Middleware sector bouncing back

For a large part of the past decade, the principal obsession of corporate IT departments was making all the business applications they had accumulated over the years work together.

This created significant demand for messaging technology that coordinates the flow of information between applications and databases, or middleware as it is otherwise known.

That demand took a tumble during the recession (as did demand for many other categories of technology) as businesses put their ongoing integration programmes on hold in favour of shorter projects with more immediate returns on investment.

It was not certain that this demand would ever return to its former health. The business value of enterprise architecture projects has never been universally recognised, and justifying the budget for such undertakings may have become impossible post-recession.

However, in September 2010 a number of middleware vendors issued financial results that suggest this is not the case.

According to a report by analyst company Gartner, Oracle held the second-largest share of the $15.9 billion middleware market in 2009 (IBM being number one), thanks mainly to its 2008 acquisition of middleware vendor BEA. During the three months ending 31 August 2010, Oracle’s revenues from its database and middleware products rose 17% year-on-year to $2.7 billion.  

During a conference call with investment analysts, the company’s newly appointed co-president (and former Hewlett-Packard CEO) Mark Hurd said it had been a “particularly strong quarter in both database and middleware”. The latest version of Oracle’s Fusion middleware product saw “the fastest adoption curve we have seen over any of our previous releases”, he added.

At its OpenWorld conference, the company launched what it claimed to be “the world’s first integrated middleware machine”, the Exalogic Elastic Cloud. The company gave little indication of what that might cost but Exadata, the company’s comparable database appliance,  sets customers back $1 million for the hardware alone. Clearly, Oracle believes that there is still plenty of middleware spending to be had.

Coming fifth in Gartner’s 2009 middleware rankings was TIBCO Software. Having seen growth slow to single digits during that year, TIBCO has now enjoyed three consecutive quarters of 20%+ year-on-year growth. In the three months ending 29 August 2010, the company saw overall revenue jump by 23% to $184.5 million.

“We have hit the proverbial tipping point in our business,” beamed TIBCO CEO Vivek Ranadivé following the announcement. “The evidence and support of this fact continues to mount.”

“We had a very diverse mix of deals this quarter, both big and small, and fundamentally more volume,” added CFO Murray Rode.
Most of TIBCO’s revenue came from its service-oriented architecture (SOA) products, but its other lines, which include business intelligence, complex-event processing (CEP) and business process management (BPM), all grew their share during the quarter.

Progress Software has a product set that is comparable to TIBCO’s, but its sales uptick during the same period was rather more modest: its revenues grew by 8% to $128.7 million.

The company’s Enterprise Business Solutions range, which includes a combination of SOA, CEP and BPM systems, saw a 77% year-on-year sales increase. Customer wins during the quarter included Air France-KLM Airlines, which selected Progress’s Actional SOA management platform to help with the IT integration project that is still ongoing since the two airlines merged in 2004.

Commenting on the financial results of TIBCO and Progress Software, UK analyst Neil Ward-Dutton of MWD Advisors remarked that it was “good to see veteran players… rediscovering a bit of mojo. For me, the health of a handful of  ‘independent’ infrastructure software players is a good sign for the industry at large, because it maintains a level of choice that just wouldn’t be there if the market collapsed down to the usual behemoths.”

A fourth company that reported in September and operates in the middleware space is Red Hat, which acquired open source middleware vendor JBoss in 2006. Red Hat does not split out its JBoss sales figures from the rest of its revenue numbers, but CEO Jim Whitehurst told investment analysts that he expects JBoss to “grow twice as fast as the rest of the business for the year”.

Also invoking the ‘tipping point’ meme, Whitehurst said the reason for this is that the JBoss products are now sufficiently sophisticated to win enterprise customers. “I think we’ve finally reached the tipping point where we have the feature set that the vast majority of customers want from [the JBoss middleware product]” he said. “I think most customers see that we can more than meet their needs, so we are really seeing acceleration there.”

He added that the JBoss products are sold to different personnel from its virtualisation or operating system products “so it took us a couple of years to build out relationships”.

Red Hat grew its overall revenues by 20% for the second consecutive quarter. Despite the company’s profit actually falling 18% year-on-year, its share price was the highest it has been in over a decade shortly after this announcement.

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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