Pure portal era ends, as BEA charts new course

Portal software pioneer Plumtree Software  has been marked "bait" for years, ever since it became clear that portal purchases would largely come not as stand-alone "best of breed" buying decisions but as an add-on to ERP (enterprise resource planning) and infrastructure software deals. Still, BEA Systems  -- which already has its own line of portal software -- wasn't the top candidate on anyone's list of likely suitors. BEA's announcement Monday that it will pay $200 million for Plumtree has analysts arguing about whether the combination will pay off.

One area of consensus: BEA got Plumtree cheap. "It's a little unfortunate that Plumtree had to sell today -- I don't think they're in nearly as good a position as even two years ago," said Brian McDonough, IDC's enterprise portals research manager. "BEA is getting a good deal." Factoring in Plumtree's cash and other considerations, Smith Barney analyst Tom Berquist put the deal's actual cash value at $115 million. Berquist praised the deal as "a good move at a reasonable price." (Microsoft was the company most people expected to bid for Plumtree, McDonough noted.)

A rundown of top rivals BEA and Plumtree have faced in the portals market reads like a list of the software industry's Goliaths: IBM holds the top spot, according to IDC's research, followed by BEA, then SAP AG and Oracle, with Plumtree coming in fifth. The market is growing, but the gains are going to the biggest vendors, as smaller ones drop away. "We view this acquisition as a roll up of the portal space and do not expect to see a great deal of growth out of the combination," Piper Jaffray & Co.'s analysts wrote in a research note.

AMR Research analyst Jim Murphy describes Plumtree as a vendor being squeezed by the giants with which it competed.

"If I'm a company with SAP as my ERP backbone and Microsoft as my desktop, both of those companies are pushing portals very aggressively," said Murphy, AMR's information infrastructure research director. "The customer may love Plumtree, but they say, 'Why do I need three vendors selling the same thing?' Plumtree had many customers who were caught between a rock and a hard place. Which raises the question, is [BEA] putting themselves in the same place by doing this?"

BEA's biggest gain from Plumtree may come not from its technology, but its customer base and market positioning. BEA executives said Monday that they see their portal software and Plumtree's serving two different audiences: developers and business users, respectively. Analysts backed that view.

"They're differentiated," IDC's McDonough said. "One of our biggest criticisms of BEA in selling their own portal product in the past was that they really needed to move into selling to business users."

Especially since those users are the lucrative ones, said AMR Research's Murphy. "BEA's traditional audience is the IT department. But their traditional audience has less influence and can't articulate to the business users what the investment would do for the company," he said, drawing on research showing that business executives drive more technology spending decisions than IT managers.