Dataquest: IBM wins big on application server market

IBM recorded far more new license revenue growth than any other application server software vendor last year, but BEA Systems continues to lead the market, Dataquest, a unit of Gartner said Wednesday.

The worldwide application server market suffered a severe growth slowdown last year as companies curtailed IT spending. New license revenue grew 20 percent, down from 92 percent in 2000. New license revenue amounted to US$1.18 billion in 2001, up from $990 million the year before, Dataquest said.

IBM outpaced the market with 71 percent new license revenue growth, giving the Armonk, New York, IT giant a 31 percent share of the market, up from 22 percent in 2000. Rival BEA Systems in San Jose, California, increased its market share by 1 percent to 34 percent in 2001 with revenue growing 23 percent, Dataquest said.

"The net result of the IT spending slowdown and the more cautious tone for emerging new software companies made IBM a safe bet and helped it pull more application server revenue," Joanne Correia, vice president of Dataquest's Software Industry Research Group, wrote in a research brief.

BEA and IBM are by far the market leaders. Sun Microsystems Inc., Iona Technologies PLC and Sybase Inc. trail with 9 percent, 3 percent, and 1 percent of the market, respectively, according to Dataquest.

Dataquest spots two trends in the market. It is splitting, with IBM and BEA offering high-end products that can handle millions of transactions per minute, while other vendors cater to those with lesser needs. Also, vendors are bundling application servers with other products; creating a new segment Dataquest calls application platform suites.

The trend of packaging application servers with other technologies will "increase dramatically" in 2002, Correia wrote. In fact, vendors including Oracle Corp. and Fujitsu Ltd. never sold an unbundled application server. IBM and BEA will also bundle application servers with, for example, portal products and development tools, Dataquest said, adding that unbundled application server products will continue to exist.

Dataquest predicts that the application server market will grow at a 22 percent compound annual growth rate to just under $3.2 billion by 2006.

IDC, which also released its application server software platform market forecast on Wednesday, expects the market to reach almost $4.4 billion by 2006. IDC agrees with Dataquest that the market "failed to show the phenomenal growth in 2001 that it showed in the previous two years," but sees significant opportunities for vendors as the economic situation improves.

IDC also says the gap between market leader BEA and IBM has "narrowed significantly," but gives the two companies a smaller share of the market with 47.8 percent of the market in terms of revenue.

IDC is a division of International Data Group Inc., the parent company of IDG News Service.

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