If ever you needed a good example of just how though business is in the enterprise IT market right now, you need look little further than BEA Systems' $200m purchase of enterprise portal specialist Plumtree Software.
BEA is buying Plumtree to help turn last quarter's license sales blip, BEA's first upswing in software revenues for 15 months, into something more tangible. BEA hopes that by buying Plumtree it can access a ready made market of enterprise customers in one of BEA's most successful technology areas - portal.
According to BEA, Plumtree helps in two critical ways: the first is selling BEA's WebLogic to Plumtree's existing 700 customers - some of which are already BEA users. The second opportunity is for BEA to re-visit its own 15,000-strong customer base with assorted products from the Plumtree software basket.
"There is a lot of cross selling and up selling advantages across the two bases," vice president of product management Shane Pearson told The Register.
BEA is not the only enterprise IT supplier to hit the acquisition trail this year. Sun Microsystems recently spent $4.1bn for storage specialist StorageTek followed by $387m for integration specialist SeeBeyond - a bargain buy. Oracle, meanwhile, has bought six companies since kicking off the year with PeopleSoft.
Competition is fierce in enterprise systems. Enterprises are not spending like they used to, and when they are purchasing IT it's usually in selected areas, like web services or security. The days of signing big checks for an application server or a full customer relationship management (CRM) installation are gone.
That means companies are either buying competitors to soak-up customers, to gain access to the expertise of their sales staff in specific markets, or to tap their technical expertise and sidestep years of R&D investment to get to market faster.
The obvious question for BEA is, why buy a company in an area - portal - where BEA is already performing well? Clearly that was on Wall St's mind, as BEA's stock closed down on Wednesday, following a rally on Monday and Tuesday, after the Plumtree deal was announced. BEA WebLogic Portal, after all, is driving 65 per cent of sales for the WebLogic application server if BEA is to be believed.
From a vertical standpoint, BEA believes Plumtree delivers new customers in state and local government, consumer packaged goods and the retail sector while, from a technology perspective, Plumtree helps serve customers who need portals for their complex information worker and team collaboration needs. BEA, by contrast is strong in banking, telecoms and financial services while - on technology - it has helped deliver customer and employee self-service portals.
BEA has said it will continue to deliver all of Plumtree's products, but you should expect BEA to choose very carefully what it offers customers. Plumtree has a mixed product bag thanks to a strategy that took the company beyond its core portal business into diverse areas including content management, collaboration, analytics and integration in order to survive.
More important for BEA is the fact that Plumtree's products work on Microsoft's .NET architecture. BEA believes that its emerging AquaLogic service oriented architecture (SOA) strategy relies on going beyond Java, with WebLogic, and into .NET.
Plumtree's customers, meanwhile, can expect BEA's sales people to come knocking during the next 12 months. BEA will attempt to persuade Plumtree's users what they really need is an application server, transaction processing, integration, tools, messaging or maybe some nice data transformation software from BEA.
After a tough 2004 and early 2005 it would be almost inconceivable for BEA to not see licensing growth in the wake of the Plumtree purchase. The only question is, whether BEA converts a short-term sales fillip into sustainable, long-term software sales.®