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Past Surveys (Compete survey results are available to Softletter subscribers)
March 15th, Benchmarks: Chief Executive Officer Compensation, 2007
Our 2008 survey generated 118 valid responses with all but two respondents providing titles that correspond to CEO or a variant thereof. Over the last several years our compensation surveys have been fairly smooth, with steady increases in medians and sensible increases in baseline figures showing up from year to year. Not this year. Our 2008 figures show shifts and instabilities in our medians and bases that only appear when the industry is undergoing fundamental changes.
December 31st, Benchmarks: Days Sales Outstanding 2004-2007 Our latest look at “days sales outstanding,” also known as the ratio of receivables to total sales, shows that our Benchmark 50 public companies typically collect their money from customers a median 71.3 days after the invoice is sent, a significant though not tremendous increase from 2004’s 67.7 days. Several factors contribute to this increase. Please note the very significant increase in DSO for the Developer Tools and Education sectors; these are tough markets that are characterized by low growth and heavy competition; in such markets, companies have to deal with strong competition and CFOs and purchasing departments who are not shy about attempting to use your firm as a “bank” if times are bad
September 30th, The 2007 Softletter SaaS Survey: Summary Results, Part I
Introduction: Methods and Respondent Profiles Our 2007 Softtletter SaaS Survey, conducted in August and September 2007 was sent to approximately 23k companies over a period of six weeks. The survey, which consisted of 67 questions (including two tables) was conducted entirely via the web and results were processed with the Perseus Web Surveyor system. The survey received 114 valid responses, with the single largest group of respondents reporting that their title was CEO, president, or some variant of the aforementioned: 51 in total. Six respondents identified themselves with a “C” title, with three being CFOs and the others sales and marketing chiefs. The second largest cohort identified themselves as having a VP title including sales, marketing, product management and business development: 17. The third largest cohort was participants with a director level title, including sales, product management, and marketing: 13. In addition, 19 participants identified themselves as having primary marketing responsibilities; titles given included product manager, SaaS marketing manager, and similar variants. Titles for the rest of the respondents ranged from architect to product manager. 13 respondents failed to provide a title. Numbers of particular interest have been bolded. Decimals have been rounded off to one degree of precision and may not equal 100%. Summary Results The survey broke companies down into both development and revenue stages. The results were as follows:
Development Stage
The strength of the public cohort is mildly surprising, given the IPO drought that has only recently begun to abate in the software industry.
Results for “Revenue Stage,” are given in the table below.
The high number for the 100+ million cohort is deceptive; of these 14 companies, only two reported that they were receiving as high as 50% of their revenue from SaaS sales, with the rest reporting either up to 10% or 20%. However, in the $10 to $99 million segment, 12 companies reported that up to 75% or 100% of their revenues came from SaaS sales.
August 31st, The Softletter 2007 Sales Efficiency Survey: Close Rates In our Sales Efficiency Survey we asked respondents how fast their sales personnel were able to close sales. Their responses, broken down by industry category, are presented below. Numbers of particular interest are boldfaced.
Enterprise/Client Server
August 15th, The 2007 Softletter Sales Efficiency Survey: Detailed Analyses
Medians of Sales Personnel Achieving Quota By Software Type
OEM continues to have problems, the Enterprise/Client Server and Desktop/Retail figures are absolutely unremarkable, and SaaS leads the pack by a significant percentage (though the number is by no means dramatic). What accounts for the SaaS lead in this area? One reason may be that the average initial SaaS sale is lower than client server and easier to sell. Another factor is that SaaS sales are typically faster to close, allowing SaaS sales personnel to move on to new prospects more quickly.
July 31st, The 2007 Softletter Sales Efficiency Survey: Summary Results Our Sales Efficiency Survey, conducted in July 2007, was sent to approximately 23k companies over a period of three weeks. The survey was conducted entirely via the web and results were processed with the Perseus Web Surveyor system. The survey received 274 valid responses, with the single largest group of respondents reporting that their title was CEO, president, or some variant of the aforementioned (one participant identified themself as the “Big Boss”): 86 in total. Not surprisingly, the second largest cohort identifed themselves as having a sales title including VP of Sales, director of sales, and other variants: 59. The third largest cohort was participants with a financial title, either CFO or controller: 31. In addition, 19 participants identifed themselves as having primary marketing responsibilities; titles given included product manager, VP of Marketing, and similar variants. Titles for the rest of the respondents ranged from human resources to business development. Only six respondents failed to provide a title.
