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BEA pitches to the business crowd

Facing larger competitors and open-source alternatives, BEA is pitching new software to assemble, rather than code, business applications.

Searching for new revenue, BEA Systems is expanding beyond its techie roots to reach another type of customer.

The infrastructure software company later this year will deliver tools aimed at technically savvy business people and system architects who need to create business software, said Paul Patrick, chief architect of BEA's AquaLogic product family.

That's a switch for BEA, which typically markets to high-end Java programmers. The bulk of the company's revenue still comes from its Java server middleware and tools, which are used for writing and running business applications.

With its AquaLogic product line--and its Composer tool, specifically--BEA is trying to cater to a different audience, namely technically literate business analysts and enterprise architects who design systems.

BEA's strategy underscores an ongoing shift in technology purchasing at large companies: Unlike in years past, when IT departments had final say on buying decisions, business people are increasingly involved in choosing technology, giving them more purchasing clout over IT budgets.

"Money used to be in IT departments. Now it's in the business--they're funding IT," said Patrick. "Business people are driving transformation inside companies."

Selling to these new tech decision makers is a tactic other software makers are actively pursuing.

Microsoft, for example, launched a marketing campaign explicitly aimed at CEOs and other "business leaders." Even its developer-oriented tools, such as Visual Studio Team System, are being designed with connections to so-called portfolio management software, which project managers or chief information officers use.

IBM, too, seeks to sell to both technical and business managers, and the company is investing in its business consulting group in an effort to drive more outsourcing revenue.

BEA's expanded product line, which company executives say is selling well, is meant to stimulate sales at the company, which has seen revenue climb recently after a string of declines last year.

But analysts note that the new products don't fully insulate BEA from competition from larger companies--Microsoft, IBM, Oracle and SAP--or open-source upstarts, notably JBoss. All middleware software providers are vying for money spent on upgrading corporate technology to a services-oriented architecture (SOA), a more modern, modular system design.

Urban planners
BEA's AquaLogic Composer products, which will be rolled out in the next six to 12 months, will fill a hole in the existing AquaLogic product lineup, which the company first introduced last year, Patrick said.

The Composer suite is designed to let people assemble applications by connecting different systems using prewritten components, with no need to write code, he said. That's in sharp contrast to BEA's Java-heavy WebLogic development tools and infrastructure software.

Using an urban planning analogy, Patrick said WebLogic Java software is for building buildings, whereas the AquaLogic products are for designing cities. Instead of writing standalone programs--the buildings in this analogy--architects and business analysts consider other issues, such as dependencies between applications, having adequate hardware, performance and policies for governing use of applications.

In addition, AquaLogic is a deliberate break with BEA's focus on Java as the primary programming language and Java 2 Enterprise Edition application (J2EE) servers to run them.

The reality of most corporate customers pursuing a services-oriented architecture (SOA) is that there's a wide variety of standards and programming languages, Patrick said.

"It's not just about Java. It's not just about J2EE. It's not just about WebLogic," he said. "AquaLogic is not tied so it can only run on WebLogic."

Buying spree
To fuel its product expansion, BEA has acquired several companies over the past year. The largest were portal software company Plumtree, acquired last August, and Fuego, picked up earlier this year, which makes so-called business process management (BPM) software for automating business processes.

The acquisitions, coupled with BEA's strategy of supporting open-source products, mean that applications made with AquaLogic can run on both Java and Microsoft .Net servers, said Patrick.

But that strategy has drawn some skepticism, in part because of overlap with BEA's existing WebLogic products.

Annrai O'Toole, CEO of Cape Clear, which competes with BEA, said that the Fuego and Plumtree offerings brought proprietary technology into BEA's standards-based product mix.

"The success of SOA is dependent on open standards. How does the addition of more proprietary technologies get them closer to supporting SOA?" O'Toole wrote in a blog entry.

He speculated on whether the departure of several high-level executives from BEA in 2004 had affected the company's decisions.

Financial picture
While BEA sells only middleware, its large competitors have assembled broader product portfolios. That bigger product "footprint" can be an advantage when selling to cost-conscious corporate customers looking to cut down on the number of vendors they deal with, analysts said.

In addition, there are now a number of freely available open-source Java application servers that, in general, are low-end alternatives to BEA's flagship software WebLogic Server. The company was also considered a takeover candidate from Oracle for a time.

Still, despite the mounting competition and internal tumult of two years back, BEA's finances are better today than they were 12 months ago.

After seeing its license sales drop for five straight quarters through the first half of last year, the company watched revenue perk up last summer, and BEA topped $1 billion in revenue last fiscal year.

The improving financial picture has helped push its stock above $13 in the past month, a significant jump from its $8 share price of about a year ago.

But even with its strong fiscal year, some analysts are not convinced that BEA can maintain its growth rate. The company reports its first-quarter fiscal 2007 results in May.

Burton Group analyst Anne Thomas Manes said BEA continues to have good products and well-regarded engineers. But some problems remain, including lost market share to JBoss and product overlap following its acquisitions.

"BEA is feeling proud of themselves because they had a good year," Manes said. "But I'm not convinced they are out of (the) water."