aspect says there is a need for the Cadences, FiServs, Micros Systems, and Synopsys of the world as well.


But to my point in March, the list of new emerging leaders gets shorter and shorter.