Sector summaries

2002 was a test of survival for many companies within the enterprise applications, infrastructure and service provider sectors. Yet analysts remain bullish that promising technologies will secure each segment's recovery.

Enterprise applications

Users continue deploying large ERP, CRM and supplier relationship management software packages, but application integration and smaller, XML-based, gap-filling tools are gaining allure.

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Enterprise applications Enterprise application vendors’ performance The 10 most profitable companies Infrastructure Infrastructure vendors’ performance Service providers Service providers’ performance

Enterprise applications

Users continue deploying large ERP, CRM and supplier relationship management software packages, but application integration and smaller, XML-based, gap-filling tools are gaining allure.

These XML-based "composite applications" consolidate or process data from multiple applications to create, for instance, a forecasting report, says Joshua Greenbaum, principal for Enterprise Applications Consulting. He points to SAP's xApps or, to some extent, J.D. Edwards' collaborative and forecasting tools as examples of composite applications. "Customers don't want to buy three-letter acronyms anymore. They want products to solve specific application problems," he adds.

Enterprise application integration (EAI) tools also are gaining popularity. They, too, let various applications work together. Although IT budget growth will increase a mere 2% through 2004, spending on integration, including middleware, EAI, database and electronic data interchange will grow at twice that rate, AMR Research finds.

Internal application integration has the highest priority, then extended enterprise projects, with spending of $2.8 million annually vs. $1.5 million, respectively, according to 2002 budgets, AMR says.

Security software remains a top budget item, too. This market will grow by about 16%, compounded annually from 2001 to 2006, IDC says.

Despite a rosy growth future, NW200 software vendors - even those offering security products - still feel the soft economy. Some 60% reported lower revenue in 2002 than in 2001, and 74% declared a loss.

Still, the sector posted respectable numbers this year over last: The 2002 average revenue for the sector was $976 million, which generated $6 million in profit. This compares with 2001 revenue of $1 billion on which these vendors lost $221 million. (These figures exclude IBM, included in the infrastructure sector instead because it earns 50% or more of its revenue from hardware sales.) The ever-profitable likes of Microsoft and Oracle carried this segment, helped along by ERP/CRM/SRM vendors such as J.D. Edwards and PeopleSoft and topped by security vendors Check Point and Network Associates - albeit both Check Point's revenues and profits slid from last year, even though its 60% profits from $427 million in revenue keep it as one the NW200's most profitable companies. Also of note is Symantec's 26% increase in revenue, jumping it over the $1 billion mark.

Infrastructure

The infrastructure market continues to sail on a predictable path based on the need for ever-increasing speed. And so four out of the 10 most profitable NW200 companies are those that make their livings selling infrastructure gear to handle that need for speed - Cisco, Dell, IBM and Intel.

Still, overall sales in the bread-and-butter router market declined 15% to $6.1 billion in 2002, Dell'Oro Group says. That won't always be the case. As Ethernet continues to rise to carrier-class speeds, worldwide sales for Gigabit Ethernet equipment, including routers, will reach $10 billion by 2008, Pioneer Consulting says.