Waning EAI Market Turns to Project-Based Integration

With many areas in the IT sector looking bleak in terms of the paucity of money being spent on them, one area analysts continue to claim is taking a beating from the depressed spending is the enterprise application integration (EAI) market.

Research firm The Yankee Group recently concluded a study in which it determined that the demand for EAI — the practice of tying older legacy applications to newer products from various vendors — is declining because businesses aren’t embarking on large-scale integration overhauls the way they used to.

Rather than taking on massive integration campaigns, which cost big bucks and include platforms, adapters and training costs, customers are employing limited, project-based integration spending.

This means, rather than spending oodles of dollars on large-scale platforms from the likes of webMethods, Tibco, Vitria, SeeBeyond and a slew of other vendors, enterprises are paring down their choice of integration targets to specific requirements, such as customer relationship management or portal integration.

Jon Derome, program manager of the Business Applications & Commerce practice at Yankee Group, said there are other reasons for this climate change — namley competition from cheaper products from rising competitors, such as Microsoft’s BizTalk server, BEA’s WebLogic Integration, and Oracle’s 9iAS Integration.

These, Derome said, “make small-scale integration projects financially feasible — encouraging companies to incorporate integration software as a Web or functional application component.” But enterprise application vendors SAP, PeopleSoft and Siebel have also added integration products to the mix, chomping away at the EAI pie.

Worse still, take the increased competition and the number of commodity products entering the market and add that to the dearth of massive contracts, such as “big-bang implementations” like Coca-Cola’s enterprise resource planning (ERP) and IBM’s CRM rollout, and you’ve got a recipe for a struggling niche, Derome said.

Other points of view

Stephen O’Grady, senior analyst with research firm Redmonk, found little to disagree with in Derome’s assessments, but he brought a few more concepts to light.

“We agree with many of the conclusions drawn here, particularly that the monolithic, multi-year EAI projects are mostly a thing of the past,” O’Grady said. “The vendor landscape for integration products has changed significantly as noted, with new players like BEA and Microsoft making integration a real priority. But two caveats; first, while technology standards are mentioned, the term Web services is conspicuously absent. Web services have not taken over EAI by any measure, it is making incursions into EAI territory by obviating the need for centralized messaging in some cases. We see a large number of enterprise firms opening repositories, offering application services, and other department-level tasks via Web services infrastructures, and expect this trend to continue.”

To be sure, the idea that integration implementations are waning is hardly novel, although analysts find various reasons for their decline. Case in point: O’Grady pulled the Web services card, which is thrust into debate many times when software infrastructure is discussed. While he thinks Web services are making inroads into EAI in some cases, he doesn’t believe they will consume EAI wholesale. Conversely, one research firm believes service-oriented processes may some day sound the death knell for EAI. ZapThink published their results in a study this past April.

“If you’re thinking of it from the bottom-up as a bunch of systems that you’re trying to integrate, you’re going to need a bunch of expensive systems to make it happen,” said ZapThink Senior Analyst Ron Schmelzer. “By approaching a Service-Oriented Architecture from a business process perspective, it will buy you all of the things people are trying to solve with integration products today.”


So, where does all of this leave EAI in the future? Derome believes EAI vendor revenue will shrink over the next three years.

What does this portend for the integration players? Derome said standalone integration products will morph to bundled Web application platforms by the end of 2006.

“Demand will shift from a centralized EAI approach to a federated, intelligent API approach,” Derome said. “Adapters, process modeling tools, and integration brokers will be embedded in Web application platforms and functional application suites. This transition will encourage project-based integration at the expense of more ambitious EAI projects.

Derome continued: “By the end of 2004, Web application platform and functional suite vendors will control more than 50 percent of total integration software sales,” Derome said. “By 2006 these vendors will capture 75 percent of integration sales. For end users, this market transition will reduce integration labor expense on a per-project basis. The cost reduction will be less significant than an enterprise-wide integration rollout, but savings will be more immediate and attainable.”

In fact, he sees some instances along those lines already taking shape. In one case, he said a telecommunications service provider included the unusual combination of IBM, BEA, Vitria (the incumbent EAI provider), Amdocs, and TIBCO on the short list for a customer data management project. Interestingly, BEA, IBM, and Amdocs were not on the prospective integration list five years ago. What does this indicate? That the market is evolving with newer entrants to the integration game attracting customer interest.

Meanwhile, O’Grady said he sees a trend shift towards departmental-level EAI implementations and noted that because EAI is never child’s play, those who have the talents may succeed despite the sluggish spending in IT.

“EAI is easier than it was 10 years ago or even a year ago, but it’s still not a trivial task,” he said. “Web services and integration-oriented toolsets have eased some of the challenges of distributed computing, but there remains a bottleneck in that someone needs to have a vision of how distributed systems can play nicely together, and that’s a skillset that isn’t all that common.”

In conclusion, for some businesses which push integration platforms as their main meal ticket, The Yankee Group predicts EAI vendor revenue will deteriorate through 2006 as EAI efforts lose popularity and demand for project-based integration grows.

“Standalone integration technology vendors should target a vertical market or prepare to be acquired,” Derome said. “One or two best-of-breed EAI vendors will survive as horizontal solution vendors — most likely TIBCO and webMethods. Competitors should seek acquisition partners or find an attractive vertical market to serve.”