As Portal Usage Grows, Vendors Disappear

In many ways the victim of their own success, the number of enterprise portal vendors has shrunk dramatically over the past couple of years, going from more than 100 players in the late 1990s, according to some estimates, to less than two dozen in 2002.

And the decline continues as big ISVs like SAP, BEA and Sun either buy their way into the market or develop home-grown products. In fact the market has consolidated so severely in just the last nine months, according to Gartner, only two of the original, pure-play portal vendors, Plumtree — the company that founded the market and Corechange, survive.

This number could soon be reduced to one if Corechange, which is actively looking, finds a buyer, said Ray Tacoma, Corechange’s vice president of sales and marketing.

“We’ve been actively engaged in a set of M&A activities,” said Tacoma. “We’re looking for a partner. We need to be a bigger company…to compete against the companies we’re talking about.”

All of the other early players like Epicentric, Datachannel and Sequoia also have been bought by software makers who realized the benefits of a portal product and its success with customers.

Surprisingly, most of the early players did not go out of business as could be expected in an emerging market; especially an emerging technology market. The reason for this is fairly straightforward. After Plumtree basically invented the market in 1998, many business solutions vendors such as Hummingbird, Cognos and others began to market the front-ends they had developed for their products as portals.

Rush to Reposition

When the market began to shake out along with the rest of the tech sector following the dot-com crash, some vendors simply stopped marketing themselves as portal providers and quietly withdrew from the space in favor of their core competencies.

“There were a number that were bought,” said Laura Ramos, a portal analyst with Giga Information Group, “but I think the vast majority just quit calling themselves portals.”

This accounted for much of the rapid decline in numbers, but simultaneously, the market’s real players were being snapped up by the likes of Vignette (which bought Epicentric), SAP (bought TopTier) and Citrix (bought Sequoia) since the portal concept — an improved desktop environment into which ISVs could plug bundled and customized content — just made good business sense, said Laura Nusbaum, Plumtree’s group manager of communications.

But these players are not necessarily marketing their portals separately from their core products. What they are doing is using their portals to make core offerings “stickier.” This has further shrunk the market in terms of sheer numbers.

“In addition to the application server vendors seeing the need for customers to build on top of their platforms, I think we saw really large ERP-type vendors really feeling like they needed to have some kind of up-sell package for their installed base,” Nusbaum said. “When the economy’s bad it’s really hard to sell multimillion-dollar ERP systems.”

Another, similar group, bought portals thinking they would enter the market as a player, said Jim Murphy, a senior analyst at AMR Research, but as the economy worsened the decision was made to drop such ambitions. According to Murphy and research by Gartner, this list includes such well-known names as Netegrity, Divine and Ask Jeeves.

Big Portal Spending Plans

Of course, the general economic downturn and subsequent drying up of corporate IT spending has drastically effected all manner of IT vendor causing many to exit markets or put plans on hold. Even so, as a product catagory, portals have shown some surprising resilience compared to other applications. As Nusbaum points out, ERP vendors bought portal players to help sell their core products, not the other way around.

“What happened is you had the large infrastructure vendors who owned a lot of the structured data market and content management, and application servers; they just moved up the stack, that’s all,” agreed Gartner analyst, Joanne Correia.

A recent informal survey of C-level executives by Giga indicates this may prove to be a winning strategy in 2003. Portals are expected to be the No. 2 IT spend — just behind security — planned for ’02-’03. Similarly, a study by AMR research shows 52% of companies have allocated budgets for portal spending in 2003.

So, far from disappearing, as a casual glance as the market would indicate, portal technology is proving itself to be one of the few bright spots in an otherwise dismal IT picture. Its practitioners have changed dramatically, giving the appearance of decline, but the technology itself has not fallen out of favor.

“It was inevitable,” said Giga’s Ramos. “There were too many players.”