July 15th, Benchmarks: Research and Development R&D for the 2006 fiscal year stayed fairly consistent with numbers from ’04 and ’05. As previously noted in past Softletter issues, there has been a decreasing trend in R&D with respect to increasing revenue numbers; companies that are experiencing upward mobility in terms of revenue are not necessarily looking to increase their R&D expenses. However, regardless of revenue fluctuation, companies are spending about the same percentage of money each year on product development. R&D average expenditure percentages for 2006 ranged anywhere from 11% to 19%, with larger companies such as Microsoft and Google falling in the lower to mid range. Of the benchmark categories, Developer Tools ranked the highest in R&D, with Education coming in a close second.
June 30th, Benchmarks: Chief Technical Officer Compensation As the chart above shows, compensation increases for Chief Technology Officers have slowed down this year. Median base pay for our survey respondents moved up only 1%, and total pay only 7%. While the 79% of CTOs who received variable pay saw it go up by 33%, this is a small increase compared to last year’s variable pay rise of 81%.
June 15th, Benchmarks: Q1 2007 Venture Capital Investments Though Q1 2007 did not yield as many first time venture capital deals as the previous quarter, software was the recipient of the most first time investments, receiving 48. However, this quarter saw also saw biotechnology supplant software’s usual place at the top of the VC food chain with $1.5b in investments contrasted with $1.1b for software. Network related companies, which includes the security, wireless, networking, and telecommunications categories, all heavy consumers of software, received $2.5b during the first quarter. This was on a fairly even keel with the $2.4b that was invested in Q4 2006 but was down from the $2.8b invested in Q1 of 2006.
May 31st, Benchmarks: Software Company Websites and RSS The information in these charts and tables is excerpted from the forthcoming Softletter Marketing Effectiveness report. The data was derived from 193 respondents reporting on their use of RSS (Really Simple Syndication) to support their ongoing marketing and sales efforts.
May 15th, Benchmarks: Software Companies and Business Blogging The information in these charts and tables was derived from the forthcoming Softletter Marketing Effectiveness report. The data in these charts and figures report was derived from 239 respondents reporting on their use of business blogs to support their ongoing marketing and sales efforts.
April 30th, Benchmarks: Customer Concerns Surveys Best Practices The information in these charts and tables was derived from the forthcoming Softletter Marketing Effectiveness report. The data in these charts and figures report was derived from 158 respondents reporting on their use of customer concerns surveys to support their ongoing marketing and sales efforts.
April 15th, Benchmarks: General and Administrative General and Administrative costs are the corporate and front-office overheads not allocated to activities such as sales and R&D. Our Benchmark 50 summary divides G&A costs by revenues for the most recent three fiscal years, and then averages the results. For each sector the median G&A percent-of-revenue is given for each year, along with the three-year average; each sector’s results are sorted in ascending order by this average.
March 31st, Benchmarks: Operating Income The once hugely-profitable software industry (it was profitable even during the crash of 1999-2001) is now mature, and it is harder to make the enormous profits of old. What was once rare and difficult and therefore highly profitable has become ever more common, and software prices have been dropping since 2005. The post-Crash industry growth continues, but at a slower pace than in the old days.
March 15, Benchmarks: Q4 Venture Capital Investments Software is managing to maintain a steady monetary position among venture capital investments. 2005 saw $4.8b invested in 869 deals, and 2006 saw $5b put into 865 deals; the last quarter of 2006 reached $5.8m per deal. As Softletter noted in the 15 April 2006 (VCQ4) study, the deals are growing steadily larger in scope and fewer in number: $5.5m per deal in 2005, and $5.7m in 2006. As VCs raise larger amounts for their funds, they need to make larger placements. The result is a tendency to fund later rather than early stages, and to overdo the cash infusions into young companies.
