Software platforms have come a long way since the early days of personal computing in the 1980’s run on MS-DOS and Microsoft Windows. In the 1990’s  the internet and web platform era enabled a new method of software delivery.  Today’s software platforms are cloud-based as software as a service (SaaS) or mobile applications built for iOS and Android. 

From an investment standpoint, software platforms offer many strategic business advantages including: 

• Low marginal cost - Software platforms are scalable businesses that support high margins and revenue growth at scale with virtually no marginal costs or the need for debt financing. 

• Competitive moats - Low incremental sales costs means more revenue can be used to innovate, build new products, and provide increased utility to customers, creating a sustainable competitive advantage.

• Recurring revenue models - Most software platforms operate under  subscription-based models (SaaS), generating recurring revenues with high customer retention.  The SaaS model is also tariff-resistant. 

• AI and innovation tailwinds - Artificial intelligence and applications such as generative AI are creating new opportunities for software companies, as investor focus shifts from hardware infrastructure to software applications. 

Scalability: A critical advantage for software platforms

As demonstrated in the graphic below, while the marginal cost of traditional goods increases with production due to resource constraints, the marginal cost of digital goods trends to zero as production scales.  This provides an important strategic advantage for software platform companies. 

Source: The Zero Marginal Cost Society, Jeremy Rifkin

Our index approach

The AOT VettaFi Software Platform TR Index (SOFTT) tracks the performance of the top companies that rely on, contribute to, or create software platforms that enable the functionality and delivery of services.  

The index selected the top ranked companies from its Software Platform universe. Scores used for ranking combine measures of quality and market leadership. 

Companies are classified, based on their business model and activities, as software-driven enterprises where their Software Platform is a main driver of their business, and/or their products are crucial to Software-Driven Enterprises. These companies must be at least materially engaged with 20% of their revenue from software-driven enterprise business activities.

“Software Platforms” refer to integrated software systems or frameworks that serve as foundational technologies enabling the development, deployment, and operation of applications, services, or digital ecosystems. 

These platforms are essential to the functionality and strategic direction of Software-Driven Enterprises, which rely on software as a core enabler of their business models, product offerings, and operational capabilities. Designed to be extensible and scalable, these platforms often support broad user, client, or developer ecosystems. 

Within Software-Driven Enterprises, a Software Platform may include: 

• Cloud infrastructure platforms – Systems that provide on-demand computing, storage, and networking services (e.g., IaaS and PaaS solutions). 
• Enterprise software platforms – Core business applications such as customer relationship management (CRM), enterprise resource planning (ERP), and human capital management (HCM) platforms. 
• Application development platforms – Tools and frameworks that support the creation, testing, and deployment of software applications, including low-code/no-code environments. 
• Data analytics and artificial intelligence platforms – Platforms that support large-scale data processing, machine learning, business intelligence, and predictive analytics. 
• Middleware and integration platforms – Software that facilitates communication, data exchange, and interoperability between disparate systems and applications. 
• Industry-specific software platforms – Specialized platforms designed to meet the unique technological needs of verticals such as healthcare, ecommerce, financial services, education, or logistics. 

Companies that develop, license, or utilize Software Platforms as a core part of their operations, and whose platforms are mission-critical to the infrastructure, innovation, or service delivery of their enterprise or other Software-Driven Enterprises, are considered relevant under this definition. These platforms often enable digital transformation, operational efficiency, automation, data intelligence, and scalable ecosystems across multiple industries. 

Additionally, companies must trade on eligible US exchanges and meet the following minimum criteria: 

• 3 Month Average Daily Trading Value
• 1 million USD Float Market Cap Percent 
• 20% Full Market Cap: 100 million USD 

At least 80% of the value of the index must be composed of principally engaged companies that derive at least 50% of their revenues from software-driven enterprise business activities as listed in the appendix. The top 50 ranked companies within the index’s universe are selected with a 10 company ranked buffer for current constituents. 

Companies must have a positive Earnings to Price ratio. Ranking is based on the average of a factor score rank and a market cap rank. The factor score is calculated based on a company’s Cost of Goods Sold/Revenue, Earnings to Price, and Return on Invested Capital.

Materially engaged companies (those with less than 50% revenue in software-driven enterprise business activities) are capped at 20% and their excess weight is redistributed pro-rata to the principally engaged companies (those with at least 50% revenue in software-driven enterprise business activities). Constituents are weighted by float modified market cap with a maximum weight of 7.5% and a minimum weight of 0.5%. 

The index rebalances on a quarterly basis on the third Friday in March, June, September, and December. 

The AOT VettaFi Software Platform TR Index (SOFTT) has been licensed by AOT for a daily 2X levered ETF sub-advised by Tidal Financial Group which will be launching in July of 2025. 

More information about the index can be found here.