Saturday, November 17, 2007
Service Oriented Analysis - Harmony
Alex Rosen of MomentumSI recently introduced our method for Service Oriented Analysis. Check this out for a great overview.
Thursday, November 15, 2007
BEA Systems or BEA Consulting?
Today, BEA announced their 3rd quarter results:
249 million in service revenue represents approximately 65% of the overall revenue, well beyond the norm. As if BEA wasn't facing enough challenges, they'll now have to answer the very difficult question of valuation. Should BEA be valued as a product company, a services company or a hybrid.
According to Google Finance, their current Price-to-Earnings is 46.31. This is out of whack relative to competition (ORCL, TIBX, etc.) and is even farther away from the valuations of service companies like Accenture, who P/E is 18.6.
Assume for a moment that speculators weren't holding up the BEA stock awaiting an ORCL acquisition; what would happen? What if... Wall Street called BEA on their revenue split and began to value them as a service company? If you were to use consulting valuation multipliers, you might see BEAS price drop to $7 per share, immediately erasing several billion dollars of market cap.
BEA is in a tough position, they need to show year-over-year growth and strong earnings. They were able to accomplish this by creatively finding revenue. This strategy may pay off in the short term, but this quarter over quarter pattern is looking less like a stop-gap measure and more like a business model.
Looking back 10 quarters...
"If it walks like a duck and quacks like a duck..."
Disclaimer - Do not make investments based on this information.
BEA reported third quarter total revenues of $384.4 million, up 11% from last year's third quarter. BEA reported third quarter license fees of $134.8 million, down 1% from a year ago, and services revenue of $249.6 million, up 18% from a year ago.
249 million in service revenue represents approximately 65% of the overall revenue, well beyond the norm. As if BEA wasn't facing enough challenges, they'll now have to answer the very difficult question of valuation. Should BEA be valued as a product company, a services company or a hybrid.
According to Google Finance, their current Price-to-Earnings is 46.31. This is out of whack relative to competition (ORCL, TIBX, etc.) and is even farther away from the valuations of service companies like Accenture, who P/E is 18.6.
Assume for a moment that speculators weren't holding up the BEA stock awaiting an ORCL acquisition; what would happen? What if... Wall Street called BEA on their revenue split and began to value them as a service company? If you were to use consulting valuation multipliers, you might see BEAS price drop to $7 per share, immediately erasing several billion dollars of market cap.
BEA is in a tough position, they need to show year-over-year growth and strong earnings. They were able to accomplish this by creatively finding revenue. This strategy may pay off in the short term, but this quarter over quarter pattern is looking less like a stop-gap measure and more like a business model.
Looking back 10 quarters...
"If it walks like a duck and quacks like a duck..."
Disclaimer - Do not make investments based on this information.
Sunday, November 11, 2007
Power to the People, SOA Style
Guerrilla SOA advocate, Jim Webber comments, "One by one your services will be stripped from the clutches of enterprise architecture and governance teams and returned to the (business) people."
Enterprise architecture is responsible for creating SOA principles, methods, policies and infrastructure. They do this to ENABLE project teams, not to OWN the services. Often EA will work with 'zone architects' to help identify conceptual services so that the 'just build it guys' don't recreate stuff that already exists. I'm not sure where Jim got the idea that EA owns the services... perhaps that is common in Europe?
What I don't like about Jim's comments is the "us against them" mentality that he is provoking. Is EA an evil organization plotting to destroy the business? The enterprise architects that I work with know that there is no way that they could "own" the thousands of services in a large Enterprise. However, it is common for EA to champion "enterprise services" like customer and product. I think that Marty Brodbeck of Pfizer clearly demonstrated the need for creating a certain set of Master Services when he described the relationship between SOA and MDM at the InfoWorld conference.
Someone asked me if I disliked 'Guerrilla SOA' and I told them, "I have no idea if I like it or dislike it because it has no shape or form. Right now it's just a funny name to a concept that implies applying agile principles to SOA." I'd suggest that the advocates put some additional thought around the concept.
Jim Webber didn't refer to his concept as 'Chaotic SOA'. This implies that there are rules. However, I have no idea what they are. My guess is that Guerrilla SOA will end up looking much more like Enterprise SOA than Chaotic SOA.
Obviously we can't just yell, "power to the people!", although it sounds cool and is a lot easier than thinking it through :-)
Enterprise architecture is responsible for creating SOA principles, methods, policies and infrastructure. They do this to ENABLE project teams, not to OWN the services. Often EA will work with 'zone architects' to help identify conceptual services so that the 'just build it guys' don't recreate stuff that already exists. I'm not sure where Jim got the idea that EA owns the services... perhaps that is common in Europe?
What I don't like about Jim's comments is the "us against them" mentality that he is provoking. Is EA an evil organization plotting to destroy the business? The enterprise architects that I work with know that there is no way that they could "own" the thousands of services in a large Enterprise. However, it is common for EA to champion "enterprise services" like customer and product. I think that Marty Brodbeck of Pfizer clearly demonstrated the need for creating a certain set of Master Services when he described the relationship between SOA and MDM at the InfoWorld conference.
Someone asked me if I disliked 'Guerrilla SOA' and I told them, "I have no idea if I like it or dislike it because it has no shape or form. Right now it's just a funny name to a concept that implies applying agile principles to SOA." I'd suggest that the advocates put some additional thought around the concept.
Jim Webber didn't refer to his concept as 'Chaotic SOA'. This implies that there are rules. However, I have no idea what they are. My guess is that Guerrilla SOA will end up looking much more like Enterprise SOA than Chaotic SOA.
Obviously we can't just yell, "power to the people!", although it sounds cool and is a lot easier than thinking it through :-)
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