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Gross Margin is perhaps of the most followed metrics when evaluating software companies. Investors and companies themselves are absolutely obsessed with it In this article, we break down Gross Margin to figure out what drives it, and whether companies are actually rewarded for having a good gross margin. In my last article, I explored the relationship of Sales and Marketing expenditure to examine whether there is an ideal ratio of spend. Today, we’ll use this knowledge and apply it to Gross Margin. ...

Sales and Marketing (S&M) and Research and Development (R&D) often compete when it comes to company budgeting. For budget managers and shareholders alike it’s interesting and beneficial to compare companies spend in this area to get insight into strategy and design budgets. A good start would be to look at how some of the largest US listed Software companies split their spending between S&M and R&D. This plot below illustrates that there is a large range of spending choices, right from Square through to Splunk. ...