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Web Services Players Primed for Acquisitions

Analysts with an XML and Web services research firm have concluded that the busy Web services management sector has become fragmented and is primed for consolidation in the near future.

But that's not necessarily a bad thing for the sector, according to ZapThink Senior Analyst Jason Bloomberg.

"What's happening is the players in the space have been shifting around, trying to find that appropriate niche, that customer pain that they can address better than anyone else," he said. "The category of Web services management is becoming less and less well defined as the vendors who had identified themselves in that category are now addressing different sets of problems."

According to Bloomberg, companies building software to manage runtime requirements for service-oriented architectures are gaining traction, largely because they have zeroed in on specific areas of the Web services management space.

With so many players focusing on narrow sub-segments of Web services implementation, fragmentation is the short-term prognosis, according to his report, "Web Services Management: The Maturation of a Transitional Market." In the long-term, the market will continue to consolidate as customers look to vendors to provide frameworks that offer management capabilities, as well as all the components needed to build, run, and manage SOAs.

With their distributed computing approach, SOAs often underpin application-to application communication, also known as Web services .

For example, Bloomberg said, Infravio and Digital Evolution are vendors that tackle SOA enablement, while companies such as Metallect and Systinet cover metadata management issues. Focusing on one specialized niche, Bloomberg explained, will help software makers differentiate themselves among a sea of rivals that have hung out ambiguous-sounding Web services management shingles.

A tightening of focus among vendors is actually helping them pick up more customers and build credible foundations in the industry. Thanks to niche providers putting their stakes in the ground, customers are gaining a better understanding of what is being offered and can better match their needs with the correct vendor, Bloomberg added.

"Customers have a much better idea of what they need now. So, if they need metadata management, they're more likely to say "We have this project, we need a UDDI directory, we need to be able to manage service and delivery contracts, and they're able to find the vendors that fill that particular need."

The approach is a marked change from previous years when vendors would present a laundry list of provisions they'd offer to customers, blanketing the problems in the space. This, Bloomberg added, often proved confusing to customers.

Greg Coticchia, president and CEO of Logic Library, which offers software and services to help enterprises develop and integrate J2EE, .NET, CORBA and Web services applications, said the ZapThink conclusion is consistent with what he has seen in his business dealings.

"A year ago people were interested in learning, kicking tires, doing small pilot projects, talking about Web services and all the hype." Coticchia told internetnews.com. "But just a short 12 months later, the change has been rapid. There are budgeted projects, people are talking about service-oriented architectures, even though they sit above Web services, and they're understanding both of them."

For example, Coticchia explained, when he talked to customers a year ago about Logic Library's metadata management, "they were saying, 'won't I get that with UDDI?' They were very confused about the space. Now they're asking us to come in and talk to them about how Logic Library can help manage their UDDI deployment. I think [the study] has captured the rapidity with which this marketplace is establishing itself."

While SOA implementation and metadata management are key facets of the Web services management space, Bloomberg said the core consists of monitoring, service level management, and exception management. "That's what people who narrowly define Web services management think of as Web services management," he said.

That space is dominated by vendors such as Actional and Amberpoint, both of which boast strong partnerships with Microsoft .

Another sub-sector of Web services involves Web services security segment, which is often closely tied to management, Bloomberg explained, who called Oblix and Westbridge Technology strong Web services security players.

"There is definitely a story to be told about combining the two," he said. "In essence, you have to manage your security, so if you're doing management anyway, you need manage the security. If you're building an SOA, you have to take care of the identity and asset management in order to support it. So, it's really part of the same story."

Eventually, however, Bloomberg expects more consolidation because too many players remain.

"The WSM market is especially cutthroat, as vendors seek to achieve sufficient traction in advance of the dominance of the incumbent players," he said. "This market for new entrant WSM vendors will peak at $350 million in 2006, and then gradually be subsumed into the incumbent System Management and SOA markets."

According to Forrester Research Vice President Randy Heffner, systems management vendors remain kings because the pressure in the industry is to integrate Web services into strategic platforms, including Java-based, .NET frameworks, network and systems management and identity management, dominated by IBM, Microsoft, BEA, Oracle, HP, SAP, to name a few.

"The current uptick is a side effect of the fact that it is easier for a small vendor with no product legacy to fulfill immediate, niche needs than it is for a major vendor to deliver on their promises to evolve their massive product lines," Heffner told internetnews.com. "Over time, the niche vendors have a harder time proving their separate value, or the big players do acquisitions to speed up their product development, and consolidation sets in. A few niche players will live longer lives, but for most the venture capitalists will eventually execute their exit plans."