Although

BEA Systems

(BEAS)

and

IBM

(IBM) - Get Report

are embroiled in a tight race in the application server market, both gained market share in 2001 at the expense of the little guys, according to a pair of studies from market researchers.

BEA remained the market leader, but IBM is catching up, according to studies released Wednesday by research firms IDC and Gartner Dataquest. That's contrary to

a study by Giga Information Group released in March that showed that the two companies share the top market position.

Meanwhile, in the database field, IBM and Microsoft grabbed market share from

Oracle

(ORCL) - Get Report

, according to another IDC study. But unlike

a Gartner study released earlier this month, IDC found Oracle held onto the No. 1 position in the database market, although its lead slipped.

According to IDC, BEA boasted 24.8% of the application server market in 2001, compared with 20% in 2000, and IBM's share increased to 23% from 17%.

Gartner Dataquest, meanwhile, reported that BEA's share of the market rose to 34% in 2001 from 33% in 2000. According to the Gartner report, IBM gained ground on BEA, with its share growing to 31% in 2001 from 22% in 2000.

Gartner also measured a new segment of the application server market, which it calls application server suites, representing application servers bundled with other products such as portals and integration products. IBM ranked No. 1 in this category, maintaining its 33% market share from 2000. BEA increased its share of this market segment to 25% from 24% in 2000. Oracle ranked third in the bundled category, maintaining its 12% market share from 2000.

IDC also pegged Oracle's market share of the overall application server market at 12.1%, but the research firm said that's an increase from 9% in 2000. Oracle ranked No. 3 in IDC's study.

The Database Struggle Continues

In the hotly contested database software market, Oracle revenue declined 4.4%, bringing the company's market share to 42.5%, according to Carl Olofson, IDC's research director for application development and deployment. IBM's database revenue grew 29.8%, giving the company 31% of the market. About 17% of that growth, however, comes from IBM's acquisition of Informix. And Microsoft's revenue grew 28.5%, giving the company 8.5% of the market.

Oracle has long maintained it is not losing share in the database market, and instead blames its declines on the economy. Company executives have said their customer loyalty remains strong and that they are not losing deals to the competition.

But Olofson said there's a big database opportunity in the midmarket, which doesn't need all of the bells and whistles -- and accompanying cost -- of an Oracle database. That could very well include divisions of larger companies that have Oracle databases. "It could well be they

Oracle are not even getting into a lot of these opportunities, even at companies where they do have existing accounts," he said.

"It was a rough year," said Olofson, who estimated database revenue overall grew only 1.7% from 2000. "In general, you also had a case where smaller vendors are struggling to hold their own or going away."

The Big Dogs Got the Bones

Similarly, in the application market, both Gartner and IDC analysts reported that gains in share by market leaders came at the expense of smaller players. "The market consolidated quite a bit. For the most part we saw a dramatic drop-off at the low end of the market," said Michele Rosen, research manager for IDC's business process automation and deployment software program. "Other vendors shifted to other functional areas. And that's where a lot of the growth came from."

Both Gartner and IDC analysts reported that gains in share by market leaders came at the expense of smaller players. "The market consolidated quite a bit. For the most part we saw a dramatic drop-off at the low end of the market," said Michele Rosen, research manager for IDC's business process automation and deployment software program. "Other vendors shifted to other functional areas. And that's where a lot of the growth came from."

For instance,

SilverStream Software

(SSSW)

last year shifted its focus away from the application server market to products above the application server such as integration, she said. The company's rank fell to No. 12 from No. 9 in 2000, she said. A larger vendor,

Computer Associates

(CA) - Get Report

, also shifted its focus away from application servers, Rosen said.

IDC, meanwhile, found that the market share of companies ranked lower than fifth place fell to 22% in 2001 from 34% in 2000. Small vendors faced a tough time last year because customers were focused on buying from established, big players that they viewed as safer bets, said Joanne Correia, vice president of Gartner Dataquest's Software Industry Research group and the author of the application server market study. "Enterprises are buying from vendors they feel are going to be around for a long time," she said.

But at least one large player,

Sun Microsystems

(SUNW) - Get Report

, also lost share last year. Gartner estimated the company's market share fell to 9% from 10% a year earlier, giving it a third-place ranking. IDC estimated that Sun's share fell to 7.9% from 9%, causing the company's rank to drop to fourth from third. Still, Sun is on the right track, with its announcement Wednesday that it is bundling its application server with its new Solaris 9 operating system software, Correia said.

Gartner's market share report for the first time included the appearance of integration software maker

Iona Technologies

(IONA)

, which the research firm estimated grabbed 3% of the market in 2001, ranking fourth.

Numbers from both Gartner and IDC showed the application server market has slowed down. Gartner said the market grew only 20% in 2001 to $1.8 billion -- down from 92% growth in 2000 -- and is expected to reach just under $3.2 billion by 2006.

IDC pegged 2001 growth at only 10%, though the firm predicted the market will double to almost $4.4 billion by 2006 with an improvement in the economy.

Shares of BEA fell 19 cents, or 1.72%, to close at $10.86. In after-hours trading, shares of BEA rose to $10.97. Shares of IBM rose 55 cents, or 0.7%, to close at $84. After hours, IBM shares inched up to $84.15. Shares of Oracle dropped by 5 cents, or 0.6%, to close at $8.80. After hours, Oracle was trading at $8.75.