The Application Server Market Is Dead; Long Live the Application Platform Market

The Application Server Market Is Dead; Long Live the Application Platform Market


July 11, 2003

The application server category is changing in several significant ways. For one thing, it no longer exists.

Okay, so that's a bit of an exaggeration.

But the grain of truth is that application servers, which for the most part once simply stored and served up content, are now part of bigger platforms that offer authoring tools, integration, and a host of other functions. "Application servers, application platform suites, [the distinctions] are all going to blur," says BEA Systems CTO Scott Dietzen. "You just want a fully featured platform that is going to do the things that you need it to do."

While app servers existed before the Internet, they reached their zenith when enterprises began using the Web to decentralize applications and the business logic that drove them. Consequently, pressure on the market caused by the crash and poor economy that followed hasn't been kind to the category.

A rebound is under way, however. According to a recent report published by Giga Information Group, the app server market receded from the $2.3 billion to $3.1 billion range in 2001 to the $2 billion to $2.8 billion range in 2002. The research firm anticipates the market will inch up to the $2.1 billion to $3 billion range next year. Giga Vice President John Rymer, the analyst who wrote the report, expects that recovery to continue.

Being within a few million dollars of numbers generated during halcyon days is no small achievement. The rebound has been built around a reinvention of sorts, as the application server category has broadened to encompass functionality that was formerly well outside its realm. Such features have gone from stand-alone elements to key quarterbacks in a continuum that, depending on the vendor and the implementation, include Web servers, portals, development and integration tools, the runtime environment, identity management, and links to clustering tools.

That's quite a survival trick. "Five years ago we had to convince people that they needed an application server at all," says James Russell, the director of emerging technology for IBM's WebSphere. "Five years later, the industry has accepted the need and is asking for a powerful new paradigm. They are asking for the Web servers' involvement in more sophisticated functions." Among these functions, Russell says, are highly individualized services such as customer relationship management, enterprise resource planning, and back-end integration.

A Complex Landscape

The application market can be carved up in a variety of ways.

  1. The expansive "application platform" view is held by two of the groups. One -- perhaps the predominant app server group -- consists of companies that write to Sun's Java Enterprise Edition (J2EE) language. This group includes the current market leaders, BEA and IBM, as well as others that have the market clout to potentially join those two, among them, Sun Microsystems, Oracle, and SAP.
  2. The other expansive player is Microsoft, which uses various proprietary approaches, including .NET and COM+.
  3. The third major category contains the surviving smaller players that don't offer the expansive platform offered by the top players. The economy has consolidated the vendor community from about 25 vendors a few years ago to a handful today, says Rich Schultz, a group marketing manager for Sun. Companies in this group include Borland, Fujitsu, Iona, and Novell, according to the Gartner report. Application server companies that no longer exist at all or as independent entities include Bluestone (which was acquired by HP), Allaire (acquired by Macromedia), Brokat (which filed for bankruptcy), NetDynamics (acquired by Sun), and Kiva (acquired by Netscape), according to BEA's Dietzen.
  4. As with just about every IT tool in today's environment, there is also an open source option. JBoss Group, Apache Tomcat, and others fall into this group.

The predominant theme in the application server market is the law of supply and demand. "The big factor in the market right now basically is over-supply," Giga's Rymer says. "There are too many products chasing too few apps and projects. It's a result of the IT recession. One of the biggest factors is that there is a high degree of discounting. The product quality is getting higher all the time. It's a very good situation if I'm a buyer."

The poor economy is driving enterprises to be more cautious about where they spend their IT dollars. "Customers are being a lot more careful now in their analysis of which features and functions they actual require," Schultz says. "A couple of years ago, they would just buy the high end and use what they needed."

The other issue driving the market is commoditization. Since the bigger players, with the exception of Microsoft, are standardized on J2EE there is an equality that shifts the battlefield to the applications that each develops. "There is a commoditization of the basic technology on J2EE," says Shawn Willett, principal analyst for Current Analysis. "It doesn't require an inordinate amount of expertise to build to those specs."

That combination -- a troubled economy and the commodization of the plain old app server -- was the driving force behind the expansion of app servers to app platforms. By broadening the tasks of the application server, the big players are attempting to differentiate themselves. Enterprises further benefit because the servers that supported formerly separate functions (e.g., intranets) can be subsumed into the app platform environment. This all dovetails nicely with the movement of more tasks onto the Internet and other IP-based networks.

"There is a fair amount of innovation going on in the market," Rymer says. "There are ideas out there such as the notion of an application server platform that includes the app server, an integration server, and a portal server all in a single unit."

From Servers to Platforms

Where these companies once spoke of application servers, they now speak of application platforms in which the server is one element. "The higher-end players, such as BEA or Oracle, have moved beyond the basic J2EE capabilities and are building a lot of things on top of the app server and expanding the definition of what it is," Willett says.

Although the platforms offered by various vendors differ, the key elements usually contain at least three elements. The first -- functionality to manage and develop applications -- is fairly straightforward. A second layer often includes the ability to integrate applications across formerly discrete information "silos." For example, a company now may be able to use its application server environment to integrate payroll and T&E packages, or to automatically reconcile software that uses different password conventions. Part of this, Dietzen says, is the capability to present users with a single interface across a variety of applications and underlying repositories of data and business logic. The final element of a modern application server platform is the ability to access these elements from a wide variety of physical and logical locations, says Marie Goodell, director of marketing for the Oracle 9i application server.

The new application server platform, it seems, is becoming a linchpin tool as enterprises seek to become more agile. Application platforms provide "a wide range of functions in terms of being able to provide access to and integrate various roles and functions of existing and new business logic," says IBM's Russell. "This is a middleware function, and application servers are able to do it across multiple platforms."

It seems likely the upswing will continue, at least according to Rymer. "I think there is going to be a recovery in spending," he says. "I just see more activity in the client base. I have seen some indications that it's going to pick up to a much greater level of activity."

BEA's Dietzen thinks that the salad days for app servers lie ahead. "Application servers are becoming the core platform," he says. "Gartner predicts that in three or four years 75 percent of the integration dollars spent by IT will go to integration platforms with application suites."