Middleware Rides Out the Economic Storms of 2009
May 17, 2010 Timothy Prickett Morgan
While the server and storage business certainly took it on the chin in 2009 as the world’s economies coped with a severe slowdown and IT budgets for these items were curtailed if not frozen, the appetite for the glue that connects IT back-ends to Web front-ends–what is commonly called application infrastructure and middleware–continued to grow last year.
According to the latest market statistics from Gartner, worldwide sales of application infrastructure and middleware software grew by 7.1 percent in 2008, to reach $15.5 billion in sales, and continued to grow at a 2.8 percent pace in 2009 to $15.9 billion.
“All factors considered, in 2009 the AIM market performed better than most software segments,” explained Fabrizio Biscotti, research director at Gartner who tracks middleware. “The poor state of the economy played a major role in shaping the overall performance of the market. Budget cuts forced a reduction in spending with consequent downsizing, delay or cancellation of software projects, which started in the first quarter of 2009 with a de facto spending freeze. This has hit vendors’ revenues, and in fact 2009, as far as growth rates are concerned, was the worst year ever for AIM spending. The increasing adoption of open source has hit commercial revenues. Nevertheless, on the back of strong drivers, such as service-oriented architecture (SOA) and business process management (BPM) adoption and buoyant demand for application integration, the overall AIM market has remained positive, unlike most software segments, where revenues generally declined.”
So really, it seems like it was a miracle that the middleware racket had any growth at all last year, considering all the kinds of pressure that were trying to push revenues down.
By vendor, IBM is still the top dog in this segment, thanks to its wide variety of WebSphere products but also, lest we forget, all the CICS code running on mainframes, which brings Big Blue the fat checks every month. IBM’s middleware sales were up 8.1 percent in 2009, to just over $5 billion, thanks not only to the stability of spending on CICS and other mainframe middleware and organic growth from the WebSphere products, but also to acquisitions that IBM has made over the past several years to boost its position in this very profitable segment of the software space. IBM attained a 31.5 percent share of the AIM space in 2009, gaining more than two points of share. It looks like a whole bunch of people in Software Group got bonuses. At least those who were not fired as IBM trimmed headcount so it could afford to buy back billions of dollars in shares last year and this year.
Thanks to its acquisition of BEA Systems, Oracle was able to boost its own revenues in middleware by 29.2 percent, to $2.66 billion, giving it the number two position in the arena. And while Sun Microsystems had a pretty significant contribution in the middleware segment in that it controlled the Java programming language and the specs for the Java virtual machine runtime for it, the acquisition of Sun will not significantly close the gap between Oracle and IBM when it comes to middleware software. Oracle has a lot more eating to do before this will happen, even if it is now the dominant player in application middleware and is closing the gap in enterprise service bus wares.
But it would not be at all surprising to see Oracle try to acquire some niche players in financial services or high performance computing. Tibco Software, which ranked fifth in terms of AIM sales last year, with $417.9 million in revenues (down 1.2 percent from 2008 as the financial services sector went through gut-wrenching collapse) comes immediately to mind. It is even conceivable that Oracle might take a pass at Software AG, but European antitrust regulators, unhappy already that Oracle controls MySQL (which was one of the most promising European software companies to come along in a while and which was eaten by Sun more than two years ago), would no doubt freak out of Oracle put the moves on Software AG. That company has a better fit with SAP or IBM if it gets eaten by anyone. And even that is pushing it.
In any event, Software AG did just fine on its own, thank you very much, with $476.2 million in AIM revenues last year, according to Gartner, up 9.1 percent. That made the German database and middleware maker, an early player in the service-oriented architecture (SOA) middleware space, the number four AIM vendor last year, widening the gap between itself and Tibco.
Microsoft was, of course, the number three AIM software provider, with $621.6 million in sales in 2009, up 9.6 percent but still with only 3.9 percent of the market. Other vendors still comprise the largest share of the AIM space, with $6.78 billion in sales, but that was down 8.6 percent compared to 2008. Business is getting tougher outside of the big boys.
Gartner reckons that of the dozen sub-segments in the AIM space, SOA governance, message-oriented middleware, business process management suites, and AIM appliances all saw double-digit growth in 2009, despite the scary global economy. Or maybe, because of it. Gartner says the AIM space is in “creative turmoil” right now, with big vendors consolidating and newbies pushing technologies in hot areas such as low-latency messaging, managed file transfer, extreme transaction processing, complex event processing, and business process analysis. And contrary to the whole cloud computing phenomenon, where you sell infrastructure as a service, AIM appliances (where you implement software as a piece of hardware) are selling like gangbusters. Go figure.
People always want what they don’t have, and they think change will be better. And often, it is.