Servers: spoilt for choice
The future may be looking gloomy for independent software vendors.
When the vendors that make and market Java application servers come calling at US-based e-services firm Agency.com, Shane Lennon, its director of alliances, is the man they court.
Lennon recently wrapped up an application server evaluation but still sorts through perks, marketing tools and product roadmaps from different vendors before making his choice. "I didn't kill any particular app server, but I asked for proactive resources and for channel resources. I have to make a lot of decisions," he said.
So do many other resellers, which are facing an application server market in flux. Industry analysts claim that, with the advent of Java 2 Enterprise Edition (J2EE) and application server offerings from IBM, Sun Microsystems, Oracle and Hewlett Packard (HP), application server independent software vendors (ISVs) such as BEA Systems, Art Technology Group (ATG) and SilverStream Software are in danger of being phased out.
According to research firm Meta Group, BEA's WebLogic software is leading the J2EE application server market in North America with a 37 per cent share, followed by IBM's WebSphere product, with 22 per cent. However, vendors that offer both infrastructure products and application servers are giving customers a compelling reason to buy their products instead of those from ISVs, said Jim Guinn, national practice director at One, a US-based systems integrator.
"What's going to end up happening is that companies such as Sun and IBM will show a unified platform and infrastructure, and I don't know how BEA is going to play that," he explained. "It is really going to have to create some alliances to keep its product moving forward."
That wasn't always the case for application server ISVs, however. Shortly after Sun launched Java in 1995, application servers became a hot item.
Vendors such as ATG and WebLogic saw Java's software potential and crafted application servers as development tools, eventually selling them to other companies that wanted to build their own Java-based applications. ISVs such as BEA (which acquired WebLogic) and SilverStream soon jumped into the fray, as did server and database vendors because the investment in application server products was relatively small.
The dawn of J2EE
But Sun's launch of J2EE in June 1999 changed everything. It is now the de facto specification for building enterprise-scale Java applications, and has since been licensed by 34 vendors, none of which have a prayer of successfully marketing a Java application server if they cannot document J2EE compliance. Also, because all application servers must pass the same compatibility tests to be branded J2EE-compliant, the differences between application server products have blurred.
"The J2EE specs are publicly available. It is a level playing field," said Peter Urban, senior research analyst at AMR Research. "[The application server] is becoming commoditised."
IBM, Oracle, HP and Sun are stepping up development and marketing of their J2EE-compliant ebusiness software and application servers. Analysts claim they are also likely to slash prices, undercutting ISVs such as BEA, SilverStream and ATG. Wall Street has had the jitters about that possibility at least once, warned Urban.
"There was a day a few months ago when BEA's stock dropped on word that HP was going to bundle its application server with its HP-UX operating system," he said.
Randy Heffner, vice president of application architecture at research firm Giga Information Group, does not think it is a question of whether infrastructure vendors with application servers will cut into BEA's market share, but of how much business they will steal. "I do see folks making decisions that say: 'There's more that I could get from an IBM, and I don't have an issue with their software reputation. So I'll go down that route rather than take the more ISV-based BEA approach,'" he explained.
However, resellers are not ready to write off BEA, given that the sterling technology behind its WebLogic product has fuelled its market dominance.
Imelda Ford, vice president of operations at Capita Technologies, said: "It will be difficult to endanger BEA. It has a good percentage of the market share on web and application servers, primarily because of two distinguishing factors: reliability and scalability."
BEA also has mind-share among large systems integrators. The company's partners include Accenture, PricewaterhouseCoopers, KPMG Consulting, Cap Gemini Ernst & Young and Computer Sciences. It recently formed an alliance with US services firm EDS. BEA and EDS plan to target Global 1000 companies with service and software bundles based on WebLogic, according to John Gray, vice president of worldwide alliances at BEA.
WebLogic remains the preference of many developers, said Bob Lytle, chief technology officer at reseller Centrifusion. "BEA is still rock solid as far as the features it offers a developer. The coder's choice is BEA," he explained. "As long as coders are still involved in the app server buying decision, BEA still has a chance."
Although application servers are becoming part of the baseline software stack, some solution providers say BEA should stick to its guns with WebLogic.
"It is BEA's game to lose," maintained Tim Appnel, director at Agency.com's Applied Concepts lab. "BEA is going to have to be a bit on the defensive and continue doing what it does best. If it does, there is no reason for developers to leave it."
Jockeying for position
Bill Coleman, BEA's chairman, said that he is not worried about reshuffling in the application server market because there is precedence for a best-of-breed middleware vendor. "Even as infrastructure companies jockey for more application server market share, BEA and IBM will remain the top competitors," he pointed out.
"I've seen this movie before. Our first product, Tuxedo, was a transaction processing monitor, and almost every hardware company with the exception of Sun had its own. We beat every one of them and became the dominant world leader in that space. Customers want a focused company that's building the best-of-breed on a global scale," he added.
