In this article we mention 15 fastest-growing software companies in the world. If you want to skip our discussion of the future of the software industry, analysts’ predictions about software companies and job creation in the space, go directly to 5 fastest-growing software companies companies.
Software is one of the fastest-growing industries in the world. According to data by Gartner, worldwide IT spending is expected to reach $4 trillion in 2021. Companies worldwide are embracing automation, Cloud computing, data analytics, websites, social media and AI to enhance their business and capture their customers online. This is driving the growth of software companies, especially SaaS. Data from U.S. Department of Labor shows that software is one of the fastest-growing industries when it comes to job creation. Jobs in computer and information technology as a whole are expected to grow 11% from 2019 through 2029, much faster than the average for all occupations. Specifically in the software space, jobs are expected to grow by 22% through 2029, must faster than the average. To quote Marc Andreessen, software is eating the world.
Software companies create and build different programs that assist companies and individuals to solve key problems. Software companies are offering products and services in almost all walks of human life, including finance, entertainment, education, shopping, sports, military and healthcare. The coronavirus crisis fueled growth in the industry as companies scrambled to move their operations online: schools needed education software; retailers looked for ways to increase their online sales; banks started creating secure and user-friendly apps to allow customers perform their transactions by staying at home; and governments increased their IT spending to get rid of age-old ways of doing business.
IT jobs pay higher than most of the jobs in other industries. IT companies are also giving a boost to overall productivity. These factors are pushing GDP growth in the U.S. A report by the BSA Foundation shows that the software industry accounted for $1.6 trillion of the total $20.5 trillion U.S. GDP in 2018.
The growth of software companies could be gauged from the fact that The Big Five — Amazon.com, Inc. (NASDAQ: AMZN), Apple Inc (NASDAQ: AAPL), Alphabet Inc Class A (NASDAQ: GOOGL), Facebook, Inc. Common Stock (NASDAQ: FB), and Microsoft Corporation (NASDAQ: MSFT) — had a combined valuation of $3.3 trillion, and accounted for about 40% of the value of the Nasdaq 100, as of 2017. Other than these giants, software companies like Salesforce, Shopify, Palantir, ServiceNow, PayPal, Square and Twilio Inc (NYSE: TWLO) are posting explosive growth numbers as well. The core reason for this growth and dominance is the fact that these companies are solving key problems and offering solutions that are full of value. In the words of legendary investor Peter Thiel, they have become monopolies by virtue of the value and satisfaction they give to their customers. Software companies also grow fast because they have low marginal costs and big potential to scale.
In this article, we will be ranking fastest-growing software companies based on their revenue and headcount growth. Let’s start:
15. Aspen Technology, Inc. (NASDAQ: AZPN)
Revenue(2015): $440.4 million
Revenue(2020): $590.2 million
Aspen Technology is a company that produces process simulation software for various industries. Founded in 1981, Aspen Tech provides software that chemical engineers can use in energy, construction, chemicals, and engineering industries.
The company was established by the Massachusetts Institute of Technology(MIT) and the US Department of Energy’s joint research project. The project was called the Advanced System for Process Engineering(ASPEN).
Today, Aspen Technology produces software for several companies. It designs software that optimizes process design, operational performance, and supply chain planning.
The company has operations through the Subscription and Software, and Services segment. The Subscription and Software segment licenses the process optimization software solutions. The Services segment provides professional services and training. The headquarters of the company is in Massachusetts, USA.
Polen Capital Management has highlighted a new position in Aspen Technology in an investor’s letter. Here is what Polen Capital Management stated:
“We started a new position in Aspen Technology (AZPN). We previously owned this company in the U.S. Small Company Growth strategy, and sold it for market cap reasons. The company is a global leader in asset optimization software. Its solutions address complex, industrial environments where it is critical to optimize the asset design, operation and maintenance lifecycle. Companies in capital intensive industries can use Aspen Technology’s unique set of assets to maximize uptime and push the limits of performance, running their assets safer, greener, longer and faster.
We had considered the company for the inception portfolio but decided to wait and watch it as we had concerns about how low oil prices and macroeconomic uncertainty back in March might affect their business. We have since been impressed with the company’s ability to navigate the tough macro environment, and oil prices have improved. We believe it has been able to deliver very attractive growth despite the macro uncertainty, giving us more confidence to start a position during the quarter. We think the company has an outstanding competitive position, a highly recurring business model, robust margins and returns, and a management team that exhibits all the behaviors that we seek, especially value-creating reinvestment.”
14. Coupa Software Incorporated (NASDAQ: COUP)
Revenue(2015): $51 million
Revenue(2020): $387 million
Coupa Software is one of the 15 fastest-growing software companies. It is a business management software platform. Coupa is a cloud-based platform that analyzes the transactional expenses of companies. It highlights spending patterns and areas of inefficiency.
