Start-ups may fill Web services gaps

The prospect of new opportunities has small software companies salivating, but they will need to act quickly before getting squeezed out by large rivals with more resources and influence.

Margaret Kane
Margaret Kane Former Staff writer, CNET News
Margaret is a former news editor for CNET News, based in the Boston bureau.
6 min read
Players: Start-ups may get window to fill gaps

By Margaret Kane
Staff Writer, CNET News.com
November 8, 2001, 4:00 a.m. PT

If small start-ups want inspiration to take on industry giants in Web services, they need only look to BEA Systems.

BEA began doing business at the height of the PC revolution in 1995, when the largest companies--IBM, Microsoft, Sun Microsystems and Oracle--were No matter what your application does, if you have three vendors out there, all of whom have support for Web services, and you don't, you lose. -David Schatsky, research director, Jupiter Media Metrix believed to have carved up most of the territory in high technology. Its ambitions seemed modest at the time: to fill in gaps left by major software manufacturers with products that allowed its customers to connect programs in various areas--linking sales to inventories, for example.

Last year, the upstart from San Jose, Calif., recorded more than $800 million in revenue and is widely considered the leader in its field.

"The tech market evolves. It was the same question when BEA was a couple of guys and they were going to go take on the middleware market. They did it, and they did it well," said Mark Atherton, vice president of worldwide marketing at Web services company Asera. "Each time there's a big change in the market, there's always one or two guys who make it through."

Today, a new generation of start-ups is trying to follow the same path, this time using technologies to link Web services and software--including BEA's products.

Although there is always room for new technology and innovation, the head start of so many major players in the industry may make it harder for new companies to break through. Microsoft, IBM and Sun are among the industry heavyweights touting ambitious plans in the emerging Web services field.

The smaller fish
These Web services start-ups hope to take on the likes of Microsoft, IBM and Sun Microsystems.

Roll over the company name on the left to find out more.

Cape Clear
Grand Central Networks
But true to the pioneering nature of high technology and the Internet, there is no shortage of start-ups planning to join the fray. Companies such as KnowNow, Kenamea, Oblix, OpenDesign, Grand Central, Avinon, VelociGen and Epicentric are attempting to ride the industry's latest wave by providing Web services development tools, secure networking and other related technologies. Even so-called open-source initiatives such as Ximian's Mono are gathering momentum.

"Any major change in the information-technology landscape represents the opportunity for a new ecosystem to evolve," said David Schatsky, research director at Jupiter Media Metrix.

That cycle will be fueled by the potential high stakes involved in Web services, which proponents promise will change the way software applications--and businesses themselves--communicate.

A fistful of standards
From a technical standpoint, at the heart of Web services is a new set of protocols designed to help different software applications communicate with one another. Some refer to the process as "componentizing," or breaking down complex pieces of software so that a developer who wants to perform individual steps can get access to those specific parts of an application in building a Web service.

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  Start-up says multiple standards can work
Bob Pasker, CTO, Kenamea
November 8, 2001

The idea echoes earlier development efforts using Microsoft's Component Object Model (COM) scheme and the Common Object Request Broker Architecture (CORBA) favored by Java supporters. But there is one important difference. Where COM and CORBA relied on proprietary protocols and specifications, Web services are based on four key standards: Extensible Markup Language (XML); Simple Object Access Protocol (SOAP); Universal Description, Discovery and Integration (UDDI); and Web Services Description Language (WSDL).

To understand how these protocols work together, imagine an ordinary phone call. In Web services parlance, XML represents the conversation, SOAP describes the rules for how to call someone, and UDDI is the phone book. WSDL describes what the phone call is about and how you can participate.

While the rules of engagement in the Web services world are clearly defined for all software makers, the major technology companies clearly hold the advantage. Still, analysts such as Schatsky believe that start-ups may have a window of opportunity before larger players ship Web services technology to their customers.

"No matter what your application does, if you have three vendors out there, all of whom have support for Web services, and you don't, you lose," he said.

Start-ups have 'one or two paths: Either out-innovate the big guys continuously, or build something cool and hope (to) get bought. Microsoft will catch up and incorporate enough (new technologies) to dissuade people from buying third-party tools.' -Frank Gillett, senior analyst, Forrester Research At present, the most fertile ground may be the development of tools to help companies create their own Web services or to deploy new ones. Smaller companies, however, must find a way to compete for this business against the likes of Microsoft, IBM and Sun, which have all launched Web services campaigns to build support for their specific technologies.

Asera's Atherton hopes that his company will be one of those that survive alongside the industry leaders. Although companies like SAP are promising to build support for Web services into their applications, he doesn't see customers jumping to take them up on it.

Instead, he thinks this will be their response: "That's interesting, but if I've spent $100 million on these applications, I'm not going to rip these all out, with all the customizations I've built in, just to implement Web services."

