Commodity shuffle

THE RAPID COMMODITIZATION of hardware in recent years is yielding great benefits for customers but brutal consequences for vendors increasingly forced to compete on price. And as the capabilities of open-source OSes, Web servers, and application servers begin to rival their commercial counterparts, it's clear that commoditization is creeping into the software stack as well.

This raises several questions. How far up the software stack will commoditization go? Will the powerful forces that make software development more competitive -- open standards, tools, and platforms -- eventually affect even the most complex applications? Will it be increasingly harder for enterprise application vendors to differentiate their products on anything but price and service?

Driving commoditization

Flash back to the 1970s, when most software was written either inside enterprises or by IBM. Developers had to write everything: their own development tools, file management systems, testing tools, even their own OSes. The past 30 years brought the development of standardized building blocks, which make it possible to leverage code and services created by others, and allow for much greater output per unit of human effort.

"We're moving from a craft environment to a production environment," explains Jim Shepherd, a senior vice president at AMR Research in Boston. "Software developers are moving up the food chain," he says, assembling solutions faster by including large chunks of third-party code. "We've been raising the level of abstraction," agrees Walker Royce, vice president of Professional Services at Rational Software in Cupertino, Calif. "The opportunity for building small-scale components on top of large scale architectures has dramatically expanded the space of people who can compete in the software market." Royce points to higher order languages (such as Java and C++), reusable components, standardized architectural frameworks (including, most recently, Web services), and tool-produced software as key contributors to the commoditization trend.

Everyone seems to agree that the lower levels of the stack, including enterprise middleware, are commoditizing. "Application servers, there's a commodity for you," says Mike Prince, CIO of Burlington, N.J.-based Burlington Coat Factory, and a big proponent of Linux and open source. "The price is down to zero. It's not even next to nothing. ... it's nothing."

Prince sees the commoditization trend reaching into other parts of the stack, such as system management software.

"There's a whole industry built up on value-add [such as] database administration and monitoring," Prince notes. "Now Oracle is giving away some of that, too. As the bar keeps rising, more and more of the software stack becomes commoditized."

Mark Carges, president of BEA's Enterprise Framework Division in San Jose, Calif., sees a similar trend, but prefers to call it convergence. "What had grown independently is a lot of these separate interesting technologies, such as personalization, workflow, and portals," Carges says. "What convergence is all about is how all these things are being driven together." Whereas BEA used to offer an application server, Carges explains, it now offers a platform including integration and portal capabilities, workflow, and b-to-b technologies. With the entry of BEA, IBM, and SAP, the 40 or so portal companies have largely disappeared, he says, and "you're seeing tremendous pressure" on the pure-play EAI vendors.