
Why there's nothing special about the business of software - pclark
http://blog.businessofsoftware.org/2009/05/why-theres-nothing-special-about-the-business-of-software.html
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iamelgringo
Ok, I just had to... I got the data from here:
[http://money.cnn.com/magazines/fortune/global500/2008/full_l...](http://money.cnn.com/magazines/fortune/global500/2008/full_list/)

And, I pseudo-randomly sampled companies that interested me.

Walmart _Revenue_ : $378 B _Profit_ : $12 B _Employees_ : 2055 K _Revenue_ per
employee: $183 K _Profit_ per employee: $5 K

Exxon _Revenue_ : $372 B _Profit_ : $40 B _Employees_ : 107 K _Revenue_ per
employee: $3476 K _Profit_ per employee: $373 K

ING Group _Revenue_ : $201 B _Profit_ : $12 B _Employees_ : 120 K _Revenue_
per employee: $1675 K _Profit_ per employee: $100 K

GM _Revenue_ : $182 B _Profit_ : $-38 B _Employees_ : 266 K _Revenue_ per
employee: $684 K _Profit_ per employee: $-143 K

Ford _Revenue_ : $172 B _Profit_ : $-2 B _Employees_ : 246 K _Revenue_ per
employee: $699 K _Profit_ per employee: $-9 K

Citigroup _Revenue_ : $159 B _Profit_ : $3 B _Employees_ : 380 K _Revenue_ per
employee: $418 K _Profit_ per employee: $7 K

At&T _Revenue_ : $118 B _Profit_ : $11 B _Employees_ : 309 K _Revenue_ per
employee: $381 K _Profit_ per employee: $35 K

Samsung _Revenue_ : $106 B _Profit_ : $7.9 B _Employees_ : 144 K _Revenue_ per
employee: $736 K _Profit_ per employee: $55 K

IBM _Revenue_ : $98 B _Profit_ : $10 B _Employees_ : 386 K _Revenue_ per
employee: $253 K _Profit_ per employee: $25 K

Nestle _Revenue_ : $89 B _Profit_ : $8 B _Employees_ : 276 K _Revenue_ per
employee: $322 K _Profit_ per employee: $28 K

Cardinal Health _Revenue_ : $88 B _Profit_ : $1.9 B _Employees_ : 43 K
_Revenue_ per employee: $2046 K _Profit_ per employee: $44 K

Sony _Revenue_ : $77 B _Profit_ : $3.2 B _Employees_ : 180 K _Revenue_ per
employee: $427 K _Profit_ per employee: $18 K

Costco _Revenue_ : $64 B _Profit_ : $1 B _Employees_ : 98.5 K _Revenue_ per
employee: $650 K _Profit_ per employee: $10 K

Microsoft _Revenue_ : $51 B _Profit_ : $14 B _Employees_ : 79 K _Revenue_ per
employee: $645 K _Profit_ per employee: $177 K

Oracle _Revenue_ : $17.9 B _Profit_ : $4 B _Employees_ : 64.6 K _Revenue_ per
employee: $277 K _Profit_ per employee: $62 K

Cisco _Revenue_ : $34.9 B _Profit_ : $7.3 B _Employees_ : 61 K _Revenue_ per
employee: $572 K _Profit_ per employee: $120 K

Coca Cola _Revenue_ : $28.8 B _Profit_ : $5.9 B _Employees_ : 90 K _Revenue_
per employee: $320 K _Profit_ per employee: $66 K

TIAA-CREF _Revenue_ : $27.5 B _Profit_ : $1.4 B _Employees_ : 7.5 K _Revenue_
per employee: $3667 K _Profit_ per employee: $187 K

Apple _Revenue_ : $24 B _Profit_ : $3.4 B _Employees_ : 22.6 K _Revenue_ per
employee: $1062 K _Profit_ per employee: $150 K

~~~
brc
Software or Oil. Those are the two businesses to be in - that's what the table
says.

Personally, I would like my own country/principality (like Monaco or San
Marino, maybe in the Caribbean) where everyone was involved in a software
company, or services supporting software companies. I'd have a zero tax policy
for software companies but the government automatically got 3% equity for all
companies based there. Everyone would have free high speed internet and
there'd be a free research university for students who passed the entrance
exams.

Now, who wants to come and live in my country?

