After fending off Oracle's advances since October 2007, BEA Systems acquiesced to Redwood City's offering of £4.3bn, which was nearly £2bn more than Oracle's original October bid. CIOs and IT departments must get ready for a year of confusion, analysts say, as product sets, sales teams and engineering organisations get sorted out. But there are smart ways to cope.
The announcement of the deal came as little surprise to anyone who follows the industry or is the least bit familiar with Oracle's modus operandi. Can anyone remember the last time Oracle made a serious bid for a company that it wanted to acquire and didn't get its target? "I cannot think of a case," says Mike Gilpin, a VP and research director at Forrester Research who follows middleware.
Like JD Edwards, PeopleSoft, Siebel, Hyperion and many others before it, BEA managementtook the money. For Oracle and its customers, the acquisition will fill several holes in its middleware product line, such as Java-based development tools and service lifecycle management, says Gilpin.
In addition, Oracle CEO Larry Ellison said that BEA's products "will significantly enhance and extend Oracle's Fusion middleware software suite" in the announcement.
To Gilpin, though, this latest deal and the year of splashy acquisitions by the major technology vendors that preceded it in 2007 have significantly altered the playing field. He describes a cumulative "psychological impact" of the deals that will affect CIOs' strategies going forward. "Until now, you could fool yourself into thinking that if you were a buyer of middleware technologies that the world was pretty much like it had always been," he said. "That there's a lot of choice [in the market], that choice matters, that some products were better than others, and that you should be buying the better products."
But that has all changed, he said. With all of the acquisitions, buying software is all about "channels" and "camps" now: Who are the partners and solution providers in your vendor's stable? "The size of the partner channel and the ways that vendors can offer comprehensive solutions and linkages to application portfolios-those are more important now [than just the best one-off product]," Gilpin said. "And that's clearly playing to the advantage of the big multi-play firms, like Oracle, IBM and Microsoft too."
Possible costs for both camps
With roughly $20bn in annual revenues and a parking lot's worth of acquired high-tech brands under its red banner, Oracle is a force to be reckoned with.
And despite Ellison's promise that BEA customers will be able to "choose among Oracle and BEA middleware products, knowing that those products will gracefully interoperate and be supported for years to come," these types of deals always come with a cost to the customer base of the acquired companies.
Forrester's Gilpin notes that BEA's current customers using the Portal product will ultimately find it desirable to migrate to Oracle's Web Center. "They won't be forced to do that," he explains, "but it means that some investments made in the context of BEA's portal will not return their full value, in the long run." They also might experience cost pressures from one of two sources. "Either they will migrate and have those costs (in a few areas, not just the portal)," he said, "or they will not and will likely have to pay Oracle's 'Lifetime Support' fees which will probably be higher than what they have been paying to BEA."