IBM Leads SOA Market - Analyst Blog

International Business Machines (IBM) announced that WinterGreen Research has named the company as the world's number one vendor based on its leading market share for service oriented architecture (SOA). 

SOA is an important segment within the overall middleware software market. IBM reported improved revenue from its branded middleware products that include WebSphere, Information Management, Tivoli and Lotus products, which increased 6% year-over-year in the fourth quarter of 2009 (most recent quarter). 

Strong demand for IBM’s key branded middleware products led to overall Software growth of 2% year-over-year in the quarter. Middleware represented 63% of the company’s total Software revenue in the fourth quarter of 2009 and has become the growth driver for IBM. 

IBM said that according to the WinterGreen report, IBM holds 75.1% of the total SOA market share in 2009, while none of the other SOA vendors held more than 6% market share. 

Through internal investments and targeted acquisitions, IBM expects the majority of its Software revenue growth to come from the SOA product portfolio. Under the company’s long-term revenue model, branded middleware is expected to grow 12.0% to 16.0%, while total software is expected to grow 7.0% to 10.0%. 

The key to continuous software growth stems from IBM’s ability to capitalize on industry trends such as SOA and Information-on-Demand. As a result, this segment has emerged as a strong source of revenue growth and was one of the largest contributors to the company’s profit in 2007, 2008 and 2009. 

IBM’s strategy remains focused on the high-growth, high-value segments of the IT industry. The company has shed its low-margin businesses and has made a series of strategic investments and acquisitions which have strengthened its position in emerging higher-value segments like SOA, Information on Demand, business processing services and open modular systems for businesses of all sizes. 

This has changed its business mix toward higher-value segments of the industry. Thus IBM has benefited from the growing focus on high-margin segments, such as Services and Software. This has allowed the company to expand its gross margins in 21 out of the past 22 quarters. 

IBM dominates the SOA Web services markets because of its broad set of software integration capabilities, backed by a strong global services team. As per Gartner Dataquest, SOA is a $160 billion market. With more than 7,000 customers and 7,420 Business Partners, IBM has doubled its SOA client and partner base in less than one year. 

IBM's continued leadership in the middleware market, particularly the SOA has been a key reason for the company's strong growth. 

We maintain our Neutral rating on IBM.
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