Companies such as Asera hope to build Web services that can work with all computer systems so that there's no need to rework applications, as SAP and others are suggesting.

"If you look at most of the big vendors (other than Microsoft), their strategy around Web services is an adjunct to their existing services," said Annrai O'Toole, executive chairman of Dublin-based Cape Clear, a Web services software maker. "If IBM comes in, they draw you the beautiful new WebSphere diagram and it has a shiny new pipe called SOAP, and they say, 'Look, we added Web services.' You need products that aren't bolt-ons, but are true, native Web services products."

A limited life span
The problem that companies like Cape Clear and Asera will face are similar to the ones encountered by application manufacturers: a limited life span. Eventually, large software companies will re-create any new, desirable It's not like other (technological) changes where the big guys didn't have their eye on the ball. All the big guys have their eyes on it--in fact, they're even driving it. -Craig Donato, CEO, Grand Central tool in their own products. And even if customers demand that their software work with many other systems, it's not hard to imagine the IBMs of the world providing that technology.

"Companies like Cape Clear are banking on the idea that they can innovate faster than big tech companies," said Frank Gillett, senior analyst at Forrester Research. "They've got one or two paths: Either out-innovate the big guys continuously, or build something cool and hope (to) get bought. Microsoft will catch up and incorporate enough (new technologies) to dissuade people from buying third-party tools."

Others are pursuing a third option, acting as a type of brokerage that helps customers find, buy and deploy the Web services they want. That's what companies such as Grand Central and Lucin are trying.

On the plus side, these companies don't have to join the software development race; on the downside, it will take at least a year or two before most companies discover needs for Web services, let alone look outside to get them--assuming the trend takes off at all.

"The biggest activity over the next 16 to 18 months will happen internally, as companies try to understand what it is and get their feet wet internally behind the firewall," said Massimo Pezzini, vice president and research director at Gartner. A recent Gartner survey of senior technology managers found that 60 percent said they planned to work with Web services only internally in the next year.

That's why Grand Central CEO Craig Donato says it is imperative for new businesses in this market to focus on helping companies, not just on developing new technologies.

"Web services are very revolutionary from a business perspective, but not revolutionary from a technology perspective. As a result, compared to other technology evolutions, we don't think there will be so many start-ups," Donato said. "It's not like other changes where the big guys didn't have their eye on the ball. All the big guys have their eyes on it--in fact, they're even driving it."  "="" height="8">


Big companies, big plans
After years of talk, some of the industry's largest companies are finally taking concrete steps toward making Web services a reality.

Microsoft: Next year the software giant will release .Net My Services, an initiative formerly known as HailStorm that will deliver content, shopping, banking and other services over a variety of devices ranging from cell phones to PCs and handhelds. The massive operation will employ a global network of Web servers to house all manner of personal information, including e-mail accounts, address books, credit card numbers and photographs. On the infrastructure end, Microsoft is selling a family of e-business software for companies to create and run Web services, which include its forthcoming Visual Studio.Net development tools.

IBM: Big Blue has built support for Web services into its WebSphere application-server software and offers Visual Age tools for building applications. WebSphere includes technology that runs transactions for Web sites and links to IBM's DB2 database software, which stores vast amounts of corporate and Web information, and its Tivoli Web services manager, which monitors performance of such products. IBM's Global Services arm is also said to be planning a move into the hosting end of Web services.

Sun: The company is building support for Web services standards SOAP, UDDI and WSDL into its iPlanet e-business software products, including its application-server software. By the end of 2002, Sun will add the existing Web services standards into Java 2 Enterprise Edition, the Java standard for writing business software. The company says it will also release a tool for building Web services next year and is working on technology that will allow Java-based Web services to be compatible with Microsoft's .Net operations.

BEA Systems: As the market leader in application-server software, BEA is expected to be highly competitive. But the company still needs good development tools and integration software. Software development tools company WebGain, which is partly owned by BEA, has yet to build Web services features into its products. In the meantime, WebGain rival Borland makes the best Java tool for building Web services, according to industry analysts.

Oracle: The database leader is moving in two directions on Web services. First it is adding support for XML, SOAP, UDDI and WSDL to its 9i database-management software, application-server software and development tools so that its customers can use Web services in new systems. Second, it is developing Web-outfitted versions of its sales and customer relationship management software.

Hewlett-Packard: The computing giant has the potential to be a major player, but it remains to be seen whether the hardware maker can make inroads into the software market.

"HP and BEA are likely to have a significant play, and Sun's iPlanet is making some headway and will eventually catch up. HP has an edge because they had the idea before with E-speak," said analyst Mike Gilpin of Giga Information Group.

"BEA is typically one of the quickest to get products out. That was true with Java 2 Enterprise Edition, but they haven't been as focused on Web services as IBM. Oracle has some Web services capabilities, but it looks comparable to what BEA has."

—Wylie Wong