Application Integration Ripe for Consolidation

As vendors of application integration software jockey for position,

analysts predict the crowded market is ripe for consolidation.

"Ultimately, there aren't going to be as many vendors in this market as

there are today, no question,"' said Dan Sholler, an analyst at Meta

Group Inc. in Stamford, Conn. As a result, he added, the $1 million-

plus investment that integration tools can require remains a risky

proposition for users.

As many as 40 software companies have rushed to develop tools for tying

together different systems. Now, some are starting to put together more

comprehensive packages of integration technology so they can better

meet user needs.This week, for example, Englewood, Colo.-based New Era

of Networks Inc. announced its second acquisition in two months: a $42

million purchase of Convoy Corp. in Emeryville, Calif. Convoy makes

software for linking PeopleSoft Inc.'s business applications to

homegrown systems.

And earlier this month, Swedish consulting firm Frontec Group said its

application integration software division is being spun off into a

separate Atlanta-based company in an attempt to jump-start sales.

Officials at the Viewlocity Inc. spin-off said they're close to making

some acquisitions to expand on Frontec's technology.

AMR Research Inc. in Boston estimated sales of integration tools

totaled $450 million last year and should grow at least 50% this year.

But the market "is still like the wild West,"' said Kimberly Knickle,

an analyst at AMR. "We have no way of predicting who's going to be

there in the long run."

Integration software "isn't very far along on the maturity curve,"

Sholler said. And most users have "a huge gap between their vision for

what they want to do with the technology and what they've done so far,"

he added.

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