One increasingly obvious casualty is Lawson Software. During its third quarter to 28 February 2005, the Minnesota-headquartered vendor of accounting, HR, procurement and distribution applications saw software sales collapse by 45%, falling to $13.9 million from $25.2 million in the year-earlier quarter. That was on top of a 42% tumble in software licence sales in the company's second quarter.

Despite that skid, increased services revenue meant that its overall revenues for the latest quarter fell by a less-dramatic 10% to $82.7 million – although that means services now account for an uncomfortable 83% of overall business.

Lawson is, however, staying profitable. Having pre-empted the downturn by laying off around 10% of its staff in the closing months of 2004, it reported net income of $2.6 million in the quarter.

The reasons for the precipitous fall in licence revenues, according to Lawson CEO, Jay Coughlan, were complex. Top of the list was greater competition from Oracle and SAP who "attempt to use their relatively larger size" to knock Lawson off deal shortlists. Rampant consolidation in the sector and customer uncertainty about the technical direction of the software industry were other factors, he said.

On the other side of the Atlantic, there was another story of restructuring upheaval. IFS, the Stockholm-based business applications vendor whose focus is on manufacturing companies, reported revenues for the fourth quarter of 2004 of SKr637 million ($89.2m), down 3% on the same period a year earlier. With 77% of its revenue derived from outside Sweden, the company pointed to unfavourable exchange rates as accounting for much of that fall.

After a year in which it has divested itself of several non-strategic business units and a few regional subsidiaries, as well as 3% of its staff, the company reported an operating loss for the quarter of SKr49 million ($6.9m), compared to a profit of the same amount in the year-earlier period. On an annual basis, revenues fell 7% to SKr 2,178 million ($304.9m) while net losses doubled to SKr243 million ($34.0m). Michael Hallén, IFS president and CEO, promised that the changes to the company's strategy would ensure a return to profitability in 2005.

That prediction assumes that there is nothing intrinsically weak about the mid-market applications sector. The numbers from UK-based vendor Coda, the financial software division of CodaSciSys, support that belief. Licence revenues showed growth compared with last year, with particular improvement in the latter part of 2004.

Although Coda's revenues fell back by 2% for 2004 as a whole to £43.3 million ($80.1m) – a downturn again attributed to currency fluctuations – the last quarter of the year demonstrated a marked upturn in business, a trend which it says has continued into the first part of 2005.

There was a similar story at Sweden's Intentia. Fourth quarter revenues rose 3% to SKr 895 million ($125.3m) after a year in which the company narrowed its market focus to just four key verticals. " We previously had customers in 13 or 14 industries – sometimes just one or two customers per industry – it was criminal," admits Bertrand Sciard, CEO of Intentia. Despite the recent upswing, Intentia's overall revenues for 2004 fell 4% to SKr 2,982.9 million ($417.6m).

One of Intentia's key rivals, Netherlands-based Exact Software, put in a relatively good performance in the latter half of 2004, with revenue up 6% to EU109 million ($139.6m), driven by the success of its new e-Synergy product line.

But the real eye-popping numbers in business applications came from another company with roots in Holland. Unit 4 Agresso reported a 39% increase in revenue to EU160.1 million ($205m) in the second half of 2004 compared to the same period of 2003. Much of that was down to the acquisition in the first half of IT security services company Risc Technology and of its Spanish partners, Escador Riverland (an Agresso distributor) and SPAI (a public sector applications specialist). The company is predicting organic growth of 7% to 10% in 2005.

Revenue transition

Trying to push down into that applications mid-market, while consolidating as fast as it can at the high-end, Oracle announced a strong upswing in sales in its quarter ending 28 February – even as the company's profits fell 15% to $540 million, mostly due to costs incurred in its acquisition of applications rival PeopleSoft.

Revenues for the quarter were up 18% to $2.95 billion, helped by a boost of 9% in applications licence sales to $152 million, by a surge of 48% in upgrade and support fees and by a 71% jump in the revenue it derives from application services. The figures reflect just a minor amount of PeopleSoft revenue, as the $10.3 billion deal was only finalised in January.

For its latest quarter, the story behind the company's health lies more with databases than applications. Its traditional engine of growth, database license sales rose by 12%, accounting for $795 million of the quarter's new software sales. IT industry analyst group IDC backs up Oracle CEO Larry Ellison's boasts that during the past 12 months, Oracle has grown its share of the database market by a point to 41.3% – at the expense of IBM, which dropped a similar amount to 30.6%.