Business Issues -> Change
By: John Brand, Research Director, Hydrasight
Published: 5th February 2008
Copyright Hydrasight © 2008
Hydrasight believes the acquisition of BEA's customer base is the primary motive behind Oracle's January 2008 definitive agreement to purchase BEA. We expect Oracle will (relatively) quickly integrate the BEA organisation (e.g., rationalising the sales, marketing, administration, support and some development functions). As such, the BEA organisation is not expected to create major business integration challenges for Oracle. Nonetheless, and despite finally putting the question of BEA's future to rest, we believe the acquisition will cause some challenges and confusion for existing clients as Oracle tries to integrate BEA's products into its portfolio.
We note that Oracle's acquisition strategy over recent times has generally been to ‘surround and conquer' the likes of SAP, IBM and Microsoft rather than compete ‘head to head' in enterprise applications and software infrastructure. Oracle has also managed to marginalise SAP by forcing them to prove NetWeaver's business value as a generic development platform relative to ‘traditional' tools/methods. We also observe that each major software acquisition by Oracle brings into question the validity of its technology ‘stack'—primarily because of the increasingly disparate platforms across the portfolio. In contrast, BEA customers have often developed comprehensive applications that are largely based on a relatively cohesive and unified BEA technology stack (i.e., portal, ‘lightweight' content management, process automation/workflow, messaging, application server, object-to-relational database object mapping).
While Oracle gains a set of premium customers from the BEA acquisition, Hydrasight believes BEA customers will be challenged over time to rationalise their existing implementations with Oracle's emerging Fusion platform (refer "The sum of Oracle's parts are more than a compelling Fusion").
Oracle's Fusion has so far been the (marketing-driven) strategy to counter customer concerns about the technical direction of Oracle's ‘stack' and its rapidly growing software portfolio (refer "Oracle's application Fusion - attractive but often irrelevant"). While Oracle will continue to see BEA revenue as being too attractive to ignore, at least in the short term, existing BEA customers are nonetheless expected to be put under increasing pressure by Oracle as it attempts to ‘rationalise' the existing BEA technology stack. Increasing sales complexity, higher support costs (as a result of having to support multiple products) and Oracle's changing competitive landscape will pressure BEA customers to move toward selective parts of the Oracle stack over the longer term-based on profitability more than technology elegance, performance or viability.
While Oracle's acquisition of BEA will bring some certainty for existing users, Hydrasight does not believe it validates the technology or brings any greater degree of viability to the platform. We expect Oracle to try to reposition selected BEA product lines as ‘mid-market', especially portal, however we believe this strategy will be unsuccessful. Instead, Hydrasight believes BEA customers must ensure they are prepared to redevelop and/or migrate BEA-based applications over the next 7–10 years, noting that there is no immediate impetus to do so. We believe Oracle will take a slow but steady approach to subsuming BEA's technology into the evolving Fusion ‘platform' and, as such, will be required to support existing applications through at least 2014.
Posted: 13th February 2008 | By J.K. :
In my opinion, having worked for both companies and also IBM, the person who wrote this article is speaking empirically, and apparently quite ignorant of the realities on the ground. Customer's architectures are always in flux, and consultant support most complex integrations, which means that customer choice, when expanded is a positive thing. Complexity has less to do with platform selection that how it is managed. Oracle's ability to develop across platforms is only enhanced by this deal, not to mention the staff augmentation of some very smart developers, marginalized by the article.
It almost seems as if the article was written with a particular motive...
Posted: 13th February 2008 | By John Brand :
Thanks for these comments. As an industry analyst I'm open to any perspectives that impact the market that I haven't considered.
To use an analogy, what you seem to be saying though is that it would be ok to buy a kit car from several different manufacturers so long as you had a good mechanic who could put it all together for you.
When you say "It almost seems as if the article was written with a particular motive..." I wonder what you consider my motive as being? I also wonder when you say "having worked for both companies and IBM" might you be considered a consultant whose job relies on integrating multiple complex products...?
Posted: 16th February 2008 | By Swaroop Sen :
First, I do not work for Oracle.
Do Not Agree on below points and my comments.
1) The acquisition of BEA's customer base is the primary motive behind Oracle's January 2008 definitive agreement to purchase BEA.
Comments: The world dynamic is changing rapidly. Given Oracle would enjoy Bea’s customer base however the biggest point is Oracle is adding another weapon in their portfolio to effectively play a game with the top competitors and evolve at the same time.
2) Nonetheless, and despite finally putting the question of BEA's future to rest, we believe the acquisition will cause some challenges and confusion for existing clients as Oracle tries to integrate BEA's products into its portfolio.
Comments: I wouldn’t imagine any short or mid term impact of Bea’s presence in the mid market as they have huge presence and a very strong one and would be quite insane to have it replaced with Fusion. Long term no body knows…
3) BEA customers are nonetheless expected to be put under increasing pressure by Oracle as it attempts to ‘rationalise' the existing BEA technology stack. Increasing sales complexity, higher support costs (as a result of having to support multiple products)
Comments: I don’t believe Oracle would do the mistake of pissing there customers especially when they have bunch of different products in there portfolio. They can always define PMOs to deal with different Portfolios and Projects related to different products. Yes, the Sales complexity would increase but the benefit on other hand is the Sales team has more to Sell!! Yes there would higher Support Cost for Oracle but net on net they will be still profitable as they will enjoying the Support contracts revenues from BEA.
Posted: 21st February 2008 | By Chris P :
I think a major fact that was overlooked in this article is the relationship that BEA and PeopleSoft had prior to the Oracle merger. The core infrastructure pieces (application server, process scheduler and web server) in about 90% of PeopleSoft installations are BEA products. That was a huge cost for Oracle to pay BEA once they acquired PeopleSoft. I think more than the other points made that was the single biggest driver to the deal. Why pay BEA royalties when we can just buy them lock stock and Barrel. Also adoption of Oracle fusion middleware to accomplish the same purpose the BEA software served has been minimal by PeopleSoft customers. I just think these facts are too big to be ignored when writing on why BEA was acquired and what position it products play in Oracle's stack. I am also a former Oracle employee.
Posted: 8th July 2008 | By Nathaniel :
Which SOA vendors are preferred by systems integrators?
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