The good news from the tech earnings season so far is that the advertising market appears to have largely recovered from the worst of the recession. But that’s probably not the case for enterprise software. While we have yet to receive earnings updates from most enterprise software companies, some of those that have reported suggest activity remains weak, thanks to a pullback in spending on software from American companies.
It’s no wonder the business software sector has been a technology disappointment this year. A gauge of software-as-a-service stocks — the Bessemer Venture Partners Cloud Index, which tracks 71 software companies — is up just 15% this year, far less than the tech sector’s Nasdaq 100 Index, a broader basket of 38 tech companies, which is up 40% (see chart).