IBM, BEA's biggest rival, begs to differ. Scott Hebner, director of marketing for IBM WebSphere, said that as the industry increasingly sees the application server as 'the operating system for the internet', it will become essential to tightly integrate the technology with servers, databases and other infrastructures.
Because BEA doesn't offer such infrastructure products, it stands at a disadvantage, he claimed. "Customers are taking existing infrastructure and extending it with app servers and ebusiness infrastructure. As they do that, the market is going to favour vendors that have part of the infrastructure installed," said Hebner.
Sun also falls into that vendor group. It sells a range of related, interoperable applications and the hardware on which to run them. And next year iPlanet, which holds five per cent of the J2EE application server market, is expected to become a Sun division.
"We are in a position to take integration costs out of the system, which a lot of companies don't have," explained Sanjay Sarathy, director of product marketing at iPlanet, an ecommerce software developer that was part of the Sun AOL/Time Warner alliance.
According to Guinn, most of the application servers Sun ships are BEA's. But analysts say that now Sun's sales staff are pushing iPlanet application servers with Sun server hardware and software under the company's Open Net Environment initiative, BEA could lose that critical business.
"If I have an application and want to run it on BEA's server, I could fairly easily move that to iPlanet if they are both compliant [with J2EE]," said Urban.
Although Sun's sales staff get financial incentives to sell iPlanet products, there is still room for BEA to run on Sun infrastructure, maintained Sarathy. "We will continue to compete with BEA and IBM. There's certainly a great app server from BEA in that little niche," he said.
But smaller application server ISVs, such as Cambridge and ATG, are not gambling on a niche in a fluctuating market. Ian Reid, ATG's senior vice president of worldwide marketing, said that ATG plans to port its portal, ecommerce and customer relationship management applications to competitors' application servers while continuing to develop its Dynamo application server.
SilverStream is also emphasising its value-added products. Steve Benfield, SilverStream's chief technology officer, said that the company is content to keep its application server business, which now amounts to about three per cent of the US market, and to focus on deriving revenue from other products.
The firm's eXtend Composer and Director XML-based web services tools, which also run on BEA and IBM app servers, are producing a steady income, he claimed. "The fact that every hardware vendor on the planet is doing J2EE is great because that increases the universe of potential customers," he said.
Nonetheless, some solution providers believe the writing is on the wall for application server ISVs. "The competition is pretty much done, and the two still standing are IBM and BEA," said Tony Rems, chief technology officer at ebusiness integrator SBI.
"In a weak economy, we are seeing more people betting on IBM," he explained. "But IBM is 'late to the game' with Java-based ecommerce and personalisation offerings. I wouldn't be surprised to see it acquire ATG and distance itself from BEA."
ATG focuses on ebusiness
ATG is broadening its horizons. According to company executives, by the middle of next year the US-based ISV plans to finish porting its Dynamo ebusiness suite to application servers from rivals BEA Systems, HP, iPlanet and IBM.
ATG will continue to develop and market its own application server, said Ian Reid, senior vice president of worldwide marketing at the company. ATG, which released Dynamo 5.5 late last month, expects to provide an edition of Dynamo for a competitor's application server this quarter, although no order has been set for the different platforms.
"It became very clear to us some time ago that we are not going to be the glue in the enterprise IT architecture," explained Reid. "Our goal and strategy is to be the provider of front-line, people- and supplier-facing applications."
ATG unveiled the strategy in July as part of a move to focus on its portal, ecommerce and customer relationship management applications. When the plan was announced, Jeet Singh, the firm's chief executive, said that it reflected a trend in which application servers were becoming "baked into" the ebusiness infrastructure and that app server vendors would look to build other software to extend their products' functionality.
"ATG has done a smart thing," said Agency.com's Appnel. "It said what it does better than anyone else are these ecommerce and e-CRM modules, and the one thing that limits their sales is that their applications have to run on their application server. That is a great example of how these application server firms need to change their business model."
However, ATG's strategy might make it an acquisition target, according to Tony Rems, chief technology officer at US-based reseller SBI. ATG has "far more mature" Java-based ecommerce, personalisation and e-CRM capabilities than app server market leaders BEA or IBM, he claimed.
"[ATG is] pursuing a strategy of becoming a set of tools that run on top of IBM, BEA and other [J2EE]-compliant application servers," he said. "That makes it a niche player. I expect a large app server vendors will acquire them as the market consolidates."
Meanwhile, Quinn said that ATG has never really been an app server ISV exclusively, since Singh has always emphasised the development of other ecommerce software. ATG's decision to port its ebusiness modules to rival application servers will give it a "competitive advantage", he said.
CONTACTS:
Agency.com (001) 212 358 2600 www.agency.com
IBM (02932) 561 029 www.IBM.com
Sun (020) 7628 3000 www.Sun.co.uk
Oracle (08705) 332 200 www.oracle.com/uk/
Hewlett-Packard (01344) 360 000 www.hp.com
BEA Systems (001) 408 570 8000 www.bea.com
ATG (0118) 956 5000 www.atg.com
SilverStream (01442) 860 500 www.silverstream.com