App Servers Can't Get No Satisfaction

Wednesday Oct 6th 2004 by Drew Robb
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Application servers are moving toward commodity status with IBM, BEA, and Oracle still commanding the lion's share of the market. Buying in to open source and targeting SMBs are two ways the vendors are attempting to differentiate themselves.

In the old days, life was simple for application servers. They were easy to define, everybody knew what you were talking about and they even contained (for a brief period) a bleeding-edge aura.

"IT managers just don't make business decisions based upon application servers anymore. They look at the broader picture based on how products are bundled."

What a difference a half decade makes! Today, the definition has gotten cloudy, and nobody seems to know what is meant when the word is mentioned. Perhaps, even worse, nobody cares. Like Mick Jagger failing to resonate with a Gen Y, app servers just ain't cool any more. They merit respect, as well as amazement, for their longevity. But they lack in the cool quotient department.

"IT managers just don't make business decisions based upon application servers anymore," said Dennis Byron, an analyst for application deployment software at Framingham, Mass. based International Data Corp. (IDC). "They look at the broader picture based on how products are bundled."

So how does an app server to get some satisfaction? Let's start with a definition what it is, then detail where the marketplace is at and where it is likely to go. While the long-standing market leaders — IBM, BEA, and Oracle — still dominate, Microsoft is steadily gaining ground and the open source movement is invading on all fronts.

19th Market Breakdown

An application server is defined in McGraw Hill's Desktop Encyclopedia as, "a computer in an intranet/internet environment that performs data processing necessary to deliver up-to-date information, as well as process information for Web clients."

Essentially, the app server sits along with or between the Web server and the databases and legacy applications. It provides the middleware glue to, for example, enable a browser-based application to link multiple sources of information. However, the dictionary really confuses the issue when it ends the definition with "See Web server."

IDC is similarly dismissive of the term "application server" and relegates it to just one small part of the larger "application deployment software" sector. This category includes application, Web, and integration servers as well as message-oriented transaction servers and access-integration middleware.

According to IDC, the worldwide application deployment software market grew 4.4 percent in 2003 to reach slightly more than $7 billion in software revenue. IDC expects the market to maintain this rate of growth through 2008. The research firm does not factor in the hardware element as part of the above numbers.

Some vendors, notably IBM and Sun Microsystems, include hardware as part of their application server packaging. Others mix and match software elements, primarily among the broad application deployment software category above, to market their wares as attractively as possible.

BEA, IBM, and Oracle, with respective 35.6 percent, 11.5 percent, 5.9 percent, market shares still rule the roost in the broad application deployment software field. Of the three, Oracle is showing the highest growth. Each has its own sphere of influence. According to Byron, IBM is especially strong in the mainframe and non-U.S. arenas, while BEA leads in North America and in Unix-heavy data centers. Oracle's "market little helper," though, may be based on its ability to couple app server functions with database management, e-business, and integration capabilities.

In terms of application server software, alone, IBM is ahead of the others with $630 million in revenue, worldwide. BEA, with $566.9 million, and Oracle, with $417.7 million, follow. BEA and IBM appear to be hurting somewhat because of the standardization around J2EE, performing processing via Java Servlets, Java Server Pages (JSPs), and Enterprise Java Beans (EJB). These developments also seem to be bringing about something of a commoditization in the marketplace.

Thus, bundling hardware and other software features has become an increasingly important component of a competitive strategy.

Sympathy for the Devil

People aren't necessarily buying Windows Server 2003 for its app server capabilities, so it's hard to tell just how popular it really is.

Meanwhile, Microsoft has stubbornly refused to get off the app server cloud. It offers an alternative to J2EE via Active Server Pages (ASP) and ActiveX controls. Microsoft may not be the only vendor to have a feature-bundling strategy, but it does so with a devilish twist. Redmond throws its app server in with Windows Server 2003 and bundles its AppCenter server with in-demand business applications, such as Great Plains and Navision, as well as BizTalk Server and the SharePoint Portal.

"Microsoft's market share appears smaller, but they are actually very prominent now and are becoming increasingly so," said Byron.

On the flip side, however, people aren't necessarily buying Windows Server 2003 for its app server capabilities, so it's hard to tell just how popular it really is.

>> Differentiation Tactics

It's Only Open Source (But I Like It)

Perhaps the biggest change in the app server space as a whole is the arrival and acceptance of open source. Red Hat, for example, recently came out with the Red Hat Application Server, which interoperates with J2EE. It incorporates some of the popular open source Java elements, such as JOnAS for EJB, Tomcat for JSP and Servlets, and Web services through Apache's Axis.

"The application server was a natural next step for open source," said Paul Cormier, executive vice president of engineering at Red Hat. "Customers have been asking for an open source application server that is fully interoperable with existing 2J2EE vendors, so they can leverage open source where possible while protecting legacy investments."

Interestingly, all of the established players are buying in to open source. BEA is in bed with Red Hat on a project to integrate Beehive (based on BEA WebLogic Workshop) into its app server. BEA already owns a 25 percent share of the Linux app server space, while IBM is up to 11.5 percent, and Oracle has 10.3 percent. Other organizations, such as the JBoss Group, offer free open source app server software and live off the maintenance revenue. That's enough to give JBoss a 5 percent share.

"Like it did in the Unix market before it, open source is depressing app server prices and forcing vendors to find extra ways to add value," said IDC's Byron. "An open source app server from the likes of JBoss is probably only going to be profitable in the long run if you use it for three or less applications and have an astute IT department."

Although it's hard to determine the exact numbers, IDC estimates open source has captured as much as 8 percent of the total app server market. That's up from zero two years ago. By 2006, IDC expects it will exceed 10 percent.

Tumbling Dice in the SMB Market

In addition to product bundling and arranged Linux marriages, the upsurge of open source is forcing the established vendors to take a closer look at the SMB market. BEA is engaged in a big push to that sector with its WebLogic Application Server, and IBM has offered a WebSphere Express package for some time now.

Oracle has slashed the price of its Oracle Application Server Standard One Edition to make it more palatable for smaller businesses. While the enterprise edition comes in at $20,000 per CPU, the SMB version breaks out to about $5,000 per CPU. But bundling, again, is still a core strategy. This product consists of a J2EE app server, a portal, a business intelligence module, and identity management features.

"The application server marketplace has been muddied up with bundling and packaging," said Byron. "As everybody is into the bundling game, you have to look beyond the app server element to locate the combination of elements and features that make the most sense in your environment."

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