In-Depth

Impressive Growth Ahead for Application Server Market

The application server marketplace isn’t the exclusive playground of J2EE and .NET: CICS is amply represented, market watcher IDC says

• By Stephen Swoyer
• January 9, 2007

What’s at stake in the fiercely contested application server race? Plenty, according to market watcher IDC, which has IBM Corp., BEA Systems Inc., Oracle Corp., Sun Microsystems Inc., and a host of other vendors vying for their share of a surging application server market segment. The prize, IDC says, is a doozy: annual revenues of $4.5 billion—and counting.

Nor is that all. IDC says, the number of servers running application server workloads—either as application servers themselves or as hosts for workloads associated with (or consumed by) application server platforms—will increase at a compound annual growth rate of nearly 11 percent between 2005 and 2010. Application server-associated revenues, on the other hands, will grow more slowly: reaching approximately $5.6 billion by 2010.

"There are several trends driving revenue growth in the ASSP [application server software platform] market going forward, as well as negative trends that will slow growth," said IDC program director Maureen Fleming, in a statement. "Factors that will encourage growth include increased transaction volumes from applications built on [business performance management] and SOA, adoption of application server virtualization, introduction of application server appliances, and the sale of deployment software bundles in the midmarket."

On the other hand, Fleming says, a number of factors—including "extreme" transaction processing, adoption of high-performance servers, and increasing commoditization—will dampen application server revenue growth.

IDC collectively groups not just application server software but also transaction-processing software in its overall ASSP market assessment. Recently, the market watcher reclassified the ASSP space into "legacy" and "distributed platforms," with the latter consisting of mainframe-based transaction processing tools (CICS), or, surprisingly, older component-development models (such as CORBA); the former, for the record, is inclusive of J2EE, .NET, and what IDC calls "Windows programming models."

Not surprisingly, distributed application servers—a product segment that includes Microsoft’s Windows Server 2003, which ships with its own built-in application server and which is frequently deployed for just that purpose—are the biggest ASSP cash generators, accounting for more than half (56 percent) of the overall market. IDC expects this percentage to grow over time, until—by 2010—distributed application servers account for almost two-thirds of total ASSP revenues. Legacy transaction-processing systems, on the other hand, currently account for about 44 percent of ASSP market revenues; IDC expects this share to grow only slightly over the forecast period.

IDC has IBM as tops in the overall ASSP space, with about 43 percent market share, followed by BEA and Oracle. Collectively, IBM, BEA, and Oracle accounted for 72 percent of ASSP market revenues in 2005. IBM’s first-place showing is enabled, to some degree, by its strengths in what IDC calls the "legacy" ASSP segment, which includes CICS software revenues. BEA is the distributed ASSP market leader, with nearly one-quarter (24.2 percent) of the market, followed by IBM and Oracle. BEA, IBM, and Oracle dominated this segment, too, collectively accounting for 67 percent of all revenues.

The dark horse is Microsoft, which is making its first appearance in IDC's ASSP market survey. The software giant posted the most rapid growth (29.7%) among top ASSP vendors and debuted at number 4 position in the overall market.

All’s not lost in the otherwise written-off "legacy" segment, of course. This space—which IDC pegs at around $2 billion in overall revenue—not only grew faster than its distributed kith but generated nearly as much revenue.

Big Blue dominates the legacy space with 68 percent share, according to IDC, followed by BEA and Micro Focus.