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IBM continues gains in server software

Big Blue expanded its lead in application servers in 2003, according to a new report made available to CNET News.com.

IBM, which leads the infrastructure software sector, continued to build up its market share last year, according to a new report made available to CNET News.com.

IBM expanded its lead in commercial application servers to 41 percent market share in 2003, compared with 36 percent in 2002, according to research company Gartner Dataquest. Meanwhile, No. 2 vendor BEA Systems' market share slipped to 27.5 percent last year from 29 percent in 2002.

IBM surpassed BEA in the market for application servers for the first time in 2002. Application servers are used to run server-based business software.

In the market for suites of Java-based infrastructure products--which includes application servers, integration software, portal software and development tools--IBM's revenue grew faster than BEA's in 2003. IBM's revenue increased 4 percent, giving it 32 percent market share last year, while BEA saw its revenue in the same category climb 2.5 percent to give it 19 percent share, according to Gartner Dataquest.

"IBM is gaining share in every market, whereas most vendors were flat or negative," said Joanne Correia, an analyst at Gartner Dataquest.

Preliminary market share numbers for Web application servers from IDC, shown to CNET News.com, reflect a similar pattern.

No. 1 IBM's license and services revenue from application servers went up 6 percent in 2003 to give the company 29 percent market share, as No. 2 BEA's revenue dropped 4 percent to give it 26 percent market share. No. 3 Oracle, meanwhile, saw its revenue increase 15 percent, leading to 19 percent market share. And No. 4 Sun's application server revenue slipped 15 percent, giving it 3.5 percent share.

Total corporate spending on commercial Java application servers declined 8 percent last year to $1 billion, according to Gartner Dataquest, in part due to the rise of free, open-source Java application servers. For example, JBoss, which sells consulting services around a free Java application server, is targeting corporate customers looking for an alternative to commercial application servers. Sun Microsystems also makes the low-end version of its application server available for free--cutting into the money spent on application servers.

As commercial Java application servers face price pressure from free options, the largest vendors of infrastructure software have turned to selling suites that include development tools, portals, integration software and application servers. The market for these so-called composite application platform suites is the most vital to technology providers in the long run, said Correia.

"That's where the real battle is. If a vendor sells one component, it more likely over time will sell another component. Or if they sell a suite, they effectively are locked in (with customers) over time," said Correia.

Revenue for application platform suite components grew 2 percent last year to nearly $2.8 billion, according to Gartner Dataquest.

Meanwhile, Microsoft saw its market share in portal and integration software grow last year and reached the No. 5 position in those sectors, according to Gartner Dataquest.

BEA, which is trying to shift its revenue from application servers to portals and integration products, showed strong growth in the market for integration software, according to IDC. Its revenue more than doubled in the category, giving it nearly 8 percent market share. IBM's integration software revenue grew 7 percent, giving it 17 percent market share.