- The US software market had a market value of $176.8 billion in 2021
- Microsoft, IBM, Alphabet and Oracle were the leading players in the US market
- Large multinational software companies often dominate areas of the market by offering broad portfolio of products
Competitive Landscape Overview
The US software market is dominated by global players Microsoft, IBM, Alphabet and Oracle. These players are large and act as formidable competitors. Despite this, the market is still unconsolidated, with a high number of smaller software companies present. Large multinational software companies often dominate areas of the market, such as Oracle, which focuses on databases and middleware. However, the largest companies offer a broad portfolio of products. IBM makes mainframe computers for instance, while Microsoft also makes consumer electronics.
Leading Players
- Microsoft is a leading player in the software market. Microsoft offers cloud-based solutions that provide customers with software, services, platforms, and content; and consulting and product and solution support services. The company reported revenues of $168 billion for the fiscal year ending June 2021, an increase of 18% over FY2020.
- IBM is an integrated IT company. It is engaged in offering consulting, delivery and implementation services, cloud and cognitive offerings, enterprise software, systems and financing solutions. It reported revenue of $73.6 billion, including $23.3 billion from its cloud and cognitive offerings.
- Oracle is one of the leading providers of IT solutions in Australia. The company offers software and computer hardware products and services, including database and middleware software, application software, cloud infrastructure, hardware systems such as computer server, storage and networking products and related support and services. The company reported revenues of $40.5 billion for FY2021, an increase of 4.0% over FY2020.
- Alphabet, the parent holding company of Google, offers a wide range of products and platforms such as Search, Maps, Ads, Gmail, Google Play, Google Drive, Android, Chrome and YouTube. In FY2021, Alphabet reported revenue of $257.6 billion recording Y-o-Y growth of 41.2%.
What strategies do leading players follow?
- Microsoft expanded its hybrid cloud capabilities to enable organizations to build, manage, and deploy applications from anywhere by linking private and public cloud services. At the same time, the company has developed new AI software for commercial customers which enables users to converge data integration, enterprise data warehousing and big data analytics and apply data management and governance to map all their data, whether it resides on-premise, in the cloud, or in SaaS application.
- IBM’s global delivery centers enable the company to capitalize on local expertise and client relationships. IBM Research focuses on several technologies ranging from AI, blockchain, security, nanotechnology cloud, quantum computing, silicon, and post-silicon computing architectures. IBM is primarily focused on the delivery of Hybrid cloud and AI software solutions, which it believes is the only way to deliver the digital transformation that businesses are looking for across all their processes, applications and data.
- Oracle strives to improve the computing performance of its products and services by combining with its applications and platform technologies. The company’s R&D focuses on adding new or improved functionality to its offerings based on customer requirements or supports the expansion of its third-party hardware and software ecosystem, besides developing new software offerings.
What are the strengths/weaknesses of leading players?
- Alphabet derives a significant proportion of its revenue from its advertising business. The profitability of its advertising businesses allows Google to continue investing in the expansion of other business ventures which may operate at a loss to begin with but will eventually mature into profitable business segments. Their growth is primarily driven by GCP followed by Google Workspace offerings. Google Cloud's infrastructure and platform services were the largest drivers of growth in GCP.
- Oracle has a strong focus on software which can be used for sales, service, marketing, finance, human resources, supply chain and manufacturing. By focusing on these specific uses, Oracle can produce industry-leading software solutions by concentrating its investments on the development of software applications tailored towards these services.
- Microsoft’s multiple revenue streams have enabled the company to achieve significant scale which allows the company to reinvest in the development of new software products to maintain a competitive advantage over other software developers. During FY2021, Microsoft spent over $20.7 billion on R&D representing 12% of company revenues.