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.
Players: Start-ups may get window to fill gaps
By Margaret Kane
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
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.
"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
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.
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
"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">