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November 22, 2005 6:49 pm

ESB minnows swim ahead

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A posse of small vendors has stolen a march on the industry giants in a crucial new part of the business software market – enterprise service bus technology.

Over the past few years, Sonic Software, PolarLake, Cape Clear, Fiorano and IONA have pushed the term enterprise service bus (ESB) to the top of the corporate IT agenda.

They claim to provide a cheap and flexible answer to a problem which has swallowed millions of hours of consultant-time and billions of corporate IT dollars – how to make different applications within an organisation talk to each other.

At first, the existing application vendors claimed that it was just a new term for what they had been doing for decades. But now they have started marketing their own products as ESBs.

In September, IBM gave this new market the sincerest form of recognition – imitation. It announced an upgraded version of one of its existing products, which it termed an ESB, and a second, newly built product to launch in December.

Tibco, WebMethods, Sun Microsystems (through recently acquired SeeBeyond) and BEA Systems have all announced products that carry the ESB label. Even Microsoft is planning a product which will fit into this space, called Indigo, due to launch in 2006.

"The big vendors are recognising a threat, and are saying 'we had better start rebadging our old war horses as fit young stallions'," says Ronan Bradley, chief executive officer of PolarLake.

The established vendors do have a point when they say that the ESB phenomenon is not new, as it has much in common with previous approaches to the integration question.

An ESB is basically a backbone which links together different applications such as customer relationship management, enterprise resource planning or financial systems.

Rather than giving each application a set of separate links to all the others, they just need a single link to the backbone. The key difference with ESB is that rather than using proprietary technologies, which require rare and expensive consultancy skills to deploy, they are based on standardised data formats, such as XML, WSDL and SOAP.

"Generally the previous generations of IT were more expensive, harder to use, more complex, and proprietary," says Mike Gilpin, vice-president and research director at Forrester Research. "The ESBs that have the greatest appeal are the ones that offer best value, are easiest to use, flexible, and standards-based."

Standards, and service-oriented architectures (SOAs) based on them, are taking off throughout the industry, and the ESB vendors have been able to ride this wave of change. In fact, ESB is now seen as the easiest way to adopt an SOA.

Their larger rivals are equally committed to the standards process, and to SOA. But the newcomers can claim to be more standards-compliant.

"They started from a clean sheet of paper. That translates to an easier development process," says Roy Schulte, analyst at research company Gartner.

The fact that the newcomers have nothing to sell other than an ESB is also an advantage. "They also tend to be very neutral to the operating systems they support. The big vendors tend to support their own systems better," he says.

These advantages have seen the small ESB vendors line up some impressive customers. Cape Clear's clients include mobile operators Vodafone and Orange. PolarLake lists Japanese telecom giant KDDI and JP Morgan Chase as customers. It also has contracts with a chronic sufferer of integration problems, the UK government.

In dollar terms, the new entrants are still small. They did less than $150m (£85m) of business in 2004, estimates Mr Schulte, which is around 10 per cent of the market for integration suites. But given how conservative and risk-averse corporate IT buyers tend to be, this is an impressive bite out of the big IT vendors' pie.

However, the software industry is cruel to small companies. The weak run out of money and the strong tend to get taken over by their larger rivals.

"They haven't got a prayer," says Vivek Ranadive, chief executive officer of Tibco. "Like any part of the software industry, it's only the number one or two players that survive, and that is Tibco and IBM."

For Paul Fletcher, chief architect at e-mail security company MessageLabs, which has installed an ESB from Cape Clear to ease integration with customers, it's a worry. "It is a concern that they might get swallowed up. But that is a risk we have to take," he says.

It would be unusual if all the small ESB vendors were still in their present form five years from now. But they have certainly made an impact on the market, and they are in a good position to capitalise on it.

"Many of the smaller players will be shaken out," says Mr Schulte. "But I think that, because the big players have some significant limitations, the better small players will continue to grow. The dominant players haven't executed as fast or as well as they should have."

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