IBM, BEA in server-software dead heat

The two companies are now in a dead heat, each capturing 34 percent of the market for Java-based application-server software, technology that companies use to run e-commerce and other Web site transactions. The crucial under-the-hood software has become a standard piece of e-commerce infrastructure for linking Web sites to back-end database software.

IBM saw its market share grow from 31 percent in 2000 to 34 percent last year, while BEA's shares dipped from 36 percent to 34 percent, according to a new report by market research firm Giga Information Group.

Overall, the application-server market grew 39 percent to $2.19 billion in revenue in 2001. Sun ranked third with 7 percent, followed by Oracle with 6 percent, Sybase with 4 percent, and Hewlett-Packard with 3 percent. The remaining application-server makers had a combined 12 percent of the market. Microsoft doesn't sell Java application-server software, so it was not part of the survey. Its application-server software is sold as part of the Windows operating system.

Giga analyst Mike Gilpin, the author of the new study, said that IBM gained ground on BEA for two reasons: IBM improved its technology, and now offers customers the programming tools they need to build Web services, something BEA didn't have until recently. Web services is an emerging method for building software, allowing companies with different computing systems to interact and conduct transactions.

"IBM's WebSphere (application server) got better. Before, it was weak technically, but it became strong to where it was truly competitive. Now no (company) has a significant technical advantage," Gilpin said. "The second major factor is IBM was one of the earliest vendors to embrace Web services and capitalize on that. Early on, IBM was giving out free software (tools) to build Web services."

While Sun stayed in the No. 3 position, Oracle is coming on strong. Oracle's market share doubled from 3 percent in 2000 to 6 percent last year. Sun's market share, meanwhile, dropped slightly from 9 percent to 7 percent.

Because of performance improvements to Oracle's application server, Gilpin expects Oracle to surpass Sun for third place in the next year or two, while IBM and BEA duke it out for the top spot.

"Oracle will be a solid No. 3, but not at the same level that IBM and BEA are at today," Gilpin predicted. "BEA and IBM will be like a tennis game, where they're battling back and forth."

Despite the results, BEA executives focused on the positive, saying the company is still ranked No. 1, even if it's sharing the lead with its rival.

"BEA is No. 1, and we've maintained the market share, (even) as other companies who have smaller market shares have gone up and down around us," said John Kiger, BEA's director of product marketing.