Ties That BindTies That Bind

Virgin Mobile USA has signed up 350,000 customers since its launch last July, and it's adding 2,000 accounts every day. The joint venture between Virgin Group and Sprint Corp. is also a technical feather in the cap of BEA Systems Inc., the software vendor whose flagship application server and newer integration software help Virgin Mobile connect the apps new subscribers use to set up and manage their accounts with customer-relationship management software from Siebel Systems Inc. and a J.D. Edwards & Co. accounting program.

Virgin Mobile also uses BEA's WebLogic products to help Virgin's partners deliver content, including music, ring tones, and a daily message from Nickelodeon's SpongeBob SquarePants cartoon character to subscribers' phones. "BEA is the transaction hub that's making all this happen," says Virgin Mobile CIO Mike Parks. "BEA is the center of our universe." Parks is looking forward to the release of a major upgrade to BEA's products that he says will make it simpler to monitor those transactions. "These tools will make life much easier for us."

BEA needs more customers like Parks. If it can convince many of the roughly 13,500 companies that run its WebLogic application server to adopt its broader portfolio of products, BEA could be a formidable competitor in a hotly contested integration market that includes IBM, Microsoft, Tibco, webMethods, and, increasingly, others, such as SAP and Sun Microsystems.

To that end, the vendor this week is unveiling WebLogic Platform 8.1, which consists of upgrades to its application server, development tools, integration apps, and portal-building software. The suite, due this summer, will include new versions of BEA's WebLogic Application Server, Jrockit Java virtual machine, portal server, WebLogic WorkShop graphical Java development tools, and WebLogic Integration, a messaging hub with drag-and-drop controls for linking to popular enterprise apps. CEO Alfred Chuang says the software will make it easier to access legacy software online, as well as develop applications that adhere to the most current Java and Web-services standards.

BEA needs to make the hard sell. Founded eight years ago by ex-Sun executives, the vendor is nearing $1 billion in annual sales and claims 34% of the $1.5 billion-a-year market for application-server software--about the same as IBM, according to IT advisory firm Gartner. While BEA reported last month an increase in fourth-quarter profits, to $35 million, overall revenue rose just 8%, to $249.3 million, and year-over-year sales of new software licenses declined by 2.4%. "BEA needs a large, incremental line of business to fuel the next stage of growth," Morgan Stanley analyst Charles Phillips wrote in a recent report.

BEA hopes that will be in the fast-growing market for integration software, which helps companies link enterprise apps, legacy systems, and Web software. The opportunity is there--nearly half of the 300 business-technology executives responding to a recent information Research survey say application-integration tools are on their project lists this year.

BEA is betting it can capture developers with its easy-to-use graphical tools and IT managers with a portfolio of products that share a common architecture. "Large companies have often bought multiple enterprise application integration products," says chief technology officer Scott Dietzen. "It's been a very ad hoc and non-standards-based business."

Dave Gallaher, IT development director for Jefferson County, Colo., the fast-growing region west of Denver, says software binding about 160 applications in his data center was "point-to-point, spit-and-baling wire" before he started using integration software from BEA. "Some of those integration applications were bigger than the applications themselves," he says.

Other companies like that BEA offers both a Java application server and the software to integrate the apps they build. Towers Perrin, the $1.5 billion-a-year human-resources consulting company, bought BEA's integration software in October to build workflow applications to help call-center reps in its benefits-outsourcing business update customer accounts. Since Towers Perrin had been using BEA's WebLogic Application Server to build the Java logic that underlies its call-center software, it also bought BEA's integration product. "We could reuse of a lot of the Enterprise JavaBeans that had been written," says group manager Toni Pracilio. Once the company builds its first workflow with the software, "we'll probably reuse 30% of what we build with the next one," she says.

Toshiba America Business Solutions, the copier company, bought BEA's portal software for a dealer extranet that supports 15,000 users and a newly launched national-account site for large customers. E-business planning director Denise Fishel says off-the-shelf application adapters like BEA's could save development and maintenance costs and help Toshiba's Oracle enterprise resource planning applications communicate with software from its financing partner, GE Capital, in real time instead of passing data in batch mode. "We want something that's a little more standard," she says.

Still, it will be tough for BEA to exert the same influence on the market for integration software as it has on application servers. The vendor last year had less than 2% of the $1.9 billion integration market, according to research firm IDC. IBM claimed 12.5%. Morgan Stanley's Phillips estimates sales of BEA's portal and integration products contribute about 15% of BEA's revenue. That's not bad, but the vendor has a fight on its hands.

The majority of BEA's license sales have been for computers that run Sun's Solaris operating system, Giga Information Group analyst John Rymer says, and Sun wants that business back. Sun bundles directory and app-server software in Solaris and last week said it will add portal, instant-messaging, and possibly integration software by year's end. Sun is expected this week to announce a deal to supply BEA customer Vodafone Group with its Sun One application server.

IBM has updated its popular integration software, such as its MQSeries, with support for Java standards. The vendor says it will ship later this month version 4.2 of its WebSphere Business Integration software, which cuts down on Java programming and works with IBM's Eclipse development environment. Microsoft also has designs on the integration market--its Office 2003 suite, due later this year, will include technology to help sift through back-end data using desktop applications.

What's more, the open-source JBoss app server is putting pressure on BEA from the low end. WebMethods began bundling JBoss with its integration software last fall. Partly in response, BEA cut WebLogic Express's price last month from about $1,000 per CPU to less than $700.

Meanwhile, enterprise-application vendors are going after the integration market, as well. SAP in January unveiled NetWeaver, packaged app-server, portal, and business-intelligence software with Web-services development and integration tools.

Countrywide Financial Corp. chose IBM's WebSphere application server and development environment over BEA several years ago, and now it's migrating to Microsoft's .Net environment. As for BEA, "They're currently not on our radar screen," says Ed Godycki, Countrywide's executive VP of application development.

BEA's Chuang would rather bet on companies like Pfizer Inc., whose pharmaceuticals group uses WebLogic Integration and Web services to make functionality and financial data from a project-expense management system available to other applications. The Pfizer division also uses BEA's portal and application server software and its new Liquid Data information-integration tool. "What we saw in BEA is an application platform that not only allowed us to do application development but also application integration in a single environment," says application architecture director Marty Brodbeck.

Pfizer, it seems, is buying BEA's message. The question is, will everyone else?