Software-as-a-service, Cloud, IT and mobile trends reshaping how software companies operate, Says PwC US

While US companies lead PwC’s Global 100 Software Leaders Ranking, emerging newcomers increasingly challenge its dominance 


NEW YORK, NY – May 21, 2013 – The emergence of software-as-a-service (SaaS), cloud, IT consumerization and mobile are expected to advance the future of the software industry, finds PwC US in its annual Global 100 Software Leaders report. The report, in its fourth year of publication, highlights a deeper understanding of the underlying forces and trends that are influencing the industry.

The PwC study finds that the effects of globalization and consolidation are changing the landscape of the software sector and how companies develop, market, sell, distribute and support their products. Acquisitions are viewed as an R&D strategy as well as a key way to acquire talent and build SaaS capabilities more effectively and efficiently.

 “Software companies and vendors are especially beginning to feel the effects of the software-as-a-service (SaaS) technology on their business models,” said Patrick Pugh, PwC’s US software and Internet leader. “Vendors need to continually evaluate both the changing priorities of customers and the industry because these evolving sentiments are causing deep structural changes and fundamentally shaping business models.”

According to the report, SaaS revenue accounted for at least 40 percent of software revenue for 10 companies on the Global 100, in which nine of the top 10 are US-based.  While US companies lead revenue share on both the global and North American lists of software vendors, PwC finds that powerful newcomers, as well as companies from emerging markets, will increasingly challenge the dominance of the large North American vendors.

“To drive future growth, North American software vendors must prioritize transforming their business models to address the realities of the SaaS environment and incorporate social enterprise, IT consumerization and data analytics.  Furthermore, U.S companies can find new opportunities to expand globally by tailoring their software to specific vertical markets and geographic regions,” added PwC’s Pugh.

Key industry drivers include:

  • Priority on pricing: Pricing is the paramount issue for the entire sector. With the rise of IT consumerization via low and no cost online platforms, software companies are already struggling to explain the difference in value between a low-cost mobile app and a full-strength, licensed enterprise software package.
  • SaaS is gaining traction: Although SaaS represented only 4.9 percent of total software revenues in 2011, a consistent and significant shift towards SaaS is occurring. Roughly half of 800 North American organizations confirmed they evaluate cloud based solutions when buying software. Perpetual license revenue has been shrinking since 2004 while subscription revenue (including SaaS) is forecast to grow at a 17.5 percent compounded annual rate, reaching 24 percent of total software revenue by 2016. Software companies are now closely evaluating aspects of their business models, including delivery methods, pricing strategies and sales compensation options.
  • Customer is king: With the adoption of intuitive cloud services, mobile devices and low-cost apps, CIOs are no longer the sole decision makers in the software purchasing process; end users must be satisfied in order to retain and grow enterprise sales. Additionally, customer perception of the value of software has changed dramatically.  Vendors must develop strategies to counter the expectation that software should be free.
  • Emerging hybrid models bring new challenges: There will be a range of business models, from traditional licensed software, to pure SaaS, to hybrid approaches, all of which will pose challenges for vendors in the foreseeable future.  Vendors will need to identify and adopt new business models while trying to maintain revenues and profits during a time when overall industry pricing is under pressure. Industry executives also worry that the new subscription-based business models will increase dependency on renewals and risk of customer turnover.

The PwC Global 100 Software Leaders report

The PwC Global 100 Software Leaders report compiles relevant data for calendar year 2011, the most recent set of complete financials available. In all, software revenues for 294 vendors worldwide, including the top 100 globally, the top 100 in two geographically defined markets – North America, and Europe/Middle East/Africa (EMEA) – and one market defined by maturity, Emerging Markets (China, India, Brazil and others) were included in the survey. For additional analysis and commentary on PwC’s Software Pricing Series, please visit:

For more information and to download an electronic copy of the PwC Global 100 Software Leaders report, visit

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Ray Yeung
Brainerd Communicators, Inc.
Tel: +1 (212) 986-6667