Hewlett-Packard plans to attack BEA Systems and IBM in the market for software that runs e-business transactions by giving its product away for free. Analysts say HP is hoping to make inroads into the multibillion-dollar market for application server software, a technology that allows businesses to handle e-commerce and other Web site transactions. HP executives say the company's new strategy is to give away its base application server for free but to generate profit by selling software modules that work on top of it, including more reliable technology for transactions, and tools that allow businesses to build and offer new subscription-based software and services over the Internet. Analysts say HP's strategy is a smart move in its attempt to capture more market share. HP tied with Oracle for fourth place with 4 percent of the overall application server market in 2000, according to research firm Gartner. BEA Systems ranked first with 41 percent, followed by IBM with 31 percent and Sun Microsystems' iPlanet with 13 percent. "They're going after the application server market strongly and giving it away to force their way into the market," said Gartner analyst Mark Driver. "This is their play to change the market dynamics." Analysts say IBM recently has been dropping its application server prices and bundling the products along with its servers, and Sun is trying to entice more customers by bundling a free version of its iPlanet application server with its Solaris operating system. Sun will charge customers who end up running their e-business transactions on the application server, however. All of this combined could help rivals grab more market share from BEA, analysts say. "They're putting a lot of pressure to (commodify) the application server," said Forrester Research analyst Chris Dial. "And it puts pressure on BEA because BEA is known for charging a lot for its application server." Gartner's Driver said IBM, HP, Sun and Oracle can bundle their application server products with either hardware or other products in their e-business software families. While BEA has begun to offer a slew of add-ons to its application server products, such as software that allows companies to build portal sites, the company doesn't have the product breadth of its competitors, Driver said. "That's good news for HP, but potentially bad for BEA," Driver said. "Even Oracle has a database and other (business) software that can be bundled. BEA is in a precarious position and needs to significantly expand its software offerings in the next five years." Christopher Benedetto, product marketing director for HP's middleware division, said HP's new application server 8.0 is built entirely from scratch and supports Windows, the HP-UX version of Unix, Sun's Solaris and Red Hat's Linux operating systems. Like rival software, the new HP software supports the latest version of Java 2 Enterprise Edition, the Java standard for writing business software that includes Enterprise JavaBeans (EJBs), a programming model that allows developers to write software using reusable pieces of code. HP will charge customers for additional features on its application servers. Like its rivals, HP is also offering tools that will allow businesses to build and offer Web services. Every major software maker has touted a future in which software will be available as a subscription-based service over the Web to PCs, cell phones and other handheld devices. HP's tools will allow the application server to support Web services standards and allow companies to visually diagram and map out how a Web service will work within the company. Other features will allow HP's application server to run more reliably, Benedetto said. For example, the base application server has rudimentary transaction capabilities, but new add-on parts can guarantee the delivery and reception of transactions, Benedetto said. Another add-on ensures that the application server will remember a transaction, such as a purchase from an e-commerce site, even if the Web site goes down. A third module supports Java Message Service (JMS), which allows for businesses to message each other. For example, using JMS to link computer systems, a carmaker can immediately fire off orders to a supplier for headlights every time a person buys a car. More enterprise IT news in ZDNet UK's Enterprise Channel Have your say instantly, and see what others have said. Click on the TalkBack button and go to the ZDNet news forum. Let the editors know what you think in the Mailroom. And read other letters.