The integration market: survival of the fittest
Too many firms fighting for slice of the pie?
The future of the integration market remains an uncertain one, writes Bloor Research analyst Peter Abrahams. Using a fairly general definition of the beast to include messaging, adapters, BPM (business process management), BAM (business activity monitoring), and so forth, the concern is that there appear to be a very large number of companies - around 100 - all fighting for a slice of the same pie. Clearly, it is not possible for them all to survive.
There are predictions that the total number of combatants will drop to around 30 over the next three or four years; but even that seems a lot for this market.
However, a short-term prediction is that the number will remain stable, for a variety of reasons:
- The technical cost of entry into the market has gone down with the advent of standards such as XML, web services and BPEL. New companies continue to enter the market.
- Standards are enabling companies that are successful in adjoining technologies (application development, application suites, networking etc.) to move someway into the integration space. They may not become full players but will offer a partial solution. Accordingly, they must be counted in the market.
- Many of the integration vendors have started in a specific niche, a particular industry vertical or geographic solution. They have built up a viable company within that space with a sufficient legacy revenue stream to keep them alive, if not thriving.
- Given a viable base in the integration space, many companies will diversify into related areas, such as business activity monitoring, optimisation, business modelling. The company will therefore expand and will still occupy the integration space.
- Migration from one integration product to another is not easy and most firms will not wish to do it because there is little, if any, pay back. They will continue to use the product they have even if they put another product alongside it. They will still spend money with the original integration vendor.
- Mergers and acquisitions do not look attractive. The merged firm will land up with two overlapping product sets that are difficult to integrate and a client set that will be unwilling to migrate. The cost effectiveness of the acquisition is uncertain at best and quite possibly negative. Rather than buying a company, it will normally be more effective to extend existing products.
So, the prognosis is that some companies will go to the wall, others will reinvent themselves and stop actively marketing their integration products, a number will be bought and merge, and a few new entrants will emerge. Therefore, the number of players will not change greatly.
The major software vendors will increasingly understand the importance of the integration market, show the benefits of a complete suite in this space, and carve up the lion's share of the cake between them. But the market will grow fast enough for the smaller players who remain active to make a good living.