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BEA Systems: A Study in Sustainability

The CEO of BEA Systems shares strategies for beating expectations and accelerating growth during a downturn.

Alfred Chuang, a one-time star engineer at Sun Microsystems, cofounded BEA Systems in 1995. In fact, he is the A in BEA, which drew its corporate identity from the first initials of its three founders. Chuang became chief executive this past October, succeeding founder Bill Coleman. At the time, Coleman quipped, “We’ve finally got an A executive taking over from a B executive.”

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BEA is best known for its WebLogic e-business product line. The company has more than 11,000 business customers. Last year, BEA became the fastest software company to reach $1 billion in sales, surpassing even Microsoft’s legendary pace of the 1980s.

Here, Chuang shares strategies for beating expectations and accelerating growth during a downturn.

What advice can offer about shrinking a sales force in the midst of a downturn?

The last thing you want to do is to cut the sales force — unless you are in a transformation mode where you are out to sell something different and your sales model is being restructured. Otherwise, if you cut your sales force now, you cut off the oxygen of what will feed you in the future.

In Silicon Valley, we focus so much on technology. But it’s not about technology alone; it’s also about letting people use the technology. So to us, the sales force is very critical. Even now, we are hiring and continuing to strengthen our sales force.

When you look at all your potential customers, where are your best opportunities these days — and what markets are just plain cold?

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We’re seeing the wireless-telephone providers spend money. In good times or bad times, alcohol sells, and wireless phone calls sell. We’re also seeing a shift in financial services. Investment banking has faded, and attention has shifted to retail banking. A lot of people have cash sitting on the sidelines, so companies are building applications for those kinds of purposes. And the pharmaceutical world is doing enormously well.

What about markets outside the United States?

Alfred Chuang
CEO Alfred Chuang

India has been a terrific market for BEA over the past two years. First, a very large group of Indian talent is trained on our products. There are about 350,000 developers out there using BEA products, and that developer base is critical to us. India is one of the countries that has the fastest growth rate of developers for us. Similarly, BEA sees future revenue opportunities as India invests a lot of money to grow its infrastructure.

Some of the other Asian countries have been enormously critical for BEA. China has continued to surprise us. Customers there are using our technology for large banks, post offices, and fundamental infrastructure operations. Singapore too. And a lot of European countries are still in an expansion mode.

If I’m working for you, what should I do to become indispensable? How do I make sure that, if there is another round of cuts, I’m not the person who goes?

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I talk about this pretty often in employee Webcasts. I start by pointing out that we focus on two things: building product and selling product. I know that a lot of other functions are involved in that process, including marketing, servicing, and infrastructure. They’re all critical. But if you are not involved in the critical loop of transforming ideas into avenues for servicing your customer, your job is not important.

During this kind of downturn, people will reexamine every single job in terms of what we call “line of sight.” How important are you between the inception of the idea — and delivering it to customers and making them happy? If you are not within that line of sight, your job is not that important. That’s a very critical examination that every company should go through.

How do you want to run your product cycle in this economy? Do you want to speed up and launch more new releases than ever? Or do you want to stretch out the pace and not get too far ahead of what the customer really wants?

Clearly, we’re developing a much more consistent product-release cycle. There was a time when, regardless of what we built, the customer was waiting at the door to buy. Now, as we grow bigger, we have to present ourselves very differently. Instead of selling an application server, our value proposition is a platform that includes a lot of other products. We need to orchestrate a more coherent story. We can’t be randomly shipping all kinds of releases all the time.

You’ve got a little more than $1.1 billion in cash. What does that let you do?

It lets us instill confidence in our customers and the marketplace. People know we’re going to be around and survive. I also believe this is a very opportune time. Despite the downturn, we have done some acquisitions. But these days, acquisitions are different. Now you have to acquire something that will allow you to accelerate your growth.

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How do you keep morale strong when your stock can go haywire at any moment?

The stock market is going to do what it’s going to do. A management team or an employee base can’t do anything to affect that other than build a great company. So you have to push the employees to keep the long run in mind. We’ve been very lucky. Our attrition rate is down to really nothing. People are lucky to have a job, right?

But this is the time you really have to spend more time communicating to employees so they understand the ongoing value of the business. Employees are ambassadors in the marketplace. If they believe in the company, eventually that will translate into results, and our customers will be happy.

George Anders (ganders@fastcompany.com) is a Fast Company senior editor. Visit BEA Systems on the Web.

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