BEA, Oracle users fear price hikes, dumping of products

Users from both camps turn a wary eye to Oracle's $8.5 billion agreement to buy BEA

Users of technology from both companies today expressed concern about Oracle Corp.'s $8.5 billion agreement to buy BEA Systems Inc. and to fold in the latter's middleware to the Oracle software stack.

The BEA board of director's vote to approve the sale for $19.375 per share came just three months after it spurned Oracle's $6.7 billion offer in October to buy the software vendor.

Burc Oral, a senior architect at Cambridge, Mass.-based government contractor CellExchange Inc., said that while the acquisition will give users the option of buying a database and an application server from a single vendor, he also expects a period of "confusion" for BEA users because of technology overlap.

Oral, who also heads the New England BEA Users Group, said that he expects that the deal will likely mean the end of some products -- "a little from Oracle and a lot from BEA."

He said that Oracle would be well served to retain BEA's WebLogic product, which has a hearty following among users, who have been provided with good support from BEA over the years. "[BEA] had their [WebLogic] product out there many years before Oracle was out there," Oral said. "[It] is very easy to use, and BEA has always been very friendly to the user community with downloads and documentation. Oracle doesn't have this wide acceptance from the user community in terms of applications. With BEA, life is a lot easier."

But, he noted that since Oracle made its first bid for BEA in October, the middleware firm has been less responsive than usual to the user group. In addition, Oral said that users from previous Oracle acquisitions including Siebel Systems Inc. and Hyperion Solutions Corp. appear to be "getting better value" from a larger organization that they did before the acquisition.

Jim Burgard, assistant vice chancellor of university computing and communication at the University of New Orleans, said that he doesn't expect the deal to significantly affect his organization, which uses WebLogic with Oracle's PeopleSoft applications. However, he added that he "does have some concerns about future licensing and maintenance costs now that all the components are owned by one vendor."

Mike Gilpin, an analyst at Forrester Research Inc., said that Burgard's fear is not unfounded, noting that support costs for users of BEA's WebLogic Server, AquaLogic Service Bus, AquaLogic BPM, WebLogic Event Server and AquaLogic SOA Management products could grow after the deal closes later this year.

Gilpin did note that Oracle has promised "lifetime support" for BEA products that overlap Oracle's offerings. That means that BEA users won't have to dump their BEA products but may over time pay more for support, he said. If they do move to Oracle's technology, they'll have to pay for migration, Gilpin added.

"Oracle has assured us that they will be very mindful of protecting the interests of existing BEA customers, just as they have been for customers of PeopleSoft and Siebel -- and I find their assurances credible," Gilpin said. "It's not in Oracle's interest to aggravate these customers, In many cases, they are already Oracle customers, anyway."

Todd Langille, project manager of administrative computing at Dartmouth College in Hanover, N.H., said that he has concerns over whether Oracle has a "clear coherent strategy" for its growing software portfolio, which includes many similar products.

For example, he noted that Oracle bought business intelligence software vendors Hyperion and Siebel despite have its own BI tool set -- Discover. "I take a look at that mix of acquisitions, and I'm not really sure what their data warehouse strategy will be with all their business intelligence products in play," he remarked.

Langille observed that because Dartmouth runs both Oracle Application Server and BEA's WebLogic software, it's not as important to him which product becomes the database vendor's primary middleware offering. "We see [the acquisition] as probably a knocking down of competition, but given that we use both products, we stand to benefit from whatever intellectual properly Oracle [gains]," he added.

BEA should expedite Oracle's efforts to construct a standards-based middleware architecture, Langille said. However, he acknowledged that it will take some time before any wholesale replacement for Oracle Application Server arrives.

"I don't think products are identical, and for that reason I don't think one will disappear quickly," he added.

Patricia Dues, enterprise program manager for the city of Las Vegas, said she hopes that Oracle can use BEA's technology to improve its various offerings. For example, she said she hopes software acquired from BEA can augment the analytical capability of the Oracle Business Intelligence Enterprise Edition offering recently purchased by the city.

"We realize what Oracle has done with other acquisitions in taking the best of both worlds -- there's always room for improvement, and this sparks our interest with the acquisition of BEA," said Dues.

Dues downplayed any concerns that Oracle's ongoing attrition of its software competitors -- both large and small -- may divert the company's focus away from existing customers or product road maps. "I don't see this as what Larry [Ellison] wants. I think there's a strategy behind it all. I can't say that I feel like [Oracle] is going to desert us; they have too many products to manage," she said.

Copyright © 2008 IDG Communications, Inc.

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