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SAP and Oracle's middleware battle heats up

Oracle's BEA acquisition sets the stage for a renewed middleware battle with SAP.

Oracle's $8.5 billion acquisition of BEA Systems Inc. is likely to rekindle the battle for middleware supremacy,...

according to one IT industry analyst. But it's tough to predict who will come out on top.

Oracle's Fusion and SAP's NetWeaver middleware platforms both have their strengths, according to Dennis Callaghan, an analyst with New York's 451 Group. But the acquisition of San Jose, Calif.-based BEA gives Oracle an edge, in that it proves the company is a viable middleware vendor that is committed to openness.

Oracle's purchases of major software players like PeopleSoft, Hyperion and Siebel Systems have forced the company to become more open than SAP in recent years, Callaghan said, and BEA gives Oracle some serious middleware street credit.

"At a high level, it's clearly an advantage for Oracle to acquire a third-party middleware vendor that's been application-platform agnostic from the get-go," Callaghan said. "This makes Oracle a bona fide middleware vendor, not just an applications and database vendor that has middleware offerings for those customers who've already made [investments] in Oracle applications."

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Oracle had previously attempted to acquire BEA last October, but its $17 per share bid was deemed too low by BEA's board of directors. BEA's counter-offer of $21 per share was likewise rejected by Oracle, seemingly leaving the deal dead, until this week, when BEA accepted Oracle's bid of $19.38 per share.

The answer to the question of whether SAP is a stronger middleware player than Oracle really comes down to who is being asked and where that person's application investments lie, Callaghan said.

At their cores, he continued, Fusion and NetWeaver middleware are integration and business process management software layers built for the application environments of Oracle and SAP, respectively.

"Both will connect their own applications with other applications fairly well. But you're not going to buy NetWeaver if you don't have, or plan to have, an investment in SAP business applications," he said. "Similarly, you won't buy Fusion Middleware if you don't have, or plan to [make], an investment in Oracle applications."

Oracle could, however, have an edge in mixed applications environments, Callaghan explained.

"NetWeaver is great in an SAP-centric environment," he said. "If you're a bit more [prone to] best-of-breed/heterogeneous/open standards on the applications side, you're better off with third-party middleware, and Oracle will clearly have that now."

For example, he said, thanks to the BEA acquisition, Infor or Lawson business applications users might consider Oracle middleware for the first time without fear of having to migrate wholesale to Oracle applications in the future.

"Oracle will now be able to make the case that they're better equipped to handle mixed environments, that they're less likely to lock you into using their applications," he said. "The WebLogic application server is a better and more widely used product than anything Oracle or SAP had offered before."

Java-based NetWeaver is currently more open than it has been in the past, but Callaghan suggested that SAP might benefit from a similar acquisition designed to make the platform even more open.

"SAP would need to acquire Tibco to effectively counter this move," he said. "That would be a pretty significant strategic shift for them; but it's a possibility."

According to Callaghan, SAP and NetWeaver have distinct advantages when it comes to business process management technology, an area that hasn't been a strong point for Oracle.

"Oracle will get [the BPM technology] BEA got when it bought Fuego, which isn't bad, but that of course will require some integration with the Oracle applications family," he said. "I'd say SAP is ahead there."

Also, if Oracle is not careful, its many acquisitions could lead to confusion among customers, Callaghan said.

"I think we counted about four different portal products Oracle's going to have after this acquisition, which is just confusing," he said. "So I'd give SAP an edge there, at least in the short term."

The bottom line is that it's tough to say which platform is superior, Fusion or NetWeaver, Callaghan said.

"I've yet to read a research report or technical review that clearly rates one over the other in mixed environments," he said. "I'm not sure how you could objectively gauge that, to be honest, because no two mixed environments would be the same exactly."

Customers must evaluate their own environment carefully when making a middleware choice -- and not forget about other vendors, Callaghan said.

IBM, with its WebSphere platform, has a comprehensive middleware and SOA infrastructure and is currently the No. 1 application server vendor. Red Hat, which offers the JBoss platform, has also improved over time, he said, although its product development cycle can be slow.

"Consolidation always creates opportunities to look at new vendors," Callaghan said. "So it never hurts to consider alternatives when there is any uncertainty about future product development plans."

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