Another of those great battles between open standards and proprietary de facto standards is shaping up, this time in the e-commerce applications server market.
At the center, naturally, is Microsoft with its .Net Enterprise servers and BizTalk software. Lined up against it are - who else? - Sun Microsystems, IBM and a group of smaller companies with Unix- and Java-based products. Leading this group is BEA Systems, based in San Jose, which makes the WebLogic family of servers and assorted products.
Coming up behind BEA are Iona Technologies, the Dublin, Ireland-based supplier of Common Object Request Broker Architecture software that introduced an application server this spring, and smaller competitors such as Allaire, Bluestone Software and SilverStream Software.
Many of these companies are branching out from niches within the middleware market of enterprise application integration tools or transaction software to offer complete e-commerce packages. SilverStream, for instance, bought two businesses that had eXtensible Markup Language and Java 2 Enterprise Edition (J2EE) products. Iona has introduced its iPortal Server, which reportedly can scale to support large networks. BEA was perhaps best known for its Tuxedo transaction processor before it acquired WebLogic in 1999.
Since that acquisition, BEA has been on a tear. Revenue for 1999 was $464 million, up 15 percent from 1998, but this year it is expected to hit $700 million, a 66 percent increase, largely because of WebLogic.
John McPeake, a securities analyst at Prudential Securities in New York, says the application server market is about $400 million and expected to grow 72 percent annually for the next five years.
McPeake says 70 percent of BEA's software-licensing revenue is coming from WebLogic, and he estimates WebLogic sales will hit $280 million for the year. McPeake expects BEA's revenue for 2000 to be about $700 million.
"BEA probably has 70 percent of the in-field, installed working application server market," McPeake says. "You will see numbers that say that BEA has about 35 percent and IBM about 32 percent with its, but there is not a lot of WebSphere that is actually deployed. IBM sells a mainframe and throws in WebSphere and counts it as a unit sale."
As for Microsoft, McPeake and other analysts are skeptical that the company will compete effectively with customers that want an open-standards-based approach. Java is widely seen as the most desirable answer to that need.
Microsoft announced at its meeting for securities analysts in Redmond last month that the Euroclear System, a European securities trade clearing business operated by Morgan Guaranty Trust, and Lycos had selected its .Net Enterprise servers for their online businesses.
"There is a big migration to open standards, and Microsoft is not perceived to be an open standard," McPeake says. WebLogic runs on Sun servers and is compliant with J2EE, as are the components used to build e-commerce applications.
Erick Brethenoux at Lazard FrŠres & Co. is equally skeptical of Microsoft: "I will believe it when I can see installations and talk with customers," he says of the .Net server business. He also does not believe Microsoft has a convincing story for selling cross-platform integration tools. "It is still Microsoft," he says.
McPeake says BEA may be vulnerable with Tuxedo, an older product that he calls "long in the tooth." If Java is considered the way to build Internet servers, then a standard-based Object Request Broker, such as Iona's new Orbix product, might challenge Tuxedo, a more proprietary product, he says.