Next generation middleware, SOA makes it easier to integrate the "everything-but-the-kitchen-sink" environments that characterize information technology at most companies. It starts with "loosely coupled" (meaning an application doesn't need to know the technical details of another application to communicate) services that carry out repetitive business functions, such as verifying a credit card transaction or processing purchase orders. "The new set of requirements that are emerging as a result of SOA means that you can compare what you get today from 10g, or WebSphere, or NetWeaver and ask, "How completely does this application platform fulfill the requirements of an SOA platform?" says Mike Gilpin, research director at Cambridge, Mass.-based Forrester Research Inc. "Over the next two or three years, you'll see them all move to 100%."

IBM also scored nicely with the PeopleSoft deal, its largest software partnership to date. "When customers think about what they want, they don't just want an empty platform, they want a platform with a bunch of services running on it," Gilpin notes. "There are many ways you can get that. You can get both of them from one company like SAP, or you can get them from a combination of platform vendors and a set of ISPs that provide applications running on that platform, which is the strategy IBM is pursuing.'"

It can take time, however, for alliances to bear fruit. Two years ago, ERP provider J.D. Edwards & Co. made a decision to broaden its customer reach by signing with IBM and standardizing its apps on IBM's middleware. But it took two years and three versions for J.D. Edwards to release its integrated platform, by which time PeopleSoft had taken over its rival. "[Alliances force] the users to move from the traditional integration platforms that they've used with this product to an IBM stack," says Yvonne Genovese, vice president, business applications research, at Stamford, Conn.-based Gartner Inc. "You can continue to use other stacks, but this is the one that they're going to update and they're going to have integrated into the product. You have to get to at least that level of software. So usually it forces customers into an upgrade cycle at the very least, which will cost them money, and at the very most, they may end up having to license significant portions of the product, like the WebSphere stack, in order to do things," she says.

PeopleSoft and IBM plan to roll out their initial products for banking, financial markets, insurance and telecommunications next year. Philip Fersht, the group director for business applications at The Yankee Group in Boston, says another PeopleSoft goal is to fast-track composite-centric HR solutions to help companies transform and automate HR processes quickly and effectively with the least amount of disruption and minimum cost. HR service providers would also be able to leverage a more robust technology platform to deliver the pre-built HR solutions within PeopleSoft applications in a WebSphere framework, he says. Oracle's HR platform is at risk, he says, because PeopleSoft, with WebSphere built in, will offer a more robust service-oriented solution.

Customers are also awaking to the possibilities of integration that is built into applications from the ground up. They want flexible frameworks first and packaged application functionality second. In a recent survey, The Yankee Group also found that 76% of key decision-makers from 437 mid-to-large U.S. companies are making significant investments in SOA, with 65% claiming to be actively looking "to rip and replace" their existing technology platform and applications with SOA next year. "The battle is very much at the integration end in terms of who is developing the right environments to enable seamless integration not just within the enterprise, but outside into the supply chain as well," says Fersht. "I don't think it's going to make the software more expensive. It's going to make the software more innovative ultimately, and this is an innovation race now."