BEA Turmoil Worries VARs

"I am worried about [BEA]," said Joe Lindsay, CTO of eBuilt, a Costa Mesa, Calif., solution provider. "They have great technology, but they often leave me scratching my head wondering what is going on and how do I work with them."

Considered among the most influential vendors in the Java application platform market, BEA last week announced a consolidated sales, marketing and services organization called Worldwide Field Operations. BEA CEO, Chairman and President Alfred Chuang appointed former head of services Tom Ashburn to lead those operations, while himself taking over the Product Leadership Team to drive BEA's software strategy.

In a memo to employees, Chuang voiced optimism about the restructuring, which comes amid a slew of key BEA executive departures. Those departures, which included technology visionary Adam Bosworth, have many solution providers and industry analysts concerned about BEA's continued viability in an unforgivably competitive software market.

Kevin Faulkner, BEA's vice president of investor relations, said the point of BEA's restructuring is to enable the San Jose, Calif., company to focus all of its attention on its most important asset, the WebLogic software suite. The foundation of BEA's success--WebLogic Server, long an industry leader in the application integration platform market--has lost significant ground to IBM WebSphere in recent years. BEA and other commercial software vendors also face mounting market pressure from open-source alternatives.

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BEA's gyrations on the management side and changes in its channel strategy have done little to comfort its channel partners. Last year the company worked with about 3,000 partners. This year that number is closer to 100 as a result of BEA's deliberate strategy to cut its partner base, said Sam Jankovich, president and chief revenue officer of solution provider Enterpulse, Decatur, Ga.

While Enterpulse sees BEA engaged in more dedicated co-marketing and co-selling efforts from which the solution provider has benefited, Jankovich said he understands how the "folks that got left behind" could be upset by the new channel alignment.

So far, even partners who no longer receive much support from the vendor say they continue to see strong demand for BEA products.

Indeed, one BEA partner said his company's revenue from providing services on BEA software has grown 15 percent year over year, without any help from the vendor. "I think their partner program has been the worst I've seen in a year and a half of any company," said the partner, who asked not to be named.

But if increasing uncertainty about BEA's future affects customers' willingness to buy, BEA could face serious ramifications from its decision to limit its partner efforts.

While it's unlikely that a company with more than $700 million in cash will simply disappear, BEA's management troubles could determine whether the company will be acquired. If that happens, partners could find themselves either shut out completely, or part of a larger company's channel ecosystem. Analysts view Oracle and Hewlett-Packard as potential buyers.

The latest member of BEA's management team to leave the company was BEA veteran and CTO Scott Dietzen, who helped build the J2EE enterprise standard. Mark Carges now succeeds Dietzen.

Other executives who left over the past month include chief architect Bosworth; Scott Edgington, vice president of channel and worldwide alliances in charge of ISVs; Rick Jackson, vice president of products and solutions marketing; and Eric Frieberg, senior director of product marketing.

These departures, more than BEA's financial performance, have Wall Street worried. "[BEA's] value resides in its technology and the talented innovators developing that technology," wrote Sanford C. Bernstein analyst Charles DiBona in his July 30 research report.

Without this crop of talent to woo potential buyers, DiBona wrote, the company could be forced into a riskier, " 'go-it-alone' path, without the fall-position of a later sale."