EAI - everything you wanted to know...

Neil Ward-Dutton, principal analyst at Ovum's Software and IT Services Group, considers the latest developments in enterprise application integration...

The enterprise application integration (EAI) market became a coherent entity in the mid-to-late 1990s, with a handful of small, specialist suppliers solving complex integration problems for large blue-chip companies. Then, in 1999, the market suddenly became 'hot', as a trio of vendor-funded start-ups - Active, CrossWorlds and Vitria - and used the ebusiness bandwagon to bring the technology to a wider audience.

And they succeeded, not only in raising CIOs' visibility of integration technology but also in pumping up the expectations of investors. For example, with amazing timing, webMethods' IPO in 1999 raised $170m for the company as its stock climbed to $35 (500 per cent of the offer price).

Since then, though, the EAI supplier community has been through one phase of consolidation. Now the shape of the community is changing again. The boundaries of the EAI market are becoming blurred by changes in a large number of adjacent technology markets - specifically those for application servers, application development tools, web services technology, portals, workflow and even business intelligence (BI) tools.

It is Microsoft and IBM who are forcing these changes on the EAI supplier community, by bundling more and more infrastructure technologies together into 'platforms'. Their argument is that by bundling, they 'add value' for customers because they can guarantee that the technologies work more effectively and efficiently with each other. This reduces application development and administration costs. The moves by these two companies have quickly been replicated by 'infrastructure platform' suppliers like BEA, Oracle, SAP and Sybase.

So the integration landscape is becoming populated by just two types of supplier. The 'whales' who sell broad portfolios of infrastructure technology bundled as platforms. And the 'minnows' who specialise in delivering one or two types of infrastructure technology either because they don't have the resources to be a whale or because they have explicitly decided to avoid the whale approach.

The moves of IBM, Microsoft and the other whales are forcing the independent EAI technology suppliers who created the EAI market, into playing the role of the minnows.

Over the eight financial quarters in calendar 2001 and 2002, IBM's share of the market grew by 15 points, from around 32 per cent of the market to just under 37 per cent. But it is Microsoft who is making the biggest waves. In the same period, Microsoft has gone from having virtually no market presence to accounting for around 15 per cent of new product spending.

Over the same period, on aggregate, the market shares of integration specialists Mercator, SeeBeyond, Tibco, Vitria and webMethods and fell by 23 per cent. Tibco and webMethods are suffering but their comparative size advantage makes them the most likely survivors from the impending shake-out.

While it's tempting to conclude that IBM, Microsoft, Tibco and webMethods will be the only serious EAI players by 2004, the truth is more complex. This is because Microsoft is doing more than just growing its market share: it is growing the market as a whole, helping to evangelise EAI concepts and push the technology into smaller user organisations.

The other players (BEA, Mercator, SeeBeyond, Sun, Sybase and Vitria) all have opportunities ahead, specifically in heading downmarket, creating simpler, more packaged propositions that will appeal to medium-to-large sized companies. But the question is, do the specialists have what it takes?

Neil Ward-Dutton has just completed Ovum’s quarterly updating service on EAI. See Ovum Evaluates: Enterprise Application Integration for more on the changing face of the supplier landscape.

For further information see www.ovum.com or email info@ovum.com.