I was updating some files recently and I came across a list of the companies that made up the Goldman Sachs Software index just two years ago. Of the 46 large and mid-cap companies on the list, ten no longer exist or have been merged into a larger organization. Most of us are well aware of the wave of consolidation that has swept the industry, but it’s striking to see how many important companies have been taken I was updating some files recently and I came across a list of the companies that made up the Goldman Sachs Software index just two years ago. Of the 46 large and mid-cap companies on the list, ten no longer exist or have been merged into a larger organization. Most of us are well aware of the wave of consolidation that has swept the industry, but it’s striking to see how many important companies have been taken out. Those gone from the GSTI (short hand for the index) are Aspect Telecommunications, Cognos (as soon as the purchase by IBM closes), Filenet, Hyperion, Internet Security Systems, McAfee, Mercury Interactive, Siebel Systems, THQ. And remember that was just a list that the Goldman team deemed representative of the sector. There are plenty of other major software companies that have gone away, including most recently Business Objects, Retek, PeopleSoft, Oracle’s first major conquest, and Veritas, which developed storage-related software and is now part of Symantec. Heck, Oracle alone has swallowed more than 30 companies in the last three years or so, IBM software is a frequent buyer, and now SAP is getting into the act. I’ve complained about the collateral damage caused by the wave of software M&A — loss of jobs, less competition and less innovation — in these electronic pages before so I won’t repeat myself. But it’s becoming clearer and clearer that the market will pretty much support only large-cap, integrated software companies, and nimble little niche players. The great unwashed of the mid-range are disappearing rapidly and won’t be back. Although, some of those companies, Mercury Interactive comes to mind, shot themselves in the foot via bad management practices, many of the disappeared had solid businesses and decent (sometimes excellent) management. This is altogether different from the dynamic that reduced the major players in the PC industry to a handful. In that case, the PC became a commodity and it made no economic sense to build them without huge economies of scale. A similar dynamic radically thinned the ranks of hard drive makers. I think Marc Benioff of Salesforce.com overstates when he talks about the end of software, but we are most certainly going to see the end of more mid-sized software companies in the next few years. Technology Industry