Is Novera first victim of server shake-out?

Struggling to capture market share in the flourishing, but crowded market, Novera has ditched plans to sell its application server as a standalone product and is now marketing it as an add-on to other application servers.

Analysts said the move is a sign that the market, which had as many as 50 players last fall, may be on the verge of a major shakeout. Forrester Research analyst Eric Brown said Novera's decision to specialize is a matter of survival and he expects other smaller vendors to follow suit as the larger companies that offer more complete products--BEA Systems, IBM, Microsoft, Oracle, and Sun Microsystems--capture the majority of business.

Overall, the list of application server vendors is beginning to dwindle as a result of acquisitions and partnerships, Brown said.

"We are on the other side of the feeding frenzy now. As this list collapses, companies are deciding to partner with others, such as Novera [has done] with Sun," he said. "Some will align with vertical industries. Haht will do well by aligning with SAP. Progress Software is looking at embedded systems. There's a significant market in selling to software makers and system people and software makers. That's a beautiful business model."

Novera, in recent weeks, has partnered with two former rivals--Sun Microsystems' NetDynamics and SilverStream--and is negotiating deals with several others.

The company is now touting its jBusiness product an "object" application server. It connects other application servers--better at generating Web pages and other front-end services--to information in databases and legacy systems, said David Butler, Novera's marketing vice president. "The important thing we do is information integration."

An application server performs business logic, handling browser-based requests from users who seek information or Web pages from back-end databases.

A few smaller application server vendors have already developed niches. With the industry heavyweights going after business from larger companies, Pervasive this month said it will compete with Allaire's ColdFusion in the smaller markets. Bluestone Software is augmenting its Sapphire/Web application server with a specialized standalone application server built solely to distribute XML documents.

But other vendors say they have no plans to specialize. In fact, Allaire is enhancing its application server--adding support for more platforms, such as HP-UX and adding new features, such as more security--so it can tackle the enterprise market.

GemStone executives question whether specialization is even a good business strategy.

"What you're seeing is a lot of vendors shuffling for position. They're looking for a way to survive," said Steve Seminario, GemStone's product marketing director. "The problem with that is, from our experience, customers have been looking for a [complete] solution from a vendor. You could use SilverStream with its neat graphical user interface development tools and use Novera for legacy connectivity. But I'm not sure that's what customers are looking for."

Brown, however, said those smaller companies who partner or merge have a better chance of survival. While no application server makers are on the verge of death, Brown believes Bluestone is struggling.

"The company has an excellent product and has a good reputation. But the company is competing in very shark infested waters. Their competitors are partnering with people left and right," he said. "The opportunity to sell the company is high."

Secant Technologies, like Novera, has had opportunities to partner with other application server vendors, but so far, the start-up has resisted the overtures.

Other application server makers want Secant's object relational mapping engine, which helps users get to information in relational databases by turning the data into objects.

"We haven't licensed it because it's the primary differentiator between our application server and the competition," said Kenny Rubin, Secant's chief operating officer. "We don't want to eliminate that. If a customer buys some other vendor's application server, we want them to worry about this big hole in their product."

Secant is going after the e-commerce market, but if that fails, the company could consider a business strategy similar to Novera's, Rubin said. "That's a business decision facing us."

News.com's Mike Ricciuti contributed to this report.