Revenue Per Employee 2016, The Softletter Benchmark 53 (Softletter subscriber-access only)

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The Softletter Benchmark 53 are all publicly-held companies and most of our basic business metrics are derived from documents these companies are legally required to provide to investors.

We have completely revamped our Benchmark 50, now the Benchmark 53, to reflect the profound changes the software industry has undergone over the last several years. The firms profiled are now broken into eight segments that provide a representative overview of industry trends and performance. Below are listed the current members of the Softletter Benchmark 53. This list is periodically updated to reflect changes in company status and viability.

The Big Four

  • Microsoft
  • Google
  • Apple
  • Oracle

We understand that the inclusion of Apple may be questioned by some, but considering that Apple is one of the largest sellers of Apple software, the largest reseller of iOS apps (with 30 point margin per sale), and that iOS apps generate about 70% of all app revenue, we believe it’s very apropos to include them in our benchmark list. We also believe that over time, Apple’s software will generate increasing amounts of revenue for the Cupertino giant, particularly as interest in device independent software portable software environments grows. However, when comparing Apple’s performance against “pure” software companies, keep in mind they’re a hardware/software hybrid.

You will note IBM is missing from the list. The reason is that Big Blues is now primarily a consulting firm, not a software publisher and increasingly not even a producer of “machines.” The imperial days when IBM reigned over computing ended 30 years ago with the demise of OS/2.

SaaS Sales and Marketing

  • Constant Contact
  • Marketo
  • Netsuite
  • Salesforce
  • HubSpot
  • Cvent
  • LivePerson

The second cohort is SaaS Sales and Marketing. This is a dynamic market sector that includes 1200 pound gorilla Salesforce.com, NetSuite, and other vibrant firms such as Marketo and HubSpot.

SaaS Enterprise

  • Workday
  • Zendesk
  • Veeva
  • Demandware
  • ServiceNow
  • Benefit Focus
  • LogMeIn

Third is SaaS Enterprise. When Softletter began covering the rebirth of SaaS in 2004 and 2005, the concept of “enterprise” SaaS sounded comical to many people. But today, the reign of server-based enterprise software is coming to an end. Investment in on-premise software is over (yes, there a few increasingly rare exception but not enough to count). These days, when companies look for systems to help manage company-wide needs, they begin with a SaaS search. Only if one is not available will they look for an on-premise alternative.

SaaS B2C Verticals

  • Angie’s List
  • Wix
  • Pandora
  • Blackbaud
  • Qualsys
  • Realpage
  • Callidus

Fourth is SaaS Verticals. This group ties back to the beginnings of the SaaS revival after the ASP collapse of 2001. SaaS established itself by occupying niches and new markets that could not be reached by on-premise products. It is a myth that corporate and CIO acceptance fueled its growth.

Mobile B2B

  • Millenia Media
  • Medl
  • Glu Mobile
  • Turbine
  • Perion
  • Intellicheck
  • NQ Mobile

Next is Mobile B2B. Mobile applications are growing rapidly, but they face a unique set of business challenges. Growth must come from one of two primary sources. The first is very high volume sales, as there’s tremendous market resistance to paying high prices for apps (ask the poor GPS firms that attempted to sell $50+ mapping systems to iOS and Android owners. It was not a pretty sight. And Apple price caps products in the App Store at $999.00. The second is services built upon network effect data, something that can’t exist unless sales or use volume creates it. Until recently, not enough publicly-held mobile B2C firms existed to justify creating this category.

Mobile B2C

  • NQ Mobile
  • King Digital
  • Fitbit
  • Electronic Arts
  • Zynga
  • Majesco
  • Yelp
  • Renren

Mobile B2C is the most unstable group in the Benchmark 53. The category is dominated by gaming companies, and trends (and revenue) can vanish as quickly as a plant zombie meeting a mulcher, then reappear in new and very profitable guises. It will be an interesting category to track.

Social Networking

  • In LinkedIn
  • Facebook
  • Twitter
  • Snap Interactive
  • MeetMe
  • Mediabistro
  • Sina

We now come to Social Networking. Who doesn’t want to know how all those companies tracking our movements, encouraging us to expose every aspect of our personal lives, invading our privacy, and reselling our contacts and personal networks are doing financially? We certainly do.