It also gives the companies actionable steps and decisions to improve the companies’ cost-effectiveness and inventory management. Coupa’s SaaS products manage real-time expenses, invoices, and indirect purchases. The Coupa Software platform is user-friendly. Today, it is used by several companies, including The United States Postal Service(USPS).
The company regularly adds new features to the site to make recommendations that improve their customers’ spending process and purchase decisions. Its headquarters are in California, USA
13. Dropbox, Inc. (NASDAQ: DBX)
Revenue(2015): $603.8 million
Revenue(2020): $1.8 billion
Dropbox Inc., founded in 2007, is a software company that provides cloud storage, file synchronization, and collaboration to its clients. It offers document management and editing tools to individual and business customers. Dropbox’s product solutions allow users to organize files, share presentations, and sync designs across several devices.
It offers various packages like the Dropbox Basic, Plus and Professional package. The Dropbox Paper allows users to co-author, edit, and comment on projects in real-time. The Dropbox Smart Sync allows users to access their content without taking up storage space on their computers. Its Dropbox Showcase enables users to present their work to clients and partners through a Webpage.
12. Qualtrics International Inc. (NASDAQ: XM)
Revenue(2015): $125 million
Revenue(2020): $602 million
Qualtrics is a software company that creates and distributes web surveys. Founded in 2002, it is a CXM(Customer Experience Management) software company that collects and organizes essential data relative to customers and employees.
It helps businesses understand how to improve services and products to suit the preferences of their customers. It collates and organizes important metrics that relate to customer experience and academic research.
Qualtrics has four core area functions; CustomerXM, EmployeeXM, ProductXM, and BrandXM. CustomerXM allows businesses to engage, aid, and understand customers. The EmployeeXM tool helps employers improve employee satisfaction. It provides them with data that enables them to understand and improve the workplace environment.
ProductXM allows producers receive feedback on the products. BrandXM aids business owners in developing a suitable brand campaign by identifying how well customers receive it.
11. New Relic, Inc. (NYSE: NEWR)
Revenue(2015): $110 million
Revenue(2020): $600 million
New Relic is a software company that allows users to track the performance of their website and application. It was founded in 2008, and it is based in California, USA. It is a SaaS company that allows customers to observe their application and website from a user’s perspective. This software enables them to improve these sites in a way that suits the users.
It provides real-time monitoring that allows customers to view every aspect of their web application. New Relic collates data that highlights user behavior, customer insights, and more. It is a user-friendly software that troubleshoots and resolves customers’ web application issues in real-time and traces the source of the error.
10. Okta, Inc. (NASDAQ: OKTA)
Revenue(2015): $41 million
Revenue(2020): $586 million
Founded in 2009, Okta is a software company that provides identity recognition and authentication in workplaces. It is an identity-management software that allows business employees to access applications, websites, and mobile apps. It also allows web developers and application creators to provide security and authentication on their site.
Okta offers products that enable businesses to use centralized and simple authorization to various applications and websites in the workplace. It has products like adaptive multi-factor authentication, Lifecycle management products, Single Sign-on application program, etc. It has over 2000 customers, including 21st Century Fox, Adobe Systems Inc., and more. The company is based in California, USA.
9. Veeam Software (Private)
Revenue(2015): $474 million
Revenue(2020): $1 billion
Veeam, founded in 2006, is a software company that provides backup, security, and high intelligence data management products. In 2008, the company produced the Veeam Backup and Replication product. This software restores data and copies it to another location for a time when it is needed.
It enables the recovery of various documents, designs, and more. The software works virtually by storing information in a central location. In the event of loss, the saved data can easily be accessed and restored to the device. It has also produced the monitoring and management software, which merged to become Veeam ONE.
Its recovery services have extended to the Office 365 platform. It has main offices in Ohio, Australia, and France, but its headquarters are in Switzerland.
8. Slack Technologies, Inc. (NYSE: WORK)
Revenue(2015): $30 million
Revenue(2020): $630 million
Slack Technologies is a software company that created Slack, a virtual collaboration tool. Founded in 2009, Slack was initially called Tiny Speck, and it was designed to develop the game, Glitch. When the game failed, Slack was unveiled to the public.
It has a business messaging platform that allows employees to share resources, ideas, files, and tasks virtually. Slack is an organizational tool that helps companies communicate as a group or privately to employees. The software syncs across various devices and provides real-time messaging and file sharing for business teams.
