With all the talk about Microsoft’s new CEO and the changes he is likely to bring, it is sometimes forgotten that the company is the biggest software vendor in the world. According to new figures from Gartner, Microsoft retained that crown in 2013, while Oracle muscled past IBM to claim the number two spot. 

That is one of the significant points from the Market Share: All Software Markets, Worldwide, 2013 report, which also notes that Salesforce has pushed itself into 10th position from 12th last year. This is the first time that a cloud or SaaS vendor has managed to make it into the top 10 list.

Global Software Spending

The figures also confirm what many companies have been saying about increasing IT budgets over the past 12 months. This is reflected in a general rebound for the software market worldwide, which went from $388 billion in 2012 to $407.3 billion in 2013, representing growth of 4.8 percent. Growth here was principally in the developed countries, offsetting the generally poor performance in the emerging markets.

In the coming year,  this trend is likely to continue with worldwide IT  spending, including software, on pace to total $3.8 trillion in 2014 -- a 3.2 percent increase from 2013 .

Gartner also points to the fact that the software market is in transition, and that there could well be further changes in the coming months. Organizations within the industry are looking to invest in technologies that support existing IT infrastructure while simultaneously looking at new cloud or subscription based models to help drive growth. 

It seems that the Internet of Things (IoT), and the way organizations respond to the challenges posed by its continued development, will also play a role in the transformation of the software market. The change is further being compounded by the rise of cloud computing:  

The software market has been changing shape over the past five years, and cloud is driving the bulk of this change as software vendors acquire and provide applications and infrastructure technology to support the cloud and the Internet of Things (IoT) movement. A clear indicator of this is that for the first time we have a pure cloud vendor in the top 10,” Joanne Correia, Gartner researcher said.

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Indicative of this is the progress Salesforce has made over the past 12 months. Over 2013 it reported revenues of $3.8 billion, moving up two places to No. 10. It also reported the highest growth rate of any of the top 10 vendors with 33.3 percent growth over the year, as well as entering the top 5 for overall application revenue.

Oracle and IBM

However, most of the focus this time around has been on the fact that Oracle has passed IBM for the first time ever in total software revenue in a year that hasn’t been great for Oracle.
Oracle made $29.6 billion during 2013, growing 3.4 percent over the previous year, becoming the second largest software vendor behind Microsoft.

This is the first time in Gartner's global software market share research that Oracle has ranked second in terms of total software revenue with $29.6 billion, capturing 7.3 percent of the global market. Global trends around big data and analytics with business investment in database and cloud-based applications helped to drive Oracle's top-line growth,” Chad Eschinger, Gartner vice president said.

It's a disappointment for IBM, whose loss comes despite its massive investments in big data and analytics, as well as its ongoing development and acquisition of cloud technologies. 

Learning Opportunities

Surprisingly, there has been no reaction to the news from Oracle or Larry Ellison, who rarely misses an opportunity to sling mud in the face of IBM. But then maybe he’s been too busy with the new Lanai Island film festival he is sponsoring to notice the big news.

Over the years, he has made it clear that his ambition is to overtake IBM at all levels, but particularly in servers and integrated systems, which explained why he bought Sun all those years ago.

IBM, for its part, has been re-strategizing over the last 18 months, with CEO Virginia Rometty saying on many occasions that IBM will be focusing on software for the foreseeable future. Even with the recent sale of its small server business to Lenovo, IBM is still taking time to make that shift.

All that said, it is possible that by this time next year the entire market will have changed again. Current figures aside, it is clear that the focus is on cloud computing and investors are pumping money into companies that show promise in the cloud computing space.

With developments happening as quickly as they do here it would not be a surprise to see major changes in the next 12 months, even in the top 10 list.

Title image by Pete Niesen / Shutterstock.