Contents. Software QuickTakes Issue 4

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1 Software QuickTakes Issue 4 Introduction to Software QuickTakes Software QuickTakes allows Gartner Dataquest analysts to share opinions and analysis of key events as they unfold. To learn more about Gartner's industry-leading products and services, we encourage you to contact us at: or contact your local account executive. You can also visit us at About Gartner Gartner Dataquest is the recognized leader in providing the high-technology and business communities with market intelligence for the semiconductor, computer systems and peripherals, communications, document management, software, e-business, and professional services sectors of the global IT industry. Contents Supplier Relationship Management: New Market Estimate... 2 MAPICS Closes Frontstep Acquisition... 2 BEA: Fourth Quarter and Fiscal 2003 Results... 3 IBM Completes Acquisition of Rational Software... 3 Oracle Projects at AppsWorld... 4 Gartner provides unrivaled thought leadership for more than 10,500 organizations, helping clients achieve their business objectives through the intelligent and efficient use of technology. Additionally, Gartner helps technology companies identify and maximize technology market opportunities. Gartner's technology content and strong brand reach IT professionals globally through Gartner Research, its research and advisory unit; Gartner Services, its custom consulting unit; Gartner Events, including Gartner's renowned Symposia; and at Gartner, founded in 1979 and headquartered in Stamford, Connecticut, achieved fiscal 2001 revenue of $963 million. Gartner's 4,000 associates, including 1,200 research analysts and consultants, are in more than 90 locations worldwide Gartner, Inc. and/or its Affiliates. All Rights Reserved. 1

2 2 Software QuickTakes, Issue 4 Supplier Relationship Management: New Market Estimate There has been a great deal of focus for nearly two years about the user benefits of supplier relationship management (SRM). With much fanfare and accolades from the software industry, confusion remains and opinions vary on what exactly SRM is and what it should encompass. So, is there an SRM software market? No, not yet. A plethora of software applications support SRM initiatives, but to date, no true SRM applications exist. Source: Gartner Dataquest (February 2003). Gartner Dataquest recently conducted a study of leading best-of-breed and enterprise application software vendors that offer solutions labeled SRM. The study also included a survey of end users that purchased SRM software. While many vendors view their solution as SRM, it is clear that SRM is the latest of a series of innovations within supply chain management (SCM) and represents only an incremental development. Realistically, SRM represents an evolutionary extension of SCM, driven by the need for enterprises to create a better understanding of suppliers' long-term financial and operational contribution to the top and bottom lines. SRM is the next step in managing the supply chain and, while inherently strategic, early initiatives will be predicated on tactical requirements. SRM is unique because it is predicated on the notion of understanding and improving, from a business context, the implications of operational decisions that are automated through SCM applications. Thus, SRM is an extension of SCM that, through a unique recombination of supplier-oriented applications, is necessary to create an understanding of supplier's life cycle cost and revenue contributions that enriches the business practices. Consequently, the components of SRM have begun to weave themselves throughout SCM technologies and practices. For more information, please see the Gartner Dataquest Focus Report, "Supplier Relationship Management: New Market Estimate" (SWSA-WW-FR-0102). By Thomas Topolinski (thomas.topolinski@gartner.com) and Chad Eschinger (charles.eschinger@gartner.com) MAPICS Closes Frontstep Acquisition MAPICS announced that it has completed the previously announced acquisition of Frontstep. Source: Business Wire (19 February 2003) The recent closure of MAPICS' acquisition of Frontstep is a positive move for these two mid-market application providers. As with any acquisition, there will be initial difficulties in maintaining and differentiating three distinct products (MAPICS for iseries, MAPICS for extended systems and Syteline). The key for vendors adopting an acquisition strategy is to ensure that the portfolio of solutions fall within their core competence as well as to minimize indigestion so that the burden of supporting multiple lines of business do not become unwieldy. As with most enterprise application providers, each vendor has experienced declining revenue. However, the new company is stronger combined than alone through clarity of product positioning and go-to-market strategy for each. Yet, given the difficulties, this acquisition was needed as it enables MAPICS to become less reliant on its iseries customer base (approximately 90 percent before the acquisition), bringing a more balanced distribution of customers (approximately 50 percent of the new install base). The acquisition will provide MAPICS with an opportunity to re-establish itself as a viable contender within the mid-market. With the Frontstep acquisition, MAPICS has acquired a mature, established installed base that will provide it with an opportunity to attract new customers looking for.net. MAPICS also needed a.net alternative to PivotPoint (NT and Unix).

