The Bloor Perspective: IBM v BHAL, location-based services and ecommerce VAT

BEA WebLogic 8.1 has just gone GA. This gave BEA the opportunity to have a customer rah-rah session. The main messages were: * The 8.1 Beta customers have been successful * Lots more (160+) ISV are joining the BEA bandwagon * BEA is partnering with many service integrators, hardware purveyors and middleware software suppliers * The BEA data integration product Liquid Data has been integrated into the 8.1 platform. However the main message from this announcement is that two of the partners are more equal than all the rest: Accenture as the premier SI and HP as the premier hardware and systems software supplier. The implication is that to gain the highest return on investment and return on value requires input from all three. A decision to choose a product from one of the three suggests buying goods and services from the other two. This direction begs several questions and suggests some answers. Why HP rather than Sun? More BEA software is installed on Sun than HP. However there is a conflict of interest between BEA and Sun's software arm Sun One. HP got rid of Bluestone and now there is a perfect fit with BEA supplying the software for HP environments. This is shown in a three fold increase in the penetration of HP in the BEA customer set. It would seem that BEA and HP would expect that penetration to exceed Sun's in the foreseeable future. It is going to be interesting to see how Sun hardware reacts to this reducing revenue stream. Will Sun One become a major part of its sales campaigns?

Accenture is easy to explain as it already has a good relationship with HP and sees IBM as the enemy. It would much rather install WebLogic than WebSphere because that reduces the risk that IBM will capture some of the services. Linux is another bond between the three with all of them actively promoting it and working together to increase its acceptance in the enterprise. This leaves the other SIs and hardware vendors with a delicate balancing act to play. BEA is an important platform but how do you avoid HP and Accenture being dragged in? Interestingly Microsoft hardly seems to come on to BEA's radar either as a partner or a competitor. IBM is seen as the bigger threat and efforts are concentrated on that battle. So does BEA+HP+Accenture+Linux equal IBM? Nearly! They do provide hardware, software and services and only have minor overlaps, so together they are not dissimilar to IBM divisions. There is one missing piece and that is the database. Oracle used to be the obvious partner but with 9iAS they compete directly with WebLogic. DB2 is the enemy so the options are limited. Maybe an open source database or maybe extend NonStop SQL from HP to support other platforms. Buying an application server, like WebLogic 7.0, used to be driven by the development community. But the decision for WebLogic 8.0 has potential hardware and services drag along. The decision now needs to be made at a strategic level and include a comparison of the benefits of buying everything just from BHAL against the flexibility of buying the bits independently. In this open world with open standards and open source the idea was that plug and play, mix and match, would rule. But in reality we are likely to finish up with behemoths selling a total solution be it IBM, BHAL, possibly Sun, Microsoft or Oracle. In summary, BEA + HP + Accenture + Linux equals something like IBM with all the positives and negatives implied in that statement.

*Who, where, how...?*

There's been a lot of talk about location-based services for mobile phones. Much has revolved around personalised location oriented advertising, and for a sneak preview of one version of that future take a look at the Tom Cruise film, Minority Report. But there are better ways to employ location-based services to generate increased revenues from subscribers. Take giving directions. Knowledge of location makes perfect sense for any type of mapping or navigation service and there has been much attention focused on driver aids in cars. But what about the poor pedestrian? Pedestrians don't need to know where jams are or when to keep on motorways to travel faster. They need the shortest walking distance between two locations. On a device as generic as a mobile phone they also need a simple way to specify the start and destination locations and access the directions presented. A Cambridge, UK-based company, m-spatial, has addressed this challenge with its pedestrian navigation service, MapWay. The maps are designed to fit the small screen of a mobile phone. The user can view a sequence of maps each tailored to the user's phone, indicating the directions from starting point to destination. At the start of the journey, the user can employ a 'FindMe' feature that makes use of location information provided by the phone network to start the journey off on the right foot, so to speak. The destination location can be searched for by address and postcode in a similar way to many online mapping services. However this service is built on a database of over 20 million building locations. This allows the user to search for and specify a particular landmark, such as restaurant, station or pub. In many cases you're far more likely to know the place you want to head for rather than its address or postcode. This is especially true when you're already mobile, and are informed of a meeting place via a text message or phone call. Now Vodafone has integrated the MapWay pedestrian navigation into the travel section of Vodafone live! making it immediately accessible to over a million customers across Europe. That's good but there's a potential opportunity being missed. The crucial issue with this type of location based service is not so much your current location but the one you're trying to reach. That may seem obvious. But when you examine the reason why the user is travelling, and what they may want to do when they reach their destination, this becomes a potentially important revenue generator. If Vodafone or any other operator can link the direction service with what's on offer at the destination location, they could generate an untapped source of follow on revenue. "Book a table", "buy a ticket", "when's the next bus" are all potential actions that might be very useful to the user, if offered depending on the destination. Either way, m-spatial has a personal mobile application that walks the walk as well as talking the talk.

*Taxing times*

An EC Directive (2002/38/EC) concerning VAT levying arrangements came into effect from 1 July. What it does is remove the obligation for EU suppliers of electronic services (software, music, videos) - which can be downloaded from their websites - to levy VAT when selling in markets outside the EU. This legislation removes what was considered to be a severe competitive handicap. Previous legislation demanded that EU vendors charged the relevant (home country) level of VAT to customers, even in countries outside the EU, when supplying digital products. These changes are what e-business retailers had been campaigning for and are intended to 'level the playing field'. Non-EU based businesses supplying electronic services to customers domiciled in the EU must levy VAT at the rate imposed by the customer's EU member state, which can vary between 13 to 25 per cent. Simplified VAT collection arrangements have been implemented. Non-EU businesses (rather than registering for VAT in each EC country where their customers reside) can now use a taxation authority dedicated website (one for each member state) to access a simple, automated system for declaring and paying their VAT dues online and at a single location to cover all their EU customers. For the UK the VAT collection is the responsibility of HM Customs and Excise. Adoption of this Directive has resulted in US companies AOL Time Warner, eBay and Amazon, which previously were exempt from charging VAT, now having to comply. Freeserve, who recently moved their servers to Madeira to take advantage of a VAT rate of 13 per cent, has been reported as estimating that AOL saved £150m (since 1996) by not paying VAT in the UK. Bloor Research is a leading independent analyst organisation in Europe. You can find out more at www.bloor-research.com or by emailing mail@bloor-research.com.