Analysis: Oracle's Takeover of BEA Would Reduce Enterprise Software Choices
If Oracle succeeds, or someone else enters to acquire BEA's middleware offerings, the number of enterprise technology choices will dwindle yet again.
CIO — Perhaps Oracle doesn’t like it when SAP grabs headlines by announcing a juicy acquisition, as it did this week when SAP bought Business Objects.
Whatever the case, Oracle launched a bid for middleware vendor BEA Systems, the maker of WebLogic, on October 12, worth roughly $6.7 billion. Unlike the SAP announcement, however, Oracle’s salvo was not surprising because of its recent history of growing through acquisitions — JD Edwards (ERP), PeopleSoft (ERP), Siebel (CRM) and Hyperion (business intelligence) are just some of the bigger ones. If this deal indeed goes down—and indications are that it is not a done deal, based on BEA’s notice to Oracle that its offer was too low—enterprise software market observers this will have a huge impact on not just the software industry, but also many IT operations.
“Oracle's potential acquisition [of BEA] takes away the last remaining independent major middleware platform provider leaving future competitors without a large install base and a third party supplier,” says Ray Wang, a principal analyst at Forrester Research.
For years, though, many vendors such as SAP have preached “organic growth” as a way to bring new products and innovative services to the market. But as noted in this analysis of the SAP-Business Objects deal, that seems more and more like a bygone era for enterprise applications and software.
“If you can’t beat ‘em,” SAP seemed to say with the Business Objects purchase, “then join ‘em.” But what will all of these mergers and acquisitions mean for CIOs who have historically preferred some competition among their vendors and will now find themselves with fewer options?
Maybe it’ll be a good thing. For nearly a decade now, CIOs and their companies have been working to reduce complexity and siloed data and systems in their organizations. With fewer choices and, possibly, less integration chores to do because all of the available software applications will be under one vendor’s umbrella, CIOs’ infrastructure worries could decrease.
Forrester Research analyst John Rymer isn’t so sure. A merger between technology companies “does not necessarily translate to reduced complexity. There's a bit of software engineering required first,” he says. “The biggest suppliers are mostly operating as ‘portfolio companies,’ meaning they can fill most needs, but product integration is required.
“The contracts [between vendors and customers] can also be pretty complex when lots of products are included,” he adds. “So reduced complexity is not automatic.”
