The next household name?

Application-server software may not be sexy, but under CEO Alfred Chuang, BEA Systems has elbowed aside rivals to become the market's leader.

5 min read
Alfred Chuang isn't yet a household name, but seven years after he co-founded BEA Systems, both Bill Gates and Larry Ellison are watching his company warily.

BEA finished its last fiscal year with $975 million in revenue, making the San Jose, Calif.-based company the market share leader in the lucrative market for application-server software, a category of products that allows businesses to handle e-commerce and other Web site transactions.

Microsoft Chairman Gates has publicly described BEA as a competitor to the software giant, and Oracle CEO Ellison has gone one step further, attacking BEA in speeches and marketing campaigns.

What's it like to be a target?

"I am flattered," said Chuang, a 40-year-old Hong Kong native who previously spent nine years as a senior manager at Sun Microsystems. "I'd like to have a billion-dollar company that these guys don't notice, but that's the price you pay. You get noticed by people."

Chuang, a graduate of the University of San Francisco and the University of California at Davis, co-founded BEA in 1995. He has since managed everything from BEA's engineering and product development to the company's marketing, sales and finance departments. He replaced BEA co-founder Bill Coleman as CEO last October.

On the eve of this week's annual BEA eWorld conference in San Diego, CNET News.com spoke with Chuang, who described his long-term goals for BEA, talked about the competition, and laid out his vision for Web services.

Q: What's the message you're conveying to customers at your annual conference?
A: The Department of Motor Vehicles and the banks are still running on 30- to 40-year-old computers. It's almost the dinosaur age. Our major message is it's time to shift and revolutionize the environment. We will be focused on what that revolution will be: Microsoft's Windows gave us access to computing much easier, with the proliferation of the PC as a tool. The same thing has to happen with software for enterprises. The new stuff is Internet-based.

What are your goals for BEA in the next year or two, financially and competitively?
The way (Web services) will change the world is by shielding complexity away from users. Our goal is to have 1 million developers using BEA's technology. We want to continue to rack up substantial customers and penetrate large enterprises with our technologies. Financially, we are conservative, coming off our toughest year economically. We've set revenue guidance for $967 million to $1.025 billion for this current fiscal year. It's a small increase (from the previous year). Few companies have crossed a $2 billion run rate, but I'd like to get there as soon as possible.

What have you done to combat the bad economy?
As a company, you have to hunker down. As things get tough, you have to be more focused...We have eight new products in the next 90 days. We've been conservative on spending money, and the company has a lot of cash--more than $1 billion in cash. That helps because your viability is never in doubt.

We did do some trimming last quarter, about 200 people, but that's less than 9 percent of the company. It was the right thing to do. It makes the company leaner and more aggressive. Our smaller competitors are struggling, so it's time to grab market share.

Who's your biggest competitor? IBM, which is percentage points behind you in market share of application servers? Or is it Microsoft?
It's clearly IBM. They sell into the customer directly, and the critical thing is they own the legacy base of customers. Those mainframe (computers) that companies are using to run their applications today--we run into IBM because of that. They're a tough competitor. And they sell a lot of stuff--hardware, storage, PCs, monitors, keyboards, all this stuff. With Microsoft, there's a lot of noise in everything they do, such as .Net. But we don't see them in deals (for e-business software).

How will Web services change things?
Some of Microsoft's behavior is not acceptable. They need to be punished for stifling competition and innovation in the marketplace. The way it will change the world is by shielding complexity away from users. You gain compatibility (between different software and computing systems). This is the only agreed-upon layer today by us, Microsoft, IBM and others on how to be interoperable. We jointly founded a group called the Web Services Interoperability Organization to make sure things are compatible.

This week we will demonstrate a car using our technology, where you can push a button and someone can talk to you and help you make reservations with an airline. Getting smog checks is a pain in the butt, but in the future, the car can (automatically) scan the system and report the results directly. Where does Web services help? Web services allows people to build applications, so things are linked up and dynamically integrated together. And new and very old environments are tied together into one.

What's your view of the U.S. government's settlement with Microsoft on the antitrust case?
It's mixed emotions. I'm glad it's over. Yes, they are a monopoly and they've been naughty, but at the same time, it's not helping the economy and helping to push technology forward. In this economic climate, people don't want to see this. But at the same time, some of Microsoft's behavior is not acceptable. They need to be punished for stifling competition and innovation in the marketplace. I'm here to innovate, and most of the companies in the (San Francisco) Bay Area are here to do so.

How has your life changed since you became CEO?
I was chief operating officer for two and a half years before taking the CEO job. The change is not in running the company. The change is doing TV and interviewing with people. It's my duty to spend more time with developers and the analyst community. I enjoy it. I don't get to tinker with technology as much as I've done in the past.

What are your personal goals?
I want to make a difference. At some point, I want to help my kids and explain that they can do so much by just sitting in your car. You can drive to work and pay your bills, book airline tickets, or buy groceries. I want to change people's lives with technology.