Money in the Middle

BEA Systems, for example, signed up Accenture as its showcase partnership. In their announcement, the companies vowed to work together to develop and market a suite of comprehensive infrastructure solutions for the deployment of reliable, scalable, and flexible e-business applications. An early fruit from this alliance is EasyTax, a replicable on-line government revenue agency system. According to a BEA announcement, EasyTax, built on BEA's WebLogic server, taps the latest computing, communication, and content technologies to provide customers the ability to conduct most of their business with revenue agencies over the Internet in a simple, safe, and secure environment. Other BEA consulting firm partners include Cambridge Technology Partners, CSC, KPMG, and PwC.

"At the end of the March quarter, we found ourselves involved in 30 repeatable-type engagements with firms like Accenture, AMC, KPMG, and CSC. These were really segmented engagements, which is what our partners need and like to respond to," says Rauline Ochs, BEA's vice president/worldwide partner initiatives.

Meanwhile, Vitria Technology, Inc., which recently was cited as the leading integration server by Forrester Research, has alliances with Accenture, Deloitte, EDS, KPMG, and PwC, among others. Another leading player, webMethods, formed alliances with Accenture, as well as Cap Gemini, CSC, Deloitte Consulting, EDS, and KPMG. Asera has struck up partnerships with Bain and Cap Gemini, as well as with other application server vendors including BEA, webMethods, Oracle, and iPlanet, which itself is a partnership of Sun and Netscape. SeeBeyond, formerly known as STC, cites a similar cast of partners, including Accenture, CSC, EDS, and PwC.

Among the consulting firms, Accenture has jumped on the middleware bandwagon in a big way. "This is about what clients need and want. We don't call it middleware. It is really about broader EAI [enterprise application integration], about total integration to achieve B2B, B2C, B2E [employee]," says Christy Bass, Accenture's global EAI practice partner. At Accenture, EAI encompasses any products that focus on the integration issues around systems and business process efficiency, she continues.

Driving the interest in such technologies is customer demand for procurement systems or any number of complex, extended applications that involve multiple distributed systems. "EAI is not an end in itself. It usually is a strategic component in another business objective, such as CRM," says Bass.

The need for middleware arises from the accumulation of enterprise systems over a number of years. "First you had Y2K, and companies installed a bunch of new systems. Then the Internet happened, and companies built a lot more systems," says Guy Hosford, partner, Andersen. Then the economy slowed down and companies quickly found themselves saddled with lots of different systems and under pressure to get maximum value from the systems while reducing costs. "The real value comes in using what you have. A lot of clients have huge investments in legacy systems. They don't want to trash the old stuff, but to extend it," Hosford continues. The answer is to connect them together using middleware of various sorts.

Joe Damassa, vice president of strategy for IBM's WebSphere software said that while IBM has consistently been focused on the return its customers receive on their IT purchases, middleware applications now have a new found attractiveness.

"Middleware has always been revolutionary in terms of its implementation, and what you can do with it may become revolutionary in terms of Web interfaces and Web services, but what it does today is save the customer from having to rip and replace what's already been built, and at this point in time that's resonating very well with customers," said Damassa.

International Data Corp. (IDC), Framingham, MA, in its recent report titled The eBusiness Platform: Where Application Servers and Application Integration Meet, dubs this middleware market the application server software platform and declares: "Application server software platforms (ASSPs) are coming of age and transforming into e-business platforms." This latest middleware, according to IDC, has grown to encompass all the functionality required to implement a complete e-business solution. Driving the change are customers who are clamoring for a comprehensive, integrated approach to building, deploying, and maintaining solutions for e-business, according to Steve Garone, IDC's vice president for enterprise integration software.

This demand is translating into investment levels that defy reports of a slowdown in IT spending. In 2000, ASSP revenues grew 128 percent and reached almost $2.2 billion, reports IDC, which expects strong growth to continue through 2005. "It's difficult to overstate the significance of this growth rate," says Garone, in a recently published report. "End users," he continues, "are clearly demonstrating a strong commitment to moving forward with the distributed, multitiered, component-based solutions for which ASSP products form the foundation."

And the middleware solutions they seem to be choosing most, according to IDC, are those of BEA Systems and IBM. BEA achieved 18 percent share and IBM 15 percent share in 2000. IDC attributes BEA's and IBM's success in this market to their ability to extend beyond basic ASSP middleware functionality and deliver an e-business platform that includes all the functions necessary to build and deploy e-business applications, leveraging the ASSP as the foundation layer.

A hot market segment like this attracts a crowd, and there are now dozens of vendors offering application server technology and middleware of various sorts. Consulting organizations will have to pick and choose their technology alliances carefully or risk spreading themselves too thin.

"We've chosen three horses to ride: IBM, Tibco, and webMethods," says Andersen's Hosford. Each vendor brings a distinct set of middleware capabilities and a different architecture, such as point-to-point messaging, publish and subscribe, ASSP, he notes. IBM, for example, brings not only the WebSphere extended application server platform but also MQ Series, a message-oriented middleware product popular in large enterprises.

By focusing on these three alliances, Hosford believes that the firm can develop deep expertise and still meet the needs of a wide range of clients. "Most middleware products sort out into one of these architectures," he notes, and the firm can usually solve the client's problem with some combination of the three. However, he concedes, there are clients that have other middleware technologies in their environments. "It comes down to a business call. We can and will work with other vendors' products," says Hosford.

BEA has been the most aggressive of late in signing up vendors as partners. "You can't use our product out-of-the-box. It needs an ISV [independent software vendor] or consultant or system integrator or application developer," says Ochs. The same can be said for most other vendors' middleware and ASSP products; they require third parties, such as consulting firms, if they are to deliver value.

Until August 2000, BEA relied primarily on its own direct sales force, system engineers, and architects to sell and implement solutions. Consultants and integrators may have been involved in the implementation, but there was little communication between BEA and the consultants. With the new alliances, BEA maintains close contact with its partners and provides them with in-depth training and support, Ochs explains.

The partnerships take a variety of forms. With the top-tier consulting firms, each alliance is customized. For example, some BEA partners, such as Cap Gemini Ernst & Young, do not actually sell the product. Others, such as Accenture or CSC, "source the product and act as a single procurement source, taking responsibility for the entire account," notes Ochs.

Others distance themselves from the actual sale. "We don't sell products. We don't even recommend a particular product," explains Hosford. Instead, Andersen educates the client to the various possibilities and implications and ultimately "lets the client make the decision," he says.

Still, there is no getting around the fact that middleware vendors are in business to sell technology. Whether the consulting firm actually sells the technology, recommends it, or simply educates the customer, the amount of care and attention a consulting firm receives is clearly related to how much revenue is directly or indirectly attributed to it.

The market today is volatile, and not all middleware vendors will survive. You can expect acquisitions and failures among the vendors. Also, don't expect the surviving middleware vendors to be content simply as infrastructure providers. Increasingly, they are pushing into the application space, where they encroach on the turf of commerce applications and others. "We are infrastructure. We do not build end-user applications," insists Ochs, but that could change with next quarter's results. Notes Hosford: "You should expect changes. This is a very dynamic market."

One sure change is the emergence of multiparty alliances, rather than simply one-on-one relationships. Such an alliance might involve multiple middleware vendors, a consulting firm, an application vendor, and even a hardware vendor. The goal of these alliances, notes Ochs, "is to deliver the complete solution end-to-end."