3 Software QuickTakes, Issue 4 3 MAPICS now has a portfolio of enterprise resource planning (ERP) II offerings that includes enterprise application management (EAM), product life cycle management (PLM), customer relationship management (CRM) and business intelligence (BI). The move should aid in rejuvenating sales interest and the perception of being historically late to market when it comes to technology. Gartner Dataquest continues to emphasize that merger, acquisition and demise (MAD) activity will continue to riddle the ERP market as software providers vie to position themselves for an uncertain future. For more information, please see the Gartner Dataquest Perspective "Predicts 2003: The ERP Market Readies for a Rebound" (SOFT-WW-DP-0118). By Chad Eschinger (charles.eschinger@gartner.com) and Robert Anderson (robert.anderson@gartner.com) BEA: Fourth Quarter and Fiscal 2003 Results BEA Systems, an application infrastructure software company, announced results of its fiscal fourth quarter and fiscal year, which ended 31 January BEA reported growth in revenue and net income for the fourth fiscal quarter and growth in annual net income but said total revenue for fiscal 2002 declined by 4.2 percent. BEA reported total revenue of $249.3 million, including license fees of $134.6 million for its fiscal fourth quarter. For the fiscal year, which ended 31 January 2003, BEA reported total revenue of $934.1 million, compared with $975.9 million for the fiscal year, which ended 31 January BEA gave forward guidance of first quarter 2003 revenue from the current quarter, which ends on 30 April to be between $235 to $239 million. In 2001, BEA and IBM together controlled nearly 70 percent of the enterprise application server market. (For more information, please see the "IBM Closes Gap in 2001 Application Server Market" [SOFT-WW-DP-0080]). The nearest competitors were far behind, with only single-digit market shares. In 2002, BEA continued to build its financial strength by reporting another quarter of growing revenue, cash and profit. However, BEA's year-over-year total revenue was negative 4.29 percent in 2002, because of competitive pressures from IBM and to a lesser extent, Oracle and Open Source in On a positive note, while integration and portal revenue was negligible in 2001, they grew significantly in BEA also shipped WebLogic Platform, an application platform suite, in 2002 with BEA de-emphasizing its marketing on the application server market while placing more emphasis on the integrated stack. For additional analysis, please see the Gartner Dataquest Report "BEA Systems: Courted for Years, but Still Independent" (QA ). By Nicole S. Latimer (nicole.latimer@gartner.com) and Joanne Correia (joanne.correia@gartner.com) IBM Completes Acquisition of Rational Software IBM announced the completion of its $2.1 billion acquisition of Rational Software. Rational offers products that focus on the entire application development (AD) life cycle, which includes integrated tools for modeling, requirements, testing, configuration management and defect tracking. Rational also offers a methodology, the Rational Unified Process (RUP), to deliver process throughout the life cycle. Rational shareholders approved the acquisition on 22 January 2003, and the required worldwide government regulatory approval process has been completed, although there was some delay with European regulators.

4 4 Software QuickTakes, Issue 4 "Rational is an important element of our e-business on-demand initiative," said Steve Mills, IBM senior vice president and group executive for the IBM Software Group. "Rational's complete open software development platform can improve the speed, quality and predictability of software projects. It's a perfect complement to our existing four brands WebSphere, DB2, Lotus and Tivoli." Mike Devlin, who previously was Rational's CEO, is the general manager of the new division, reporting to Steve Mills. Source: Press release (21 February 2003) This acquisition signals the continuing collapse and consolidation of the enterprise AD tools market. For more information, please see the Gartner Dataquest reports "IBM to Acquire Rational Software" (SFTW-WW-NT-0137), "Watch IBM's Commitment to Rational's Tools for Microsoft.NET" (FT ) and "IBM Buying Rational Signals Consolidation of Software Tools Market" (AC ). By Nicole S. Latimer (nicole.latimer@gartner.com) Oracle Projects at AppsWorld During Oracle's AppsWorld conference in San Diego, California in January, Oracle showcased Oracle Projects, a family of applications that includes modules for project costing, project billing and contract management. Although Oracle has had a very strong focus on financial applications within its Project offerings, its new product has four major components project management, resource management, collaboration, and accounting and operations. It is a part of Oracle's e-business suite and is integrated with many of Oracle's other applications. It has multimethod access, including portal via a Web browser and several interesting features, such as workflow driven s. Source: Oracle AppsWorld (January 2003) With Oracle Projects, Oracle's entry into this market is encouraging but long overdue. PeopleSoft, Lawson, Deltek and Agresso have all had products marketed for almost 2 years. Although there is still a lot of uncertainty around Oracle's product and strategy, this is still good news for Oracle and bad news for its competitors. Those competitors that may have been successful selling into Oracle shops in the past will face stiffer competition as Oracle increases its marketing. Further, Oracle's strong focus on financial applications will position it well against many others. Oracle joins enterprise suite vendors, Microsoft- Great Plains and SAP, which have recently announced their entry in this market. With Oracle Projects, Oracle is targeting several verticals, departments and business types at once. As with every other enterprise application suite vendor, Oracle is attempting to provide everything to everyone everywhere at once. This strategy rarely works and will likely bring more distraction than opportunity. Although targeting a broad market is not much different from what its competitors did initially, PeopleSoft, for example, did so under the guise of not targeting any specific market (as opposed to Oracle spelling out several markets). Further, PeopleSoft had the advantage of time, having been one of the first enterprise application suite vendors to introduce a product almost two years ago. For more information, please see the " PeopleSoft Chooses Education Over Verticalization for SPO" (ITSV-WW-DP-0325). By Hams El-Gabri (hams.elgabri@gartner.com)

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6 6 Software QuickTakes, Issue 4 For More Information... In the United States: In Europe, the Middle East and Africa: In Asia/Pacific: In Japan: Gartner Interactive: The content herein is often based on late-breaking events whose sources are believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The conclusions, projections and recommendations represent Gartner's initial analysis. As a result, our positions are subject to refinements or major changes as Gartner analysts gather more information and perform further analysis. Entire contents 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction of this publication in any form without prior written permission is forbidden Gartner, Inc. and/or its Affiliates. All Rights Reserved