February 28th, Benchmarks: Operating Income per Employee Operating Income per employee measures efficiency in use of personnel; the figure is the result of subtracting operating costs from revenues, and does not count payments for taxes or interest on debt. Generally, larger firms have a definite advantage over smaller firms, as the table below shows; it gives the median operating income per employee for firms in different size categories, based on the most recent revenue reports:
>$1b $75,720
February 15th, Benchmarks: Return on Equity Return on equity (ROE) is simply a company's net income (revenues after expenses are deducted) divided by shareholders' equity in the company. The equity is calculated by adding up all the assets and deducting all the liabilities, including debt. The resulting figure is an indicator of how efficiently management is using a company's assets, and comparing the figures is a rough guide to identifying industry leaders and leading sectors.Yahoo! Finance reports the following returns on equity for the various sectors of the software industry:
Information and Delivery Services 31.0%
January, 31st, Benchmarks: Services Margins and Contributions Because of consolidation in the software industry we cannot track the very same companies we have been able to follow in the past, but there is great overlap in the current Top 50 with the old Top 50 listing and our current listing does contain its own three-year history. Our current results show that both median services margins and services contributions to revenue are holding steady:
January 15th, Benchmarks: Chief Executive Officer Compensation
The Soft•letter Top 50 CEO list is led by Larry Ellison of Oracle. Steve Ballmer of Microsoft holds 20th place, and unlike Ellison, did not exercise any stock options this year. Interestingly, Eric Schmidt of Google does not appear on the list at all, for like Google co-founders, Page and Brin, he has chosen for several years now to receive only $1 in pay. And this year, like Steve Ballmer, he did not exercise any stock options. Other dollar-a-year men in the tech industry are Steve Jobs of Apple and Terry Semel of Yahoo!, taking their compensation in stock options which are expected to result in lower taxes....
December 31st, Benchmarks: Google AdWords Survey Results
The joint Soft•letter and Red Gate Software survey on the use of Google AdWords gathered 195 responses. Two thirds (66%) of the respondents have an international customer base, while 28% have only national customers; 4% have regional businesses, and 2% put themselves down as local. We found it surprising that only 67% of those responding currently use AdWords. Considering that our audience is the software industry, a technical and Internet-savvy group, evidently the word has not got out that three-fourths of the current AdWords users really like it. 54% said it was “a good investment and competes favorably with other media,” while 19% were pumped enough to call the use of AdWords “a complete no-brainer....”
December 15th, Benchmarks: Q3 Venture Capital
Third quarter is a slow time in the financing world, and on the whole VC investment remains steady in its recent pattern of caution and narrow focus. This year shows three consecutive quarters of $6b+ investment, while last year had only one such quarter, and on the whole there is an 11% increase in Q3 investments over last year at this time ($5.635b in 771 deals), although this quarter represents an 8% drop in investment dollars from last quarter (from $6.775b to $6.243b), and a 12% drop in deals from 907 to 797....
November 30th, Benchmarks: Chief Financial Officer Compensation
CFOs are doing well this year. At the star-performer level, the Top 50 CFOs are taking home median base pay of $ 258,750, sweetened by median variable pay of $144,499, for a median total pay of $410,275. Nineteen of the Top 50 exercised stock options this year (the Long-Term column), with a median exercise value of $322,416....
November 15th, Benchmarks: Revenue per Employee
The addition of Google to the Benchmark 50 is turning up some interesting results. While revenue-per-employee is positively related to the size of the firm (see the table below), Google manages to stand things on their head. Microsoft, the largest firm, manages $623.7k per employee, but Google with scarcely 14% of Microsoft’s revenue and 8% of the employees, manages nearly twice as much revenue for each employee: $1.081m....
October 31st, SaaS Survey Part II: Experience with SaaS
In our first SaaS survey, we polled those planning to release SaaS products, those who were evaluating doing so, and those who had thought it over and decided not to. The results were published in our August 31st issue. That first survey was intended to find out what the software companies thought might be involved in creating and releasing a SaaS product....
Part I: Company Characteristics In the first place, these are not all companies that were started for the purpose of jumping on the SaaS bandwagon. Two-thirds of them have been in business more than five years, and two-thirds of them also have non-SaaS products on the market. Overwhelmingly they are small companies: 80% of them are between $1 and $25 million in annual revenue and only 2.2% are above $500 million. 22.8% are venture-funded, and 9.8% are public. Only 3.3% say that their revenue is exclusively from SaaS products. To gain some idea of the spectrum of revenue from SaaS and non-SaaS product sales, we asked two questions, and have arranged their answers in the table on the following page:...