~~~
Dilpil
Only cause finance wasn't listed.

~~~
iamelgringo
Actually, there were plenty of finance companies that I glossed over. Most of
them took a beating this past year, so I didn't include them.

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CalmQuiet
Profit per employee would be more interesting.

Even more interesting: salary per employee (not only for its meaning to
employees but to the local economy.

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sethg
IIRC (this was discussed on the "free software business" email list a number
of years back), Microsoft and possibly Autodesk are the _only_ major software
companies that actually get the vast majority of their revenue from selling,
well, software. Every other large company that is generally thought of as
"selling software" also sells consulting services or hardware or some other
complementary good.

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prospero
None of these companies are trying to maximize profit-per-employee, just
profit. There's obviously a diminishing return with each subsequent employee,
but that's no deterrent for larger companies. It's pretty reasonable that
healthy companies will have per-employee profits around the average salary: if
a current employee "pays" for a new employee, there's no real reason not to
hire one.

If you search for software companies that _do_ try to maximize their per-
employee profit, you find companies like 37Signals and id software, which I
imagine are at least an order of magnitude above any other organization that's
been mentioned. They're what make the business of software special, not
Microsoft and Google.

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run4yourlives
Revenue per employee seems like a ridiculously meaningless statistic. It tells
you nothing.

Total revenue can be useful. Total Profit can be useful. Profit per employee
can be useful. Loss per employee is useful.

Revenue per employee is half the story. This is how you run your business into
the ground - Believing half stories.

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biohacker42
Wow, that seems low. Even more reasons to work on a startup.

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earl
Hmm. I have stuff to do so I can't follow up but I'm really dubious. Note this
after the chart: _General Motors has revenue of $600,000 per employee_. GM?
OHRLY?

Perhaps the author conflates revenue and profit?

Edit: in fact, the author actually notes this. Which makes the whole exercise
stupid: If you don't have the data you need, you don't have the data you need
and using the maximum value instead is useless. As should have been trivially
obvious at the time the author wrote the blog post by examining one of his or
her own examples.

~~~
SwellJoe
I think it's worth noting how many of the world's top ten (or 20 or 50, etc.)
richest people who earned it, rather than inheriting it, got there with
software.

Gates, Ballmer, Allen, Brin, Page, Ellison, etc. There are plenty of others,
of course, who didn't get there with software. But the numbers certainly make
it seem like software is a good way to get fantastically wealthy.

~~~
mixmax
What most people forget that the worlds 50 richest people are outliers - after
all there are only 50 of them in the world. The interesting thing would be to
see how big a percentage of the worlds richest 5 million people made their
money by creating and selling software.

I'm not saying that you're wrong, just that the data doesn't support the view.

~~~
SwellJoe
That's true. I suspect oil has made dramatically more millionaires and
billionaires than software has (but, having lived for many years in Texas,
having a dad that worked as an engineer in the oil and gas industry, and then
working myself for a few years on software for the oil and gas industry, my
view of rich people and how they got that way may be skewed). But, I think
maybe we're past the time when there are major opportunities for new people to
make their fortune in oil. Though I do know some software developers who're
rich because of the software they make for the oil and gas industry.

Anyway, I don't know, either. We're all working with dramatically less data
than we need to make an informed decision.

But, since we're probably all strongest at technical stuff, rather than
finance or arbitrage or whatever other ways folks make a billion dollars, I
kinda think our best odds are in playing to our strengths.

~~~
krschultz
If you read the book Millionaires Next Door they pretty much tackle this
problem and show that owners of small->medium sized businesses are the bulk of
the millionaires. A lot of these businesses are just run of the mill things
like construction, commercial real estate, service stations etc. The home runs
from taking huge risks are few and far between.

~~~
SwellJoe
_The Millionaire Next Door_ also reportedly has data problems, but, I think
the idea of becoming one of those millionaires next door from software is also
sound. I think the risks that have to be taken for those home runs in software
are smaller, as well. What's the cost of a major construction project that can
net millions in revenue vs. a major software project that can net millions in
revenue?

I was just think we're pretty lucky (or clever) to be working in a field that
has produced so many billionaires in a short period of time, and now requires
less risk and investment than ever before. It's a good time to be a nerd.

