BEA to take on Asia thanks to Oracle

Oracle's acquisition of BEA will boost the latter's presence in Asia Pacific, as well as strengthening Oracle's foothold in the telecommunications space -- but there will be no serious ramifications on the local market, according to analysts.

The buyout will see BEA benefitting from the deal by being able to tap into Oracle's extensive sales network in Asia, however. Chris Perrine, Springboard Research COO, told ZDNet Australia sister site ZDNet Asia: "BEA will be able to tap into [Oracle's] network of infrastructure and partners to accelerate their sales plans and penetration in Asia."

Oracle also stands to benefit from BEA's strong foothold in China, Perrine said. "China has always been the most important market for BEA in Asia, and historically, they have done very well [in Asia]," he said.

However, according to Massimo Pezzini, distinguished analyst at research firm Gartner, the acquisition will not have any profound effects on the local market. The impact in Australia "will be the same as anywhere else", he said in a statement.

Balaka Aggarwal, Springboard senior manager, added that BEA's presence in the region is supported by a clientele that includes some of the larger telecommunications providers, including BSNL and MTNL in India, and China Mobile, China Unicom, China Telecom and China Netcom.

The software company's strength in the telecommunications industry will also help bolster Oracle's efforts over the last two years to expand its presence in this segment, Aggarwal said.

According to a Technology Business Research (TBR) paper, this focus on the telecommunications space is in line with Oracle's acquisitions of telecommunications middleware companies, Net4Call and Portal Software, in April 2006.

"TBR believes BEA positioned itself well to take advantage of the growing telecommunications market in Asia-Pacific and Japan," the report noted.

Furthermore, BEA's Tuxedo suite for high-transaction processing software is popular among customers in China and India that handle high-volume transactions such as Indian Railways, credit card transaction gateways in China and telecommunications companies, Springboard's Aggarwal said.

David Mitchell, Ovum IT research senior vice president, predicts that after the BEA deal, Oracle will set its sights on the smaller applications producers. Mitchell said in a statement: "We expect that Oracle's appetite is still not satiated, although the volume of medium to large-scale targets on the market is now reducing. Expect the next moves to be in the industry-specific applications category."

TBR also predicted that Oracle will leverage its offshore coding assets in India and China, while the BEA teams will largely work on architectures and front-end development.

TBR's report noted that the consolidation between BEA and Oracle's developer teams will help lower R&D costs of BEA's team. According to the research company, BEA's developer team of 1,200 is dwarfed by Oracle's R&D team of some 20,000, but R&D costs per head for BEA reaches beyond US$200,000, while Oracle's is pegged at US$124,000.

On what the acquisition means for the SOA market, Perrine said: "I believe both Oracle and BEA's competitors should be worried. Oracle will get more strength and heft in the SOA front, as well as more revenue coming in to further invest in these efforts across the region.

"Oracle will also get some interesting opportunities through BEA's customers, as well as a more cohesive offering to take to clients," he said.

Mitchell said: "The middleware market is one of the most significant markets within the technology industry... It will also continue to consolidate further.

"Oracle has already amassed a range of middleware products from organic development and through other acquisitions, assembling these into its Fusion Middleware. BEA products are likely to form a part of this domain, with its standards-based architecture allowing this to happen," he said.

According to TBR, while IBM remains the world's second largest software vendor, Oracle "is closing in fast" through acquisitions and cross-selling its middleware, database and business application products. Last year, Oracle's revenues clocked in at US$20.08 billion, exceeding IBM's overall software revenue of US$19.98 billion. However, TBR noted that IBM retains its advantage when professional services are excluded from Oracle's 2007 revenue, which would then drop to US$15.9 billion.

When contacted, both Oracle and BEA declined to comment on the acquisition.