Last week, Oracle demonstrated once again that like the Godfather, it can make offers to other software vendors that they cannot refuse. The company announced that middleware rival BEA has agreed to become part of Oracle for $8.5 billion in cash, or $19.375 per share. While the deal cost Larry Ellison and his crew significantly more than the $17 per share they originally bid for BEA, it was less than the $21 per share that BEA insisted it was worth. With the stock market tanking and taking tech shares down with it, BEA undoubtedly realized that it would be a long time before it would see a better offer.
With BEA in its shopping cart, Oracle is now on track to surpass IBM as the world’s largest middleware vendor. That puts the company in a much different position than it was three to four years ago when few industry observers put “Oracle” and “middleware” in the same sentence. As the global middleware leader, Oracle will show up on the short lists of many more companies and will undoubtedly rise to the top of quite a few of them. That, in turn, will make the fragile relationship between Oracle and IBM even more tense than it already is.
What’s in Store for BEA Customers?
According to Oracle’s statements about the acquisition, the company will continue to support BEA’s WebLogic, AquaLogic, and Tuxedo product lines for years to come. That will include supporting BEA customers that use these products with non-Oracle databases and applications. In addition, Oracle will ensure that BEA products can interoperate with Oracle Fusion Middleware. Since BEA’s and Oracle’s products support many of the same industry standards, interoperability levels between them are already quite high and will undoubtedly become higher.
The big question that BEA customers are asking themselves is whether Oracle will not only support their products, but also enhance them and issue new releases. At this point, it is too early to say whether Oracle will treat BEA’s wares as product lines that will continue to evolve. However, Oracle’s early statements indicate to us that any enhancements to BEA products could be minimal and focus mainly on integration with Fusion Middleware.
While Oracle is talking up the unique strengths of BEA’s products, the truth is that the two company’s products overlap each other almost entirely. Of course, BEA’s offerings are better at some things than their Oracle counterparts are. A short list would likely include high-end transaction processing, event messaging, business activity monitoring, and SOA governance. While these are “great to have” functions, we believe that Oracle bought BEA less for its technology than for the expanded market share it will enjoy. Oracle will also inherit a team of talented developers that should help it compete more effectively for additional market share with IBM, Microsoft, and SAP.
We also believe that over the next two to three years, Oracle will use the BEA development team to replicate the best of BEA’s functionality in its Fusion Middleware. During the same period, it will likely develop tools to help BEA users migrate to similar Fusion Middleware products. This does not mean that Oracle will coerce BEA customers to migrate. On the contrary, we expect that the software giant will portray any migration as a choice that users can take or leave. If there is one thing that Oracle has perfected over the last three years, it is the art of retaining customers by supporting their products while simultaneously offering them graceful exits to whatever the company anoints as its strategic offering.
What does all of this mean for JD Edwards customers who use BEA products? If you are one of them, relax…you will likely get support for as long as you want to use the software. However, don’t expect Oracle to keep enhancing your BEA gear over the long term to keep it competitive with rival offerings. To get the latest and greatest functions, you will likely need to migrate to Fusion Middleware down the line. Then again, migrating may not turn out to be all that painful because both product lines are so similar to each other.
As such, the best option for most JD Edwards customers will be to sit tight and not jump ship for other middleware vendors. If Oracle runs true to its recent form, the road to the future that it paves for BEA users will be a relatively smooth one.