Alfred Chuang, CEO of BEA Systems Inc., said BEA is a thought leader in the world of SOA (service-oriented architecture) with its WebLogic and AquaLogic product lines, along with its new portal strategy fueled by the acquisition of Plumtree Software earlier this year.
In an interview with eWEEK senior editor Darryl K. Taft at BEAWorld Beijing 2005 last month, Chuang also staunchly defends his companys core application server technology against open-source alternatives.
Which of the recent acquisitions have been the most strategic for BEA?
How do you define strategic? We buy two or three different kinds of companies. One is a change vehicle kind of company. Theyre not necessarily the most strategic from a product direction perspective. Others are strategic when it comes to adding people and talent in an area that would take a long time for us to build critical mass. And then the third kind would be technologically strategic in terms of building our product line.
So I think that Plumtree is big enough to be strategic. And its being led by Mark Carges … by a guy who I trust enormously and has been with the company forever. Hes very, very talented and very smart, been in sales, and has done everything in this company. And well use that as a vehicle to change the way we do things in the company.
Otherwise, you know, were getting big, we have 4,500 people and we keep growing and getting comfortable, and after a while you lose sight of the real out-of-the-box thinking. So weve bought some very strategic companies from the perspective of having some very talented people. Like ConnecTerra in the RFID space.
Representing another type of acquisition are the companies we bought to fill our technological voids—like getting the EJB 3.0 [Enterprise Java Beans 3.0] going, satisfying the market for the blended environment.
The joke inside the company is what company are we buying this month or this week, since weve been at it pretty aggressively. And the likelihood is we wont stop. People are guessing about how we will manage them.
M7 is strategic from a classic technological perspective. What they have done wouldve taken us way too long to try to reinvent. Even though its just a small group of people, they spent seven years on it. It would take BEA 10 times the people and five times the time. So that has to be a buy, not a build. SolarMetric also is a classic example of buying technology.
I figured Plumtree was the plum in the batch of acquisitions when you put former CTO Mark Carges in charge. Lots of folks asked why you would put him there and some even wondered if it was a demotion.
Its a promotion. The other thing we have to groom in the company is we have to groom more people that are CEO quality. And these are the people you cannot hire. Look at Adobe; look at companies that are bigger than us. Look at Microsoft as an example. Have they been able to hire CEOs or COO type people, and they survive? They cant because culturally in a software company it is so hard. So you have to groom. And you need more of these CEO-like people. If I get run over by a truck outside this building then thered be somebody ready to step up.
We have to be able to do big things and big things require people that think beyond just development or in silos. But when you grow so fast you groom a lot of people that grew up in the silos.
You get someone like Bill [Gates] and he is so unique in so many aspects, that you get people who try to follow in his footsteps. And thats the expectation people have. So unless you spend enough time on it and this becomes engendered in the company, you just wont get there.
Whats the uptake for AquaLogic been like? Are there differences between the uptake of AquaLogic in the states versus here in China?
Almost all the sales of AquaLogic are in the states at this time. No company would be in their right mind if theyre not talking SOA. Every major architect is talking SOA. So, all the purchases are all in the U.S. at this point in time. What surprised me, though, is we have landed some very large solo deals with AquaLogic. I didnt know it was going to be so fast.
Solo meaning new customers or existing customers?
Well, new customers and existing customers, but just buying AquaLogic, not because of WebLogic. So they look at it as a completely different kind of product. AOL is a good example. They have bought all kinds of stuff in the past, but weve sold a multi-million-dollar deal into them last quarter and its all AquaLogic. That is stunning to me. We didnt know that was going to happen so quickly.
Right. Its now about execution. And that question continues to come up, the one about sales and breaking new ground with your new AquaLogic product line.
We are selling to people we have never sold to before, ever. Were selling it to .Net shops and we never imagined we would be. Microsoft is taking us to .Net shops because theyre viewing it as a piece of neutral, independent software.
So were getting into territory weve never been in. We sold a large amount to a utility company in San Francisco last quarter that was a 100 percent SAP shop. Now theyre going to blend SAP and some WebLogic development to build their own portal. We never thought of that.
Next Page: The impact of open-source competition.
The Impact of Open
Whats been the impact of the open-source competition? Where do you see JBoss?
