Early reaction to Oracle’s proposal to buy BEA Systems has observers acknowledging Oracle would have to deal with product overlap in the application server and middleware spaces.
The two companies have been fierce competitors particularly in the application server arena. A merger would give Oracle two application server lines as well as BEA’s customer base.
“I would imagine Oracle is buying [BEA] for the customers and the engineers and not just for the product,” said Ashish Jain, president of the Denver BEA User’s Group and a former BEA official.
He expressed disappointment and doubts about the proposal.
“When I was at BEA, we were told very specifically that we would never let this happen,” Jain said.
“I think it’s a sad [thing] to happen because BEA used to be the company that would invent and drive the way,” Jain said. “By Oracle acquiring, that would be the end of that.”
Burc Oral, a BEA user and president of the New England BEA Users Group, asked how Oracle would integrate the BEA product stack. “Oracle has a very similar product stack,” he said. “I’m not so sure how BEA’s going to fit into Oracle’s stack.”
Oral uses the BEA WebLogic Server application server for developing Java-based ecommerce applications.
BEA still has a lead over Oracle in application servers, said Oral. “The [product] roadmap is going to be quite murky,” he said. HP or CA might be better fits as suitors for BEA, Oral said.
“I always considered Oracle as a very good database company,” said Oral. It would be great if Oracle replaces its other products with BEA’s software, he said.
Products overlapping for the two companies include such offerings as the BEA WebLogic Server, matched by the Oracle Application Server; BEA WebLogic Portal, and Oracle Portal, for portals, and the BEA AquaLogic Service Bus and Oracle Enterprise Service Bus in the ESB space. Both companies also offer Java development platforms with BEA’s WebLogic Workshop countered by Oracle JDeveloper.
The two vendors participate in the Eclipse Foundation for open-source tooling, which would be more of a match than an overlap.
While recognizing overlap, analyst Laurent Lachal of Ovum did not think this would be a big problem. Both companies use J2EE, he noted.
“The overlap is a problem but I don’t think that it’s that big of a problem,” he said.
“The key thing is to get business people and technology people together to come up with a set of messages that clarify how the integration is going to be handled,” Lachal said. Like what has happened with its PeopleSoft acquisition, Oracle would move customers over at their own pace, said Lachal.
While Oracle has offered US$17 per share , a price called too low by BEA, Lachal suggested a price tag of $20 per share.
BEA, Jain said, has never been able to transition from a mid-size vendor to a large company. In the fiscal year that ended January 31, revenues were $1.4 billion, an increase of 17 percent from the previous year.
While BEA had an early advantage with its application server, Oracle and IBM caught up, said Jain. Complicating things was a situation in which many customers used just the Web server part of BEA’s product and not other features, such as security components. Users now can get Apache’s Tomcat Web server via open source, he said.
“Tomcat essentially had it free, and a lot of people just started using that,” said Jain, who now is director of technology at a Ping Identity, a startup company in the identity space.
BEA has had many product visions in recent years, such as Project Genesis for building mashup applications; SOA 360 for SOA, and Enterprise 360 for Web 2.0. But Lachal said the company has improved its marketing recently. Two years ago, the company talked about SOA from a technology perspective, but now it is done in business terms, Lachal said.
Oracle’s plan was called a win for BEA — if the price is right — by analyst David O’Connell of Nucleus Research in a prepared statement. BEA users also will gain because of scale and pricing benefits as they become a critical part of Oracle’s aggressive integration strategy, O’Connell said. Another analyst also gave the plan a thumbs-up in a prepared statement.
“BEA offers top-notch applications servers, ESB, and BPM (business process management) software,” said Bart Narter, senior analyst with Celent. “Oracle has a tradition of purchasing best-of-breed systems and successfully bringing them into the Oracle family. With this purchase, which comes just days after SAP’s bid for Business Objects, Oracle can now go head to head with other companies, such as IBM and SAP, in offering SOA infrastructures to the largest enterprises,” Narter said.
A representative at BEA user Applebee’s restaurants reserved comment. Applebee’s will talk to its BEA contacts about the issues involved, said Applebee’s representative Frank Ybarra.
Oracle would have to resolve another issue in which BEA is scheduled to receive a subsidy from the city of San Jose, Calif. to move its headquarters to a downtown office building.