Results of a Yankee Group survey show that by 2006, application platform and functional suite vendors will capture 75 percent of integration sales
Tempe, AZ — July 2 2003 — Enterprise application integration (EAI), an area of the software market represented on the iSource Business " Global Enabled Supply and Demand Chain model ," demand is declining, resulting in more limited project-based integration spending.
EAI implies a corporate-wide information infrastructure capable of managing complex interaction among disparate applications. This lofty IT goal, although technically attainable, has proven unrealistic for most organizations. Instead, companies are buying integration software to meet specific project requirements such as customer relationship management (CRM) or customer portal integration, according to the Yankee Group's 2003 Integration Expense Survey, which measures the share of IT budget dedicated to integration problems and compares integration expense by vertical market and back-office environment.
The factors driving this market shift include:
- Technology standards are turning high-value EAI components into commodities, eroding deal sizes and decreasing the EAI value proposition
- Intense competition from low-cost, effective products like Microsoft's BizTalk server, BEA's WebLogic Integration, and Oracle's 9iAS Integration makes small-scale integration projects financially feasible, encouraging companies to incorporate integration software as a Web or functional application component
- In 2002, SAP, BEA, Microsoft, Oracle, Siebel and PeopleSoft added products and marketing dollars to their integration technology arsenals, which define the crowded new integration software competitive landscape
- Big-bang implementations like Coca-Cola's enterprise resource planning (ERP) and IBM's CRM rollout, which characterized software spending in the 1990s, are a thing of the past. The EAI vision of a unified IT infrastructure operating off a single integration bus is proving as unsustainable as the monolithic ERP implementation
The Future of the Integration Software Market
Integration technologies sold as standalone products today will be incorporated into functional applications and Web application platforms by the end of 2006. Demand will shift from a centralized EAI approach to a federated, intelligent API approach. Adapters, process modeling tools, and integration brokers will be embedded in Web application platforms and functional application suites. This transition will encourage project-based integration at the expense of more ambitious EAI projects.
EAI vendor revenue will wither over the next three years. From 1996 through 2001, EAI vendors faced virtually no competition from infrastructure or application vendors. In 2002, EAI vendors lost short-list exclusivity. BEA, IBM, Oracle, and Microsoft have crept onto the short list. Early in 2003, new competitors have done more than make the short list; theyÕve begun to win integration deals.
By the end of 2004, Web application platform and functional suite vendors will control more than 50 percent of total integration software sales. By 2006 these vendors will capture 75 percent of integration sales.
For end users, this market transition will reduce integration labor expense on a per-project basis. The cost reduction will be less significant than an enterprise-wide integration rollout, but savings will be more immediate and attainable.
As evidenced by Yankee Group research, the market shift is already underway:
- A telecommunications service provider included the uncharacteristic combination of IBM, BEA, Vitria (the incumbent EAI provider), Amdocs and TIBCO on the short list for a customer data management project. BEA, IBM and Amdocs were not on its 1998 integration short list
- An international wireless carrier planning a combined CRM and customer portal initiative weighed the advantages of a pure PeopleSoft environment (CRM, AppConnect integration broker and portal and PeopleSoft tools) against a mixed PeopleSoft and BEA environment
- Financial services company compared the ability of Siebel (incumbent CRM), Oracle (incumbent DB), and webMethods to solve a customer data prioritization problem
- A hard-line consumer goods manufacturer plans to deploy a Web-based order-management solution in late 2003 using either SAP (ERP incumbent) NetWeaver components or BEA's WebLogic platform
Winners and Losers
- EAI vendor revenue will deteriorate through 2006 as enterprise-wide EAI efforts lose popularity and project-based integration demand mounts. Industries that use proprietary applications to manage the business, such as financial services, health care, telecommunications, utilities and government, will continue purchasing standalone EAI platforms. EAI vendors with deep domain expertise in these industries will survive
- ERP vendors will convert internal and external (professional service) labor expenses into integration software dollars. Embedding integration software in their applications will reduce implementation time and application TCO
- The TCO benefits of Web application platforms from Microsoft, BEA and IBM will drive significant revenue. All three vendors combine portal, application server, and integration broker products in their platform offerings. BEA's WebLogic Workshop, a single user interface for the firm's application, integration and portal servers, is the most advanced and tightly integrated front end among the three competitors. It delivers near-term competitive advantage and will drive sales
- Oracle is best positioned to capitalize on changing integration technology demand. Its BizFlow implementation methodology, combined with 9iAS Integration and the 11i application suite, provides implementation flexibility and helps reduce long-term integration expenses. Oracle also can leverage 9iAS to win business with companies concentrating on standalone J2EE Web applications
Vendor Recommendations
- ERP vendors should increase their integration arsenals while the IT market is depressed. Exchange Infrastructure, SAP's integration broker offering and the remains of the company's ill-fated SAPMarkets initiative, is an unconvincing integration solution. SAP should acquire a competitive technology from Vitria, SeeBeyond, or Mercator. Siebel's UAN offering is less convincing than SAP's. UAN delivers predefined process maps and data models but lacks run-time data-transformation and process-management capabilities. Siebel should add a Java-based data transformation engine to its UAN solution
- Standalone integration technology vendors should target a vertical market or prepare to be acquired. One or two best-of-breed EAI vendors will survive as horizontal solution vendors — most likely TIBCO and webMethods. Competitors should seek acquisition partners or find an attractive vertical market to serve
Enterprise Recommendations
- If you can standardize around an ERP or CRM suite, assess your application vendor's ability to reduce long-term integration expenses. Siebel, PeopleSoft and SAP tell compelling application integration TCO stories in the sales cycle, but their products are new and lack significant customer references
- If you can standardize around an ERP or CRM suite, assess your application vendor's ability to reduce long-term integration expenses. Siebel, PeopleSoft and SAP tell compelling application integration TCO stories in the sales cycle, but their products are new and lack significant customer references
- If your 2003 and 2004 IT budget will be weighted toward applications that require machine or browser input from customers or suppliers, consider platform vendors like BEA, IBM, Microsoft and Oracle to meet your needs. These vendors bundle mature integration software with portal and application server technology, creating effective edge-of-the-enterprise solutions
- Review the Yankee Group's 2003 Integration Expense Survey results. This survey measures the share of IT budget dedicated to integration problems and compares integration expense by vertical market and back-office environment
