Big-ticket software gets a trim

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current database customers. Also, open-source application servers, notably from JBoss, are making their mark by providing alternatives to products from proprietary vendors. JBoss does not charge license revenue for its application server but makes money charging for ongoing support.

To make up for the dip in margins, infrastructure software vendors are relying increasingly on partners to sell higher volumes of middleware, particularly to small and medium-size businesses, Correia said.

IBM and Microsoft already have well-established distribution channels, while Oracle and BEA Systems are also trying to expand their partner networks.

Results from 2004 indicate that IBM and Microsoft both made middleware market share gains, according to Gartner.

Oracle also saw its market share grow, while BEA--once the market leader in application servers--saw its share slip for the second straight year.

In the category of application platform suites, IBM has the lead with 26.8 percent, up from 23.5 percent in 2003. The figures for all providers include sales on both mainframe servers as well as other operating systems.

BEA retains the second-place title in the segment with 12.4 percent, the same as 2003. BEA, which suffered declining license sales in 2004, along with the departure of some of its top technical executives, saw its new license revenue shrink 3 percent.

Oracle had 8.3 percent share, besting its 2003 showing of 7.3 percent.

Revenue for Microsoft's application platform suites--which represents sales of its SharePoint portal server and BizTalk integration product--more than doubled to $176 million, or 5 percent share.

Sun Microsystems, meanwhile, relaunched its own server suite last

It's a good thing

I feel that small business will start to feel more comfortable about buying networking software and benefit highly from deals such as free tech support and upgrades. With the economy the way it is everywhere, I personally wouldn't be inclined to purchase high-end user software if it ate at my bottom line.

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Double-edged sword

Before you stop and cheer too loudly, consider the downside to this.

Almost certainly the number of vendors will decrease. When was this ever a good thing?

Traditional software companies will be forced towards the Microsoft model of selling low-margin products. This isn?t a dance many large companies do well. Expect more layoffs and declining stock prices.

Eventually, we?ll find a new equilibrium. But, in the meantime, it?s going to get ugly.