On Premise

  • Microfocus
  • Autodesk
  • Red Hat
  • Progress
  • Symantec
  • Nuance

Finally, we come to our legacy group, On Premise. We expect this group to be relatively quiet financially (and to shrink), but in the meantime, we think it will be a useful yardstick to measure the rest of the industry against. One area of potential growth for on premise is in the area of portable backup for data and portable work environments. Over the years, as people move their computing environments to the cloud, paranoia about the safety and portability of your data will increase, replacing the traditional worries about the fact that you really should backup your PC/laptop/tablet regularly but never do. We expect a market for quick backup of cloud applications and data to local resources to be a future growth area.

Revenue Per Employee Analysis

Revenue per Employee is one of the most popular financial metrics by which to measure a software company’s performance. RPE is indeed a useful productivity benchmark, but several caveats apply. One is that a healthy RPE does not necessarily translate to a dynamic, growing company. That’s why despite its handsome RPE, Microsoft stock has not excited anyone in the last several years. Larger companies do tend to generate large RPE numbers; business does indeed benefit from scale, as the Big Four’s handsome numbers demonstrate. But while companies are growing rapidly (something that makes IPOs exciting and the hearts of investors beat faster), RPE can suffer greatly as revenue is devoted to hiring, R&D, and sales and marketing programs that drive growth.

Another point to remember is that a major layoff can temporarily boost RPE; however, this is usually only a temporary fix. But CFO’s love to point to the sugar of enhanced RPE numbers as proof of increased efficiency and health at a struggling company. Sometimes there’s a big crash at the end of the rush.

When analyzing RPE, the sweet spot you should be looking for is:

  • Is the company in an active, growing market segment?
  • Is the company outperforming its contemporaries in terms of RPE?
  • Has the company avoided laying off significant numbers of employees in the previous fiscal year?

If the answer is to the above is yes, RPE can be used as a significant indicator of growth and good management.

