Internet Software: B2B Takes The Next Step Forward

Two to three years ago--eons in Internet Land--transaction engines were associated only with consumer sites, such as Amazon.com and eTrade.com, and were limited to the sell side of commerce.

The B2C market was the only game in town, a game solely played by do-or-die dot coms that spent gobs of VC money on new, proprietary technologies. Established businesses waited for technologies to prove themselves and for standards to emerge before plunking down cash to spin the e-wheel.

Now, the wait is over. Java has surfaced as a standard, enticing myriad companies to invest heavily in transaction engines for B2B and B2C e-commerce. More important, companies are seeking e-commerce solutions that enable back-office connectivity and deliver scalability for mission-critical, e-business processes.

Companies are demanding all kinds of added value from Internet middleware technologies, such as BEA Systems' E-Commerce Transaction Platform and IBM's WebSphere, says Sally Cusack, an analyst at research firm IDC, Framingham, Mass. "They want technologies to be one-stop solutions that are scalable, standards-based and can integrate with existing technologies, including legacy systems," she says.

As a result, major e-commerce server vendors, most of which cut their teeth on consumer e-commerce, are eagerly retooling their technologies to incorporate more B2B buy-side features into their products, Cusack notes. IDC projects that worldwide sales of Internet middleware will grow to $9.7 billion in 2004 from $2.7 billion in 1999.

Cambridge, Mass.-based Giga Information Group projects similar growth for what it calls the application server market, predicting this segment will be worth $9 billion by 2003, up from $585 million in 1999. The growth will be accompanied by dramatic segmentation, the research firm notes.

IBM's On the Rise

Last year, BEA Systems led the pack with a 32 percent market share. IBM followed with 16 percent, and Sybase placed third with 15 percent, according to Giga. By the end of this year, Giga predicts BEA Systems and IBM each will hold 24 percent of the application-server market, followed by Art Technology Group with 10 percent, iPlanet E-Commerce Solutions with 9 percent and Allaire with 8 percent. Sybase's share is expected to fall 5 percent to 7 percent, according to Giga.

Other leading players in the Internet middleware market include Ariba, BroadVision, CommerceOne, i2 Technologies, Intershop Communications and Open Market. Also on the near horizon is Microsoft's Commerce Server 2000, a beefed-up version of Site Server 3.0. Now in beta and scheduled for a fall release, Commerce Server will include personalization, user and catalog management, and business analytics, according to Microsoft.

Key technological factors driving increased use of Internet middleware products are Enterprise Java Beans and other Java 2 Enterprise standards,software that allows customers to migrate from component-based application server products to component-based architectures, says Mike Gilpin, a Giga vice president who specializes in the building, deployment and architecture of e-business architectures.

"Customers want component-based development environments because they want to optimize their investment in technology, knowing they can plug in enhancements and expansions as they need [them]," says Rosie Hartman, senior partner and director of Net markets for integrator Computer Sciences, El Segundo, Calif. "Component-based technology allows companies to move from the transactional level to what we see as the next level of

e-business,the business-process level,where they can focus on improving capabilities and cutting costs while intersecting with other processes."

Indeed, corporations are looking into more sophisticated ways of using e-business technologies, industry experts say.

"E-business has evolved from the stage where companies want to put a catalog online to where they want to do business-to-business processes, and they want to integrate their back office and front office," says Sam Kapreilian, partner and global leader for e-CRM at PriceWaterhouseCoopers, New York. "Companies want more functionality from their transaction engines, and they want it tailored to their specific industry or business process."

Single Solution Is Key

On the developer side, IBM is investing heavily in its core Internet middleware, dubbed WebSphere, says Valerie Olague, director of product marketing for WebSphere at Armonk, N.Y.-based IBM. The company hired more than 1,000 engineers and salespeople, and spent heavily on product-development and marketing campaigns. During the past two years, IBM invested more than $1 billion in WebSphere and plans to spend at least that amount in 2001, Olague says.

WebSphere combines Web-application serving and integration capabilities with a broad range of e-commerce, Web development and management services.

"[WebSphere] provides an integrated set of technologies that addresses every phase of e-business," Olague says. "Customers get a solution that is stable, reliable and scalable, and they don't have to look for pieces or worry how they will fit together."

The ability to offer a single solution, rather than forcing corporations to invest piecemeal, is a growing requirement, other industry observers agree.

"Increasingly, customers are looking for a complete platform, not just an application server," says John Kiger, director of product marketing at BEA Systems, San Jose, Calif. "They want the platform to be an end-to-end solution that integrates with their business systems and processes, and to provide capabilities such as personalization and industry-specific solutions."

In keeping with this trend, BEA and IBM are positioning themselves as providers of end-to-end solutions built on top of platforms. Such positioning inevitably involves partnering with third-party developers and systems integrators, a strategy both leaders have been doggedly pursuing.

In July, IBM unveiled a program designed to attract 5 million developers to WebSphere. To encourage developers to build applications on top of WebSphere, IBM is leveraging advertising, promotional events and free offerings, including trail code, technical support, user group meetings, education and certification. In August, the vendor inked a global alliance with Austin, Texas-based Vignette to develop solutions for retail, financial and dot-com sectors.

Also in August, BEA revealed an expanded partnering initiative, promising to extend its partner-dedicated staff from 30 to 200 and to invest up to $20 million in its channel. Most of the money will be spent on improving partner and channel relationships by adding more joint marketing, training, education and support offerings to help partners extend "Built on BEA" solutions, Kiger says. BEA also is ramping up to train 4,000 third-party individuals during the next 12 months. BEA partners include Computer Sciences, iXL, KPMG International, MarchFirst and Xpedior.

BEA hopes its partnering initiative will help maintain its lead in the transaction engine space. IBM expects its own partnering work will help it secure the No. 1 spot.

"To date this year, IBM has seen a 200 percent growth in revenue from WebSphere over 1999," Olague says. "We intend to be the dominant player in this market."