R. Fink | For app-server giant, a grim tale of changing times
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Commentary: Without applications or a big professional services operation of its own, BEA is stuck in the apple business while everyone else is making sauce.
'Once upon a time there was afamily of bears that grew apples,'the Rat recited to his youngestchild. 'And life was good for awhile; everyone liked their applesaucea lot, and people would buyit from them for lots of money.''Then a collective of bears downthe valley started plantingapple trees in people'syards for free, with thehope of getting consultingwork on howto pick them ...''Daddy, can youskip ahead to thepart where the oraclenamed Larry offersto buy the bears'orchard?' the ratletteasked. 'I want to have time tocheck my portfolio before I go tobed.'Once again, the Rat had set thebar too low for his 6-year-old audience.The parable of the corporatetakeover attempt that is the done but-hardly-over Oracle offer forBEA Systems is one that hasplayed out many times in the technologymarket. And it certainlywon't be the last time: When whatyou make becomes de rigueur, it'stime to move business up the valuechain or get eaten.'OK,' the whiskered one continued.'So as application servers becamea commodity, open-sourcesoftware started to eat into BEA'smarket share and license-salesgrowth, and along came the bigbad Oracle with an offer to buy theorchard for close to market value.And the bears ' I mean, the board' refused, ticking off their big investorswho wanted to take themoney and run. And the big badCarl Icahn, who had invested inmore of BEA's apple trees thananyone else, huffed and puffedat the board for not lettingthe apple growersdecide. And he mightstill blow the housedown.''So what happenedto BEA'sstock price?' the littlerat asked, twiddlingwith her Black-Berry to answer her ownquestion. 'Oh. That was bad.The bears were dumb.'BEA should know all too well whatthe nature of the market is like.After all, its founders cobbled thecompany together through acquisitionsof application server companies.But the company is the last ofthe app server Mohicans, and almostall other application serversare now either open-source or bundledwith other wares.And while there are plenty ofWebLogic servers out there lurkingbeneath the covers of governmentand private-sector applications, therise of JBoss ' and open-sourceversions of IBM's WebSphere andSun Microsystems' Java SystemApplication Server ' has madeeven the premium aspects of BEA'ssoftware seem overpriced in a marketwhere everything else is free 'at least before you add supportand consulting.Sure, BEA has grand plans withsomething it's calling Project Genesis.But that road map for service orientedarchitectures, businessprocess management, social networkingand Web 2.0 architecturesthat BEA is promising for Decemberright now is just a press releasefull of buzzwords. 'Maybe theyshould sell honey from all the beesthat they use to make the buzzwords,'the Rat's daughter opinedsweetly.Maybe the honey business wouldbe a better bet for BEA. Oracle sawthe writing on the wall in the databasebusiness years ago whendatabases became commodities,and went after applications to helpsell its databases. IBM saw PCs becomecommodities and sold offthat business, jumping into consultingand high-margin productsthat require consultants. But withoutapplications or a big professionalservices operation of itsown, BEA is stuck in the applebusiness while everyone else ismaking sauce.
Michael Bechetti
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