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The two companies on the list that grew faster than Salesforce-Omniture and Concur Technologies-also deliver their software as a Web service. Omniture's revenue more than doubled as customers traded up for some of the new products that are taking Omniture past Web analytics and into business optimization.
At Concur, revenue grew 51% to $225 million as more companies subscribed to its employee spend management service. Concur turns the process of handling employee expense reports into an online process, and says it can reduce the cost of handling an individual report to between $4 and $10, from $30 for a typical manual transaction. Like most SaaS companies, Concur offers its service on a subscription basis-an approach that has some big advantages during an economic downturn, said Chris Juneau, the company's senior manager of segment marketing.
"We can look out to the next quarter and see 70% of our revenue," said Juneau, "versus a traditional licensed software company, which has to hunt the elephant every quarter."
Even some companies that don't deliver a hosted software solution are benefiting from the emergence of the SaaS model and cloud computing.
One such company is Red Hat Software, which grew 27% in 2008—slower than in 2007 but still twice the pace of the average company on our list.
Red Hat is the leader in commercial Linux servers, which are in wide use at Web service companies such as Google, Yahoo and Amazon. All 25 of Red Hat's top customers renewed their contracts with Red Hat in 2008, and many of them increased the number of servers they were using, said Mike Evans, Red Hat's vice president of corporate development. In addition, Evans said that more than 50 end customers, including those in banking and energy, have requested Red Hat's help in building internal clouds.
"We're a little bit of an arms dealer," Evans said, "or maybe it's better to say we're like Levi Strauss in the Gold Rush days."
There were fewer generalizations to be made about the software companies that shrank the most in 2008. One generalization that always applies, however, is that it's not good to rely on any one customer. Revenue at Synchronoss Technologies fell 10% after Apple Inc. started doing more iPhone activations directly, depriving the communications software vendor of a coveted revenue stream.
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