BEA sales chief talks customers, competition

Charlie Ill knows a thing or two about the competition. Before joining BEA Systems Inc. a year ago as head of worldwide sales he spent almost a quarter century working for its biggest rival, IBM Corp. His last job there was as a vice president with IBM’s worldwide sales group, responsible for all its software products.

At BEA he found a culture he describes as more nimble and a family of products that he thought would be easier to sell. But he also had his work cut out. The clear leader a few years ago in the market for application server software, BEA has watched competitors gain ground and in 2002 it narrowly lost its market share lead to Big Blue, according to analyst estimates. Figures for 2003 are not yet out.

At the same time, Ill oversaw the introduction of a major revamp of BEA’s product lineup. It introduced WebLogic Platform 8.1, a suite of software that rolls its application server, portal server and integration server into a tightly integrated bundle that is meant to be easier to install and use. IBM and BEA’s other rivals have also moved toward integrated platform offerings.

IDG News Service talked with Ill recently about the challenges of selling software in today’s climate, what customers want from their vendors and some of the opportunities BEA sees in the future — notably among midsize customers. Following is an edited transcript of the conversation:

IDGNS: What’s the environment like right now for selling software, are wallets opening up a bit?

Ill: I wouldn’t tell you it feels like it’s opening up, but there are certainly indicators. Some of the recent government studies in terms of unemployment, manufacturing starts — it feels better.

IDGNS: Customers have shifted their buying habits away from big, long-term projects toward smaller purchases that produce a faster return on investment (ROI). What have you done to bring your sales teams into line with that?

Ill: We’ve certainly talked to them about it. The business model that BEA had, and one of the attractive features of joining BEA for me, is that BEA historically had lots of deals under US$100,000. They didn’t have a lot of bigger deals, that’s partly why they brought me on board, to help drive the bigger deals. This year (2003) we’ve done a pretty good job at that, we’re up 12 or 13 percent year-over-year on big deals. We’ve lost a little bit of the edge we had in the small deals space, so one of the things I’m doing is putting more focus on that area. That doesn’t mean small accounts — there are a large number of accounts over $1 billion that we have no presence in at all, so I’m looking for small deals going into those accounts.

We’ve done studies showing that customers typically buy enough licenses for a prototype, then enough for a pilot, then for a project. When the project works they look to additional projects or even to an enterprise-wide deployment. That process takes about 18 months, so the first sale is under $100,000, the last sale is over 1 million dollars. What we want to do is feed the engine with lots of deals under $100,000, to drive us to the bigger deals

IDGNS: Trying to sell a full suite of products like WebLogic 8.1, rather than individual components, seems out of synch with the trend toward smaller deals. Isn’t there a conflict there?

Ill: No, it fits well with the strategy. The sales guys have the methodology down. They go in and talk to the customer about the vision for the platform. Most customers say, ‘I’m not ready for the whole animal yet,’ and we say, ‘OK, let’s talk about your specific needs.’ Generally, it’s around portal or integration. So we sell them products for their specific need. Then we say, ‘Look, we’ve actually just sold you the whole platform but we’ve only turned on the switch for the portal piece. If and when you’re ready to go to a broader set of products, call us and we’ll turn on the switches for the other elements of the platform.’ Most customers say ‘That’s fantastic, you’ve addressed my immediate needs and given me a vision for how I can grow into the platform when I’m ready.’

IDGNS: Your revenue from software licenses grew only 2 percent in your most recent quarter, disappointing some financial analysts who had been expecting WebLogic Platform 8.1 to produce more growth. What was the story there?

Ill: First and foremost the answer is product transition. (WebLogic 8.1) was announced in August. This isn’t just a new rev of the product, this is a new concept in the form of Workshop and an integrated platform with a common runtime. So customers are saying, ‘Hey, show me this is OK before I start deploying it.’ So we’ve had a major uptick in proof-of-concepts, in demos, in consulting and education around 8.1 — all indicators that there is a lot of interest. We didn’t see a massive increase in sales and that isn’t far off of what you’d expect from a new product.

The second element is execution. We had four or five deals that, had we executed a bit better, would have got into the quarter and changed that story a bit. We had the five deals, they haven’t gone away. If we didn’t close them last quarter we’ll close them this quarter.

IDGNS: Sun Microsystems Inc. has introduced a fairly radical pricing system that lets customers buy its software at a fixed price per employee. Is there pressure from your customers to move away from CPU (central processing unit) pricing, and what are some alternatives you might consider?

Ill: The answer is yes and no. The customer wants value, they want quick implementation, they want low risk, and they want it at the lowest price possible. So they will attack price every way they know how. We’re more than happy to talk to customers who want user-based pricing. I will build a contract that fits a customer’s business model. But that doesn’t mean CPU pricing is going to go away or that we’re providing value for free.

IDGNS: Is BEA more flexible about pricing now than it was when you arrived?

Ill: My sense is that that is the case. We had a fairly structured approach and it was fairly centralized. I’m not sure everybody in the company knew the flexibility available. This is one of the exciting characteristics about the company — it’s open to new ideas, it’s open to change. This is one of the things we’ve changed and everyone’s embracing it. The customers appreciate it.

IDGNS: Do you see a need to introduce other pricing models as standard offerings?

Ill: Not at this point in time. It’s something we’ll always consider but I don’t see a tremendous amount of demand for change based on what Sun has done. What they are trying to do is sell hardware, it’s a way to enrich the value of their hardware.

IDGNS: IBM has traditionally had strong reseller partners. That’s not been the case with BEA, particularly in the Americas and Europe. Are resellers important to BEA and, if so, do you plan to work more closely with them?

Ill: I announced to financial analysts (in December) that we’re going to have a reseller program where we’ll go at IBM and that marketplace. We’ve basically given them a free ride. I don’t think they’re particularly strong with resellers but they have had a free run at that territory because we’ve not historically been in it in the Americas. So yes, we are going to use resellers and they are a great way to extend our distribution. If we can do it effectively I think we can do some damage to IBM in the process.

IDGNS: Will that help you sell more software to midsize companies?

Ill: That depends on your definition of midsize.

IDGNS: Up to $100 million in revenue?

Ill: I think we’ll have offerings for what I’d describe as small businesses that would be essentially easy to use. There are ease of use capabilities in our current platform but it’s not sized and priced for smaller businesses. Do I believe a customer will buy BEA’s platform in a small business environment? No, they’re not looking for infrastructure, they’re looking for a solution to a business problem, so we’ll have to count very heavily on VARs (value-added resellers) and our ISVs (independent software vendors) to help us hit that marketplace. The customer at the end of the day is going to be buying what they bring to the table and what they’ve built on top of our infrastructure. We will have specific answers for those marketplaces.

IDGNS: When will that be?

Ill: I think you’ll see it over the course of 2004.

IDGNS: It sounds comparable to IBM’s Express line of offerings for the midmarket.

Ill: It’s slightly different — it’s a platform offering at that kind of a level. Look at IBM’s Portal Express, I think it hasn’t been very successful. Why? Because it’s too complex and too complicated and it’s just infrastructure, there are no solutions built on it. What we’ll bring is ease of use, ease of implementation, and there are solutions built on our platform. What we’ll do is just screw down the pricing and screw down the authorized capabilities of the software and we’ll make some of those adjustments.

IDGNS: But you said small businesses aren’t looking to buy the whole platform.

Ill: They’re not looking for the infrastructure by itself, but if that’s what’s required to run the solution then that’s what they’ll buy. And that’s what we’re going to offer. We’re going to offer it at a price point that will be very attractive.