I have two conflicting pieces of intelligence. I have heard that theyre doing very well. And they are growing, but the numbers dont demonstrate them as a growing concern. Ill be very honest with you. I sat in a room last quarter and I thought that in Q3 that could be a challenging, competitive quarter for us. So I asked some of our guys who are you seeing. They said we saw Oracle and they took two deals away from us in the government. I said how many deals did we close in the quarter? They said 2,000. I said OK.
So I said who else do you see? They said, oh, we see JBoss and this is a problem. I said: How many deals did you lose to JBoss? They said, none, but we dont know what deals that were not involved in. (Laughter) Salesmen always find an excuse.
So thats what my intelligence is telling me. Their revenue is probably in the low 20s [millions] and about eight to nine million of that is what they call maintenance revenue. And the other is consulting revenue. And you have to put the consulting revenue aside because anybody can be a consultant. We can be a consultant for JBoss.
So with $8 million worth of maintenance … I told our head of American sales, how long did it take you to do that $8 million? He said, I dont know. I said probably as long as this conversation. So even if they grow 100 percent, they are not going to put a ding on you. Is this stuff self sellable? He said no, we see JBoss salesmen. I said how do you sell something thats free and rely on maintenance revenue thats going to be amortized over a three-year or five-year deal? So I asked: Why are you worried about something that doesnt exist?
I think the marketplace so wants to believe theres a transition that everything is going to become open source. They are believing in something that really doesnt exist. Will JBoss work? I think yes. Only if the J2EE [Java 2 Enterprise Edition] APIs become obsolete. If they become a commodity and nobody programs to J2EE anymore, then people will use JBoss. Because then you can pop JBoss and put it on WebLogic on the fly. Were not there yet. JBoss is not Linux, and Linux is not free.
Even if JBoss becomes part of, I dont know, Red Hat, its a different model. Linux has an “open” source community. JBoss does not have an open community, not everybody can join. If it was truly open source there should be BEA contributors to JBoss, but nope, we cant. Its a selective process they select. They have full control.
And another thing that bothers me more … Well, you might talk to Marc Fleury [CEO of JBoss Inc.], but nothing that he claims, I can substantiate. And I dont think he can substantiate. That really bothers me. Integrity is everything in the enterprise software business.
People rely on us to use the software … In last count, there were more than 600 million mobile numbers in this country [China]—we cant say 655 million subscribers because one subscriber could have more than one number. But there are 655 million numbers and every single one of them gets a bill issued either electronically or printed using BEA technology. This is no joke.
When do you see a move away from competition based on products to competition based on who has a better implementation of a standard?
When our size is big enough. And thats a changing target. People will argue that if youre the size of BEA, which is $1 billion plus, then youre ready. Well, I think that landscape changed a little bit. Now I think you have to be the size of probably an SAP—which is now the third largest software company in the world.
I think as times get better and projects start opening up again its going to swing back. And when a lot of startups start showing up again, I think BEA will easily be viewed as a force in the marketplace so that we dont have to play this little game any more.
We can play with the brand; we can play with the space itself. We dont have to be competing product-to-product and letting people just copy our stuff. We dont have to do that anymore. But right now we have to.
But thats part of what I see in AquaLogic, part of what you guys were involved in with the SCA [Service Component Architecture] announcement last week.
Sure. Sure. You know, either you break out and you do something new, so people cant catch you—which is something weve had to do—or youre sort of a sitting duck waiting for people to get enough implementation.
I have to tell you, though—this is a much better time … because you have people trying to chase you again. It feels much better than when youre in the same kitchen and there are a lot of cooks in there. And even if you have more utensils than anyone else, customers say, ah whatever, you all pretty much cook the same thing, we just want an omelet. And you have to say, well, no you dont want an omelet. Thats what IBM does.
You guys have promoted a varied development approach with your blended strategy, but arent you also at the same time recommending a single toolset?
No, people are using Struts, people are using a lot of open-source stuff that you can blend into the new Workshop, that you can use to push stuff out of Eclipse. And combining some of those frameworks is fine and youre not required to use BEAs framework at all. A lot of them you dont even use BEAs tools. You can use IBMs tools. You can even use IBMs Rational tools to develop an implementation and deploy it on WebLogic.