October 15th, Benchmarks: Operating Income per Employee
We have made a large change in the Benchmark 50, dropping the Internet sector to include the growing Software as a Service (SaaS) sector. And rather than put Google with its sisters in that sector, where it would distort the sector figures, we have put it up there with Microsoft to indicate how much of its own universe it is. Google demonstrates the power of SaaS: with less than a tenth of the employees of Microsoft, it is generating 35% more income per employee. Google and Microsoft demonstrate that market leadership is very good for profits, and a look at the other sectors demonstrates that having specialized products, that is, dominating a niche, has the same effect on a smaller scale....
September 30th, Google Survey Part III: Google as Competitive Environment
In the first place, some 80% of those answering said they believed that Google was out to compete with Microsoft, and that the battle would take place in consumer applications, rather than in vertical markets. 1. Do you think Google plans to compete with Microsoft Office and other Microsoft products? Yes: 84% No: 16%...
September 15th, Benchmarks: Q2 Venture Capital Investments
The good news is that there is venture money out there in greater amounts, if in smaller deals. And while it may be bad news for get-rich-quick investors, the slow progress of investments down the IPO pipeline continues....
August 31st, SaaS Survey Part I: Software Companies Considering SaaS
Part I of the Soft•letter SaaS survey was meant to poll software companies that are considering or planning bringing a SaaS product to market. We had 134 responses, from which we dropped those who were already in the SaaS market (a whopping 46% of those responding) and those who said they were not getting into the SaaS market (13%). The remaining 41% we dubbed the Considerers, although there are plenty of Planners among them. Our purpose was to find out what sort of companies were in this category, what they expected the technology and finances of SaaS to be, and how they assessed the market opportunities and means of reaching them. Respondents tended to answer nearly every question; the average rate of non-response per question was only 2.5%.... August 15th, Benchmarks: Chief Sales Officer Compensation
How you are doing as a top sales executive depends on where you are, of course: those in bigger companies make more money. For everybody else, the aggregate figures for base and variable pay are not cheering. The Soft•letter survey of top sales execs in 2003 showed median combined base pay and variable pay to be $203,500; for 2006 the figure is $185,500. Similarly, median base pay dropped from $135,000 to $120,000 and median variable pay from $65,000 to $62,500. While these figures show that it is harder to get a high base salary, and harder to make up the difference in performance-based compensation, it is possible that the difference is being made up in stock-based compensation, more valuable now than it was a few years ago....
July 31st, Google Survey Part II: Google as a Platform
Highlights from our survey respondents: 40% indicated interest in at least one of the Google technologies (Q. 1-4) Soft•letter’s first Google survey (05-31-06) dealt with ISV use of Google’s means of promotion (AdWords, AdSense, etc.). Our second survey deals with ISV interest in and use of Google as a platform....
July 15th, The Benchmark 50: General & Administrative
For over half the market segments covered by Soft•letter’s Benchmark 50, the median G&A ratios vary between 10.3% and 11.8%, while the remaining three have median ratios between 14.1% and 15%.... June 30th, Benchmarks: CMO Compensation
Because the CMO title tends to be used in larger firms, we also selected Vice Presidents of Marketing if they were the top-ranking marketers in the company, or we picked officers described in the proxy or corporate literature as having top marketing responsibility. But in a number of companies known to have CMOs, the CMOs were not listed in the proxy statements with the other officers and their compensation; it was easier to find the top sales people....
June 15th, Benchmarks: Q1 Venture Capital Investments
Venture investment in software remains level, with the quarterly undulations that we have been observing for a while now. VCs continue to emphasize exit strategies, investing to bring their maturer ventures to acquisition or to the even rarer IPO. Software Investment Deals by Stages
VentureSource (Dow Jones) says that the current pace of exit is so slow that it would take 13.6 years to clear out the present backlog....