The Softletter Benchmark 53, Revenue per Employee

Revenue Revenue # Employees # Employees RPE  RPE  Average
Big Four 2,014 2013 2014 2013 2014 2013
Microsoft $86,833,000,000 $77,849,000,000 128,000 99,000 $678,383 $786,354 $732,368
Google $66,001,000,000 $55,519,000,000 53,600 47,756 $1,231,362 $1,162,555 $1,196,959
Apple $182,795,000,000 $170,910,000,000 92,600 80,300 $1,974,028 $2,128,394 $2,051,211
Oracle $38,275,000,000 $37,180,000,000 122,000 120,000 $313,730 $309,833 $311,781
Median $954,872 $974,455 $964,663
SaaS Sales and Marketing
Constant Contact $331,678,000 $285,383,000 477 424 $695,342 $673,073 $684,207
Marketo $149,954,000 $95,918,000 715 519 $209,726 $184,813 $197,269
Netsuite $556,284,000 $414,508,000 3,357 2,434 $165,709 $170,299 $168,004
Salesforce $4,071,003,000 $3,050,195,000 13,300 9,800 $306,090 $311,244 $308,667
HubSpot $115,876,000 $77,634,000 785 719 $147,613 $107,975 $127,794
Cvent $142,245,000 $111,136,000 1,740 1,450 $81,750 $76,646 $79,198
LivePerson $209,931,000 $177,805,000 1,058 796 $198,422 $223,373 $210,898
Median $198,422 $184,813 $191,618
SaaS Enterprise
Workday $468,938,000 $273,657,000 2,600 1,750 $180,361 $156,375 $168,368
Zendesk $127,049,000 $72,045,000 806 473 $157,629 $152,315 $154,972
Veeva $210,151,000 $129,548,000 725 663 $289,863 $195,397 $242,630
Demandware $160,533,000 $106,614,000 590 383 $272,090 $278,366 $275,228
ServiceNow $682,563,000 $424,650,000 2,826 1,830 $241,530 $232,049 $236,789
Benefit Focus $137,420,000 $104,752,000 1,314 922 $104,581 $113,614 $109,098
LogMeIn $221,956,000 $166,258,000 804 613 $276,065 $271,220 $273,642
Median $241,530 $195,397 $218,463
SaaS Verticals
Angie’s List $315,011,000 $245,642,000 1,950 1540 $161,544 $159,508 $160,526
Wix $141,841,000 $80,473,000 851 548 $166,676 $146,849 $156,762
Pandora $920,802,000 $600,233,000 1,414 740 $651,204 $811,126 $731,165
Blackbaud $564,421,000 $503,817,000 3,033 2,666 $186,093 $188,979 $187,536
Qualsys $133,579,000 $107,962,000 431 406 $309,928 $265,916 $287,922
Realpage $404,551,000 $377,022,000 3,875 3,337 $104,400 $112,982 $108,691
Callidus $136,618,000 $112,337,000 741 612 $184,370 $183,557 $183,963
Median $184,370 $183,557 $183,963
Mobile B2B
Millenia Media $296,164,000 $259,171,000 636 600 $465,667 $431,952 $448,809
Medl $2,805,632 $2,310,815 26 38 $107,909 $60,811 $84,360
Glu Mobile $223,146,000 $105,613,000 653 545 $341,724 $193,785 $267,755
Turbine $24,404,000 $3,855,000 101 89 $241,624 $43,315 $142,469
Perion $388,731,000 $325,508,000 439 203 $885,492 $1,603,488 $1,244,490
Intellicheck $6,613,000 $7,298,000 31 37 $213,323 $197,243 $205,283
NQ Mobile $332,324,000 $196,702,000 1,742 1,233 $190,772 $159,531 $175,151
Median $241,624 $193,785 $217,705
Mobile B2C
King Digital $2,260,241,000 $1,884,301,000 1200 660 $1,883,534 $2,855,002 $2,369,268
Fitbit $745,433,000 $271,087,000 469 222 $1,589,409 $1,221,113 $1,405,261
Electronic Arts $3,575,000,000 $3,797,000,000 8,300 9,300 $430,723 $408,280 $419,501
Zynga $690,410,000 $873,266,000 1,974 2,034 $349,752 $429,334 $389,543
Majesco $34,368,000 $47,267,000 23 62 $1,494,261 $762,371 $1,128,316
Yelp $377,536,000 $232,988,000 2,711 1,984 $139,261 $117,433 $128,347
Renren $82,954,000 $147,947,000 1,602 2,442 $51,782 $60,584 $56,183
Median $430,723 $429,334 $430,029
Social Networking
LinkedIn $2,218,767,000 $1,528,545,000 6,897 5,045 $321,700 $302,982 $312,341
Facebook $12,466,000,000 $7,872,000,000 9,199 6,337 $1,355,147 $1,242,228 $1,298,688
Twitter $1,403,002,000 $664,890,000 3,638 2,712 $385,652 $245,166 $315,409
Groupan $3,042,123,000 $2,573,655,000 11843 11283 $256,871 $228,100 $242,486
MeetMe $44,817,436 $40,378,007 125 126 $358,539 $320,460 $339,500
Mediabistro $3,557,000 $2,810,000 18 94 $197,611 $29,894 $113,752
Sina $621,705,000 $455,097,000 8,021 7,010 $77,510 $64,921 $71,215
 Median $321,700 $245,166 $283,433
On Premise
Microfocus $433,100,000 $412,200,000 1,356 1,214 $319,395 $339,538 $329,467
Autodesk $2,273,900,000 $2,312,200,000 7,600 7300 $299,197 $316,740 $307,969
Red Hat $1,534,615,000 $1,328,817,000 6,300 5600 $243,590 $237,289 $240,439
Progress $332,533,000 $333,996,000 1,075 942 $309,333 $354,561 $331,947
Symantec $6,676,000,000 $6,906,000,000 20,800 21,500 $320,962 $321,209 $321,085
Nuance $1,923,500,000 $1,855,300,000 14,000 12,000 $137,393 $154,608 $146,001
Ansys $936,021,000 $861,260,000 2,700 2,600 $346,674 $331,254 $338,964
Median $309,333 321,209 $315,271

 

The Softletter Benchmark 53  RPE Analysis

A look through the numbers reflects some interesting trends and developments in the industry. First, as we’ve already noted, size makes RPE good! A median RPR of 1M+ is very nice for the Big Four, though notice that Microsoft, which for years was the leader in this benchmark, is now lagging behind Google and Apple, a reflection of the company’s recent travails. Big markdowns and write-offs tend to hurt RPE.

BTW, what’s our unofficial median for all software companies all the time? $250K. Above that, you’re exceeding median performance, under that, below.

Oracle $304K per employee is a decent number, but it’s clear that for the moment, the database giant is not in a growth phase.

In Sales and Marketing, Netsuite’ relatively low RPE standouts. Of course, consider they compete against. When a 1200lb pound gorilla is pounding on you, you need to spend serious dollars to get it off your chest. Likewise, SaaS Enterprise and SaaS Verticals can’t boast stellar numbers, in many cases because these companies are growing and must spend heavily to boost growth and market share.

Mobile B2B and B2C are showing surprising RPE strength, especially consider these are mostly new companies. Both categories are unstable, so we’ll hold off on extensive commentary at this time.

On Premise is almost exactly at median. We expect this number to stay relatively steady over time.

Our upcoming benchmark is Research and Development (R&D).To gain access to this information, please subscribe to Softletter on this site.

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