The goal of Slack is to improve efficiency in the workplace and reduce the need for physical meetings. Its headquarters are in California, USA, and it has offices in Ireland, Canada, and Australia
“We became co-owners in Slack, a channels-based communication service for businesses. In an unexpected twist, a few months later it was acquired by Salesforce.com at roughly a 50% premium to what we had paid.
In accordance with my usual practice, I was planning on writing about our investment in Slack. By laying out my investment hypothesis at the onset of an investment, I hope to enable investors to assess in hindsight whether it worked (or not) because of a plausible investment philosophy consistently applied. Given that Slack has effectively already played out as an investment, this rationale has gone. After all, anyone can make a successful investment decision look smart after the fact.
There is one element of my Slack investment thesis that I would like to lay out as it neatly illustrates an idea in my first-half letter and has not yet played out. I wrote then that I wanted to invest more in “early-stage, listed companies”. What I meant by this are companies whose moat is not yet fully developed, but not so undeveloped that it is difficult to say if they will ever have one. I described early-stage companies as possessing:
The kernel of an idea (however unformed), which – if you squint – you can imagine creating a new paradigm in decades to come.
Slack was the type of company I had in mind when I wrote this. Its moat in its core business of providing channels-based communication within companies is well developed. It benefits from a network effect (the more employees on Slack, the higher the value they derive from it), a broad developer ecosystem (thousands of integrations have been built for Slack) and switching costs (Slack becomes tightly interwoven into a company’s workflow through said integrations).
What really got me excited – the new paradigm – is “Slack Connect”. Connect is a feature that allows companies to extend Slack beyond their own organisation to external partners. Connect has not yet achieved viral growth – the moat is not yet developed.”
7. Veeva Systems Inc. (NYSE: VEEV)
Revenue(2015): $313 million
Revenue(2020): $1 billion
Veeva Systems is a software company that provides cloud-based software for the life-sciences industry. Founded in 2007, its Commercial Cloud Business provides essential customer relationship management(CRM) products and additional resources.
The company creates software that allows pharma companies to manage sales. The applications and programs produced by Veeva Systems allow manufacturers to create high-quality products while maintaining the functionality and quality.
It has products like the Veeva Open data for customer reference. The Vault CDMS, a clinical data management solution, allows companies to run clinical trials on their products. It also created Nitro, a cloud-based warehouse that will enable companies to compute and analyze their data.
Alger Small Cap Focus Fund in their Q3 2020 investor letter highlighted a few stocks and Veeva Systems Inc is one of them. Here is what Alger Small Cap Focus Fund stated:
“Veeva Systems is a leading provider of cloud-based solutions for the global life sciences industry. Veeva’s key solutions are Commercial Cloud products, offering multi-channel customer relationship management software, and Veeva Vault, offering regulated content management for pharmaceutical and biotechnology companies. Shares of Veeva performed strongly after the company reported better-than-expected fiscal second quarter 2021 results and raised its fiscal-year 2021 earnings and billings guidance. Veeva’s key growth driver continues to be strong adoption of Veeva Vault, with particular strength in the fiscal second quarter in its Quality Suite and Clinical Trial Management system. Veeva is making good progress on its recent acquisitions of Crossix, which provides a platform for optimizing health care marketing, and Physicians World. which provides a physicians’ speaker bureau. Since the earlier days of the pandemic in March, Veeva has offered its Veeva CRM Engage products to life sciences customers for free to enable virtual sales visits. Veeva intends to convert a large portion of these new customers into annual subscription contracts next year, as virtual selling has become more important during Covid-19. Finally, Veeva announced the formation of a board committee to explore the conversion of Veeva into a for-profit public-benefit corporation. Veeva would be the first public company to make this change. We believe this potential change would align well with Veeva’s existing culture and operations, that Veeva will still have the legal duty to maximize shareholder value and that the change could potentially create greater trust in Veeva to properly handle proprietary customer data.”
6. Proofpoint, Inc. (NASDAQ: PFPT)
Revenue(2015): $265.4 million
Revenue(2020): $1 billion
Proofpoint ranks 6th on the list of 15 fastest-growing software companies. It provides security technology to various organizations and companies to protect, manage and secure sensitive data. It is a cyber-security platform that protects workers and sensitive information from cyber-security criminals that target emails, websites, social media, and mobile applications.
Proofpoint’s software identifies and protects users from virtual threats. The company offers products that provide multi-layered email security, digital monitoring, and supervising sensitive data. It offers Targeted Attack Protection(TAP), designed to analyze and block potential threats before they reach the email or application.
It also gives real-time reports of potential hazards and offers security awareness training to its users. With products like Proofpoint Information Protection and Archiving, Proofpoint Digital Risk Protection, and more, this software company aims to protect its clients’ information.
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Disclosure: None. 15 Fastest-Growing Software Companies is originally published at Insider Monkey.