Oracles Bid for BEA Raises Questions About Fusion

The bid for BEA Systems raises questions about whether development of Oracle's Fusion Architecture is on track.

Oracles $6.7 billion bid for BEA Systems on Oct. 12 leaves, at this early stage, more questions than answers.

Clearly, Oracles acquisition strategy—its bought 36 companies in the past two years—is to buy companies with a hefty customer base that add to its bottom line and expand its market share. And BEA, with its blue-chip client roster in key financial services and communications verticals, fits nicely into Oracles strategy.

But what does Oracles nod to BEA say about Oracles Fusion Middleware (and applications) strategy, given the fact that Oracle has pounded the middleware pulpit for the last two years, evangelizing the completeness of its suite?

Furthermore, Oracles Fusion Applications suite—which is supposed to bring together the Oracle E-Business Suite with "best of" functionality from Oracles other acquisitions, such as PeopleSoft, JD Edwards and Siebel Systems—is underpinned by Fusion Middleware.

With the acquisition of BEA, would Fusion Middleware remain the basis for Fusion apps? Rumors floating around the week of Oct. 8 suggest that Oracle will announce a major delay to Fusion Applications, currently expected in 2008, at its November OpenWorld conference in San Francisco.


Click here to read about whether BEAs rejection of Oracles initial buyout bid will prompt Oracle to up the ante.

Vinnie Mirchandani, founder of IT analysis firm Deal Architect, wrote in an Oct. 11 blog that he expects Oracle to acknowledge at OpenWorld that Fusion apps will be delayed through 2009 at the earliest, and that the projects technical lead, John Wookey, "may be a casualty as a result." Others have suggested that Thomas Kurian, senior vice president of Fusion Middleware, will take Wookeys place. The rumor mill surrounding Fusion Applications will only pump out more data with BEA thrown in the mix.

There is also the question of BEAs response to Oracles bid. BEA, long rumored to be an acquisition target of Oracle, has made no bones about its fierce desire to remain independent. But with steadily declining stock prices and investor pressure to sell, BEA is ripe for acquisition.

Forrester analyst Ray Wang pointed out in an Oct. 12 blog post that Oracle should be ready for a fight. "Other vendors like SAP, IBM and HP [Hewlett-Packard] need BEA more than Oracle does," Wang wrote. "SAPs NetWeaver is among the weakest of middleware platforms, despite [having] one of the strongest ecosystems."

Oracle is bidding for BEA because "they want the customer set. BEA has telcos and financial services companies, and thats where the money is," Wang wrote.

"IBM will be threatened by an Oracle dominance in middleware. HP could use this as an entry point to gain traction in the market. Oracles potential acquisition takes away the last remaining independent major middleware platform provider, leaving future competitors without a large install base and third-party player," he wrote.

Furthermore, Wang said he believes BEA President and CEO Alfred Chuang "wants to keep the company independent."

SAP, which announced its acquisition of Business Objects Oct. 7, essentially did an about-face of its strategy in order to grow organically and acquire smaller companies as "tuck-in" acquisitions to augment its own technology. The question is whether BEA could present yet another opportunity for reversal, given SAPs intense rivalry with Oracle.

Oracle has implemented a "Surround SAP" strategy designed to, well, surround SAP customers with Oracle technology. Those users that are SAP and BEA customers would now be in the direct sights of Oracles sales force.

Wang said theres even a "wild possibility" that a consortium of system integrators could pool resources to bolster BEAs independence. "[BEA] is the crown jewel in the market," Wang said. "There are SIs that would want it to remain independent. … Customers chose BEA for a reason—they thought it was the best product out there for their needs. Ultimately, one of those customers could decide to buy BEA themselves and help support it or keep it independent."

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