Companies open wallets to portal software

Corporate spending on software may be down, but one product is bucking the trend: portal software, which lets companies streamline access to business systems.

Companies are opening their wallets to portal software because it can improve employee productivity and, in the long run, cut costs, analysts and technology buyers said. As an added bonus, increased competition among software makers has spurred a price war that could uncover some bargains for buyers.

Unlike most business application software, which tends to add complexity to internal computing infrastructures, portal software is designed to simplify. The software lets companies create Web pages, or portals, for their employees, customers or business partners. The benefit? One-stop access through a single Web page to vital information stored in a mishmash of dissimilar e-mail programs, human resources systems and sales databases.

"It's the age-old quest for one piece of software (to bring) everything together to keep everyone happy," said Simon Hayward, research director at Gartner. "It's the grand unification of all the different applications in your organization."

A study released on Monday shows that the worldwide market for portal software grew 59 percent in 2001, with new license revenue totaling $709 million, according to Dataquest, a unit of research firm Gartner. Compare that trend with spending on enterprise software overall, which grew only 4.3 percent last year, according to banking group ABN AMRO.

And despite an expected 14 percent decline in technology spending this year, more than one-third of the 3,500 largest corporations plan to buy portal server software in 2002, according to a survey by Forrester Research.

Profit-starved software makers, sensing a rare buying spree among customers, aren't wasting time in flooding the market with new products. Smaller companies, such as Plumtree Software and Epicentric, have historically concentrated on portal software. Now bigger players like Microsoft, IBM, Oracle, SAP and Sun Microsystems are setting their sights on the market.

Sun last week announced plans for a new Sun One Portal Server that will run on top of BEA and IBM's application servers, as well as its own application server. Sun also recently announced a deal with Yahoo to allow access to popular Yahoo content through Sun's portal software.

Microsoft last month announced it would revamp its SharePoint Portal Server next year, allowing non-technical employees to build corporate portals on their own without the help of software developers.

Portals can't solve all integration problems. Issues like single sign-on user authentication still need to be ironed out. And standards for portal development are still shifting.

But portal software can cut down on the constant "screen swapping" that most business users experience in their daily jobs, leading to more efficient workers. For internal developers and tech support people, portal software creates an easy-to-troubleshoot single point of access.

"The biggest benefit of a portal server is a central point of control in security and access and a common look and feel that looks like the front of Yahoo," said Larry Podmolik, chief technology officer of consulting firm LeapNet in Chicago.

Why now?
Portal software isn't new. Products have been on the market since the mid-1990s for building systems to reside on corporate intranets. But the software has become more popular in recent months due to better features, such as content management, that can help companies consolidate their applications. Also, Extensible Markup Language (XML) has emerged in recent years as a common integration language, meaning it's easier and faster to build portals.

Companies "are dealing with the issue of the boom years. We may cut back on ambitious new applications, but I've got to manage the ones I've got. (Portal servers) are one piece of the puzzle of pulling things together," Podmolik said.

Gartner analyst Gene Phifer says despite problems with the economy, businesses will continue to spend more money on portal technology, and this will remain true even as the economy improves. see commentary

Podmolik's one caveat: "A lot of portal vendors make broad claims that it handles application integration right out of the box, but if you have a big company, you may have half a dozen applications with different sign-ons," Podmolik said. "You have to do surgery in an application to fit the portal environment."

John Gregory, a marketing specialist for the United States Postal Service, said a Web portal the Postal Service developed "allows people to be much more productive." The Postal Service used software from Epicentric to build a portal that centralizes access to market research data on competitors such as UPS, Federal Express and foreign postal services, said Gregory. About 1,000 postal service employees are active users of the portal, he said.

Success stories from Ford Motor, Merrill Lynch and other large companies who say they have saved money by using portal software have also boosted sales, said Forrester Research analyst Nate Root. "If the company around the corner or your arch nemesis is building a portal and saying they're seeing a lot of productivity and brand differentiation, that resonates with IT (information technology) buyers."

Law firm Morrison & Foerster, one of the world's largest law firms with more than 1,000 lawyers worldwide, used Plumtree software to build a Web portal that consolidates all of its software applications and nearly 3 million documents located in 18 libraries worldwide.

"It's really a platform to provide integrated access to all the tools the attorneys need to do their jobs," said Stan Deutsch, the law firm's applications manager in San Francisco.

"The problem before was a lack of integration. We had lots of information and lots of applications and lots of sources of data, an no real way of having one place to go to find all that," said Deutsch.

Market shakeout coming
The increased popularity of portal software may be a mixed blessing for some software makers. Gartner estimates that of the more than 100 portal software vendors, more than 50 will go out of business in the coming years.

Buyers like Gregory say the increasing number of portal software options has driven down prices, meaning profit margins could suffer as well.

Forrester, through its recent survey, found that portal software specialists like Plumtree charged in excess of $100,000 for their products in 2001. But infrastructure software makers like Oracle, Microsoft and IBM are willing to cut a deal on portal software to sell other big-ticket items, like database and application server software.

Those deals have brought recent prices down to as low as $10,000 for portal software, in turn forcing specialty portal software makers cut their prices.

Although no current market share exists, Forrester's Root believes the application-server software companies--IBM, Oracle, Microsoft, BEA Systems and Sun--will dominate the portal market in the future. While Plumtree and Epicentric have more than 300 customers, the bigger companies can sell into their much larger base of customers.

Consolidation has already begun in the market. Oracle, for example, bundles in portal software as part of the Oracle 9i application-server software it sells. In recent years, Citrix Systems acquired standalone portal software maker Sequoia Software while SAP bought portal maker Top Tier Software.

"The time for expiration is ticking closer for the standalone players in this market," Root said.

Root believes Epicenter and Plumtree will have to change their strategy by either focusing on small and mid-sized companies and leaving the larger companies to the bigger software makers, or by changing their product focus. One way to do that might be to serve as management tools or other add-on features that can run on top of other portal products.

"They need to stop going head-to-head with these guys (the application server software makers) and ride inside the (other) portals, maybe something that makes them easier or faster," Root said.

Glenn Kelman, Plumtree's co-founder and vice president of marketing, disagrees, saying the company can stay competitive in the growing market.

"We are the only portal vendor that runs on a (Java) application server or directly on Windows," he said. "Plumtree has independence and we feel an independent vendor has the opportunity to do very well."

And all portal software makers need to convince potential customers that buying portal software is better than building portals themselves. Podmolik said his customers who have chosen to create corporate portals have either built their own portal software or buy it from the seller of their application-server software. That coincides with Forrester's survey of 49 large corporations, in which about half chose to buy while the other half chose to build themselves.