May 31st, Google Survey Part I: Google for Promotion
Google offers new software and search products (most of them free) as rapidly as it adds new employees, and is having a strong impact in advertising and print publishing as well. In search world, the Library of Congress is curtailing some of its cataloging procedures as it expects Google to take up the slack. The company’s 2005 revenues were $6.1 billion, an increase of 92% over 2004; net income from operations was $2 billion in 2005, more than double the net income from 2004. Current market cap is $112 billion, and the P/E of 65 attests to the great value the market finds in the company....
Softletter wanted to find out how ISVs are reacting to Google, and we began by asking questions about their use of Google for promotions....
Benchmarks: Requirements Manager Compensation, 05/15/2006
R&D is consuming fewer corporate resources nowadays. The chart above shows the relative changes by software industry segment from 2003 to 2005, based on each segment’s median share of revenue spent on R&D in those years. Other looks at data collected by Softletter from 2001-2005 confirm the trend. The drop can be seen in the 2005 figures compared against 2001, but because this represents only two years of a six-year period, we present the table below which smoothes the R&D expenditures by using the averages of median segment expenditures for 2001 to 2003 and 2003 to 2005....
Benchmarks: Requirements Manager Compensation, 04/30/2006
For Requirements Managers (RMs), Base Pay is essentially static, with increases coming from Variable Pay. Compared with (marketing) Product Managers, Requirements Managers see smaller pay increases and less likelihood of bonuses (74% of Product Managers receive them, and only 38% of Requirements Managers). The best raises tend to be in the smaller companies. The two types tend to stick to their own side of the house: a Product Manager is nearly twice as likely to report to marketing as to development, while Requirements Managers are more than twice as likely to report to development. About 18% of either group report to “Other.” The above figures are generalizations that respondents made about their companies; the people actually described in our two polls broke down as follows:...
Benchmarks: Q4 Venture Capital Investments, 04/15/2006
While the total amount of VC money invested in 2005 was only 0.2% less than that invested in 2004, distribution by sector changed over that period. Software remains the largest investment category, just ahead of biotechnology, but Software is down 10% from 2004 (Biotechnoogy is down 6%). Networking and Equipment is likewise down 10%, and Computers and Peripherals down 21%, but IT Services is up by 50%. Investments in SaaS companies are now 10% of Software investments, according to TripleTree Investments, who expect the SaaS category to absorb nearly $1m additional venture capital in 2007. The $460m invested in SaaS is not the only sign of changing technologies, business models, and development methods taking hold: Open Source software investments were $144m for the first three quarters of 2005, and wireless-related companies received $1.3b, an 18% increase over 2004. Wireless is now 7% of total VC funding....
Benchmarks: Operating Income, 03/31/ 2006
Operating Income is Gross Profit less Operating Expenses, and is found in the Earnings Statement or Statement of Operations in the annual financial reports of corporations. The 10-K forms filed annually with the SEC are Softletter’s primary source for this information. Operating Income is also called Operating Profit or Recurring Profit. It is not “Net Income” because it is calculated before taxes and interest (either positive or negative) are added into the income statement. The Operating Income Ratio is simply this “Earnings before Interest and Taxes” (EBIT) divided by Sales (or Net Revenue)....
...This year (2005) provides ever-stronger figures for industry recovery. The truly bad years (2001-2003) are behind us, and the Benchmark 50 managed an 8.9% Operating Income Ratio for the year. Over the past three years the big winners are Microsoft (20.4%), Desktop Apps (14.8%), and Development Tools (10.6%); the big loser among the segments is over those three years is Internet Applications (-32%). Education managed to break even (0.1%)....
Benchmarks: Product Manager, 03/15/2006
It is impressive to see that product managers in the $1-5 million company revenue range had a median base pay raise of 39%. This indicates that there is heavy activity in getting new products out the door and sharp competition for the hands-on people who can do it. Another factor contributing to increases in PM pay is that this functions resists outsourcing; while certain aspects of development lend themselves to commiditization, understanding the workings of an industry and local market conditions don’t....
Benchmarks: Chief Technology Officer Compensation, 02/28/2006
As with other positions we have surveyed, the return of prosperity to the tech sector has caused large increases in variable pay; in the case of CTOs it is up 81% over last year. Increases in base pay for companies under $10m are generally in line with the sector as a whole, reflecting their predominance; the larger companies have smaller increases in base pay (as for other officers in our surveys as well).... |
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