“2009 was a particularly difficult year. However, in the midst of this major crisis, the French software industry demonstrated that it was surprisingly resilient. Turnover grew slightly and the industry remained profitable while innovating, preparing for the future and continuing to invest heavily in R&D. The 100 software companies of the Truffle 100 announced the net creation of 500 skilled jobs,” said Bernard-Louis Roques, Managing Partner for IT at Truffle Capital.
“The software industry continues to innovate and is resolutely turned towards the future, creating new jobs in the midst of the crisis and investing more in R&D in 2009 than in 2008. Rather than giving way to short-termism, software companies are pragmatic optimists and 45 per cent believe that they will do well as the economy recovers,” Roques added.
This positive outlook should be supported by a solid industrial software strategy at European and national levels, said Nathalie Kosciusko-Morizet, France’s Minister of State to the Prime Minister, with responsibility for Forward Planning and Development of the Digital Economy, commenting on the survey. “In Europe, we have been thinking, especially with Spain, about the establishment of a strong strategy over the next 10 years.”
The survey was collaboration with the analysts CXP and with the support of the industry body Syntec Informatique. According to Syntec Informatique, the results confirm the positive impact that research tax credits are having on employment within the software industry.
Turnover in the sector increased from €3.8 billion in 2008 to €4 billion in 2009. However, profits fell from 7.6 per cent to 4.3 per cent of total turnover. The economic crisis hit large companies harder than SMEs, with only 60 per cent of the top 50 companies maintaining or growing their sales, versus 76 per cent of the 50 smallest.
“Who will regret the year 2009?” said Laurent Calot, CEO of CXP. “For many companies, the year 2009 will leave bitter memories... [At best it was] a nebulous and erratic period, with slow growth and targets revised downwards. For many players, this year has not been the easiest to negotiate. But we cannot complain: in this sullen context, our ecosystem [...] displayed a great resistance, proving that the software is well regarded for its value: as a competitive edge.”
The year saw the growth of a number of new concepts such as software as a service, Cloud Computing, Open Source and Virtualisation. “All these concepts and technologies are changing [the scene] radically and permanently, democratising access to packaged software functions for smaller companies, but also for all those who need to reduce management costs and for those who emphasise the rapid ROI and easily measurable projects,” Calot said.
In 2009, €750 million was spent on R&D, compared to €700 million in 2008. Staff numbers in general and R&D staff numbers in particular continue to grow, rising from 51,198 in 2008 to 53,933 in 2009. Despite the crisis, the number of researchers has remained broadly stable since 2006 and accounts for 20 per cent of the total headcount. It is noteworthy that most software companies do not intend to relocate their R&D department to low-cost countries.
Despite strong sector dynamism and an increase in total turnover, there is a very uneven distribution in terms of sales figures. The leading company, Dassault Systèmes, accounts for 31 per cent of total sales, the 2nd to 5th ranked companies 23 per cent, the 6th to 20th 20 per cent, the 21st to 50th 15, while companies ranked from 51 to 100 account for only 10 per cent of total turnover.
However, small software companies are now considered to be the industry drivers. Although the multinationals are still present, they are suffering as a result of the economic crisis and the SMEs have taken over the reins, according to the survey. The SMEs feel they are rightly eligible for France’s research tax credits, offering the best returns on investment for public funding in terms of home-grown skilled jobs and lasting contributions to future economic growth.
There remain structural problems according to Bruno Vanryb, Chairman, CEO and co-founder of Avanquest Software, commenting on the survey. “With an applications market of less than €5 billion, the French software industry has clearly failed to take off. Apart from a few global champions such as UbiSoft in video games, Business Objects (now owned by SAP) in enterprise applications and Avanquest in consumer software, most French software companies turn over less than €2 million a year.” Plenty of targeted government and fiscal incentives have been introduced over the years to promote company start-ups and research and innovation in hi-tech sectors. But Vanryb says, “If the French software industry is to make an impact on the global level, other parameters need to be optimised - and not just financial ones, as successive governments tend to do. To help our software companies to grow, we need to completely revise how technology is taught at school and at university.”
“People must understand that to succeed in a global market, a business needs to develop beyond our borders - even if this means that not all the jobs are created in France. We must at last drop our distinction between the virtuous SME and the predatory multinational (as is the case in the European Small Business Act), since the dream of nearly every entrepreneur is to expand,” Vanryb adds.
In the 2009 edition of the Truffle 100, 17 software companies have risen in the ranking relative to the previous year, 9 held their position and 60 have lost at least one place. Eight companies slipped out of the ranking
The number of listed companies has continued to rise since 2004, with 33 in 2009, versus 30 in 2008. Dassault Systèmes and Sopra Group still occupy the first and second spots in the ranking, respectively, despite a drop in sales and staff numbers in 2009. CEGID, with a turnover of €226 million in 2009 and third in the 2008 ranking, slipped to 4th place in 2009. A new company Murex comes in at number 3, with a 2009 turnover of €265 million. The top 10 is generally the same as in 2008, with one exception: Berger-Levrault, currently 11th in the ranking, with a turnover of €85.7 million was pushed out by Murex.
The Truffle 100 questionnaire is available at http://www.truffle100.com/. Candidate companies can register at any time.