George Kassabgi, BEA VP

In May 2003, we interviewed George Kassabgi, Vice President and General Manager of Application Security Infrastructure at BEA Systems. Read on to find out why George says that “VCs need to look at their portfolios and ask themselves: what in our portfolio is in line with the CSO viewpoint?” and “Oracle is a masterful company when it comes to marketing and FUD.”

Intrapreneurship

Babak Nivi: What is your role at BEA and what do you do on a daily basis?

George Kassabgi: I’m basically an intrapreneur and spend my time trying to create the next billion dollar business within a large organization. I think this is potentially one of the toughest challenges that one can embark on. I also like to work with start ups both from a partnership perspective as well as in a more formal Board of Directors role and I enjoy that. It lets me live vicariously through some of these early initiatives.

I have launched several products in the industry, including BEA WebLogic Integration 2.0, Progress SonicMQ, and Progress Apptivity. I’ve also been responsible for such things as BEA WebLogic Server engineering and had the privilege to manage that team during from 2000 to 2002. So that’s what I do: launch and develop software businesses, leveraging a company’s existing strengths and assets. One thing I love about the software industry is that the assets walk out the door at the end of each day, it’s all about ‘people energy’.

You said to me in an email that you are a struggling philosopher trapped in an executive’s body. What do you mean by that?

Well, I think it is tongue in cheek. What is a software exec? I think many software execs are struggling philosophers, prophets, and evangelists. We spend time pondering the meaning, the trends and the patterns of such things as product lines, markets, competitors, teams, and so on. Much of what we opine might happen is way off… a few pieces may be right on and it is from there that large opportunities might be made.

How do you find those few nuggets of what you opine that are actually going to make sense and turn in to revenue?

The key is to find products that represent significant growth over time and fit the personality of the company. I can find product ideas that may be very lucrative, but do not fit the personality of what is a key application infrastructure vendor. That is one of the many reasons that I think the intrapreneur is a very different animal than the entrepreneur. In many ways there is far more at stake. There is much more of a stretch bet being made. And this is the secret to growth and keeping alive a large enterprise. The intrapreneurial ability within a large company is the key to its survival.

What are some keys to the intrapreneurial challenge?

There are a lot of companies that are making bets on new initiatives and there are intrapreneurs at the helm of those initiatives. Here are 3 ideas to consider about intrapreneurship:

1. The intrapreneur lives by his or her optimism. The innovator is like the explorer. Ernest Shackleton in his diary listed the 5 top qualities of explorers and the number one quality was optimism, above endurance, above courage, above patience. Optimism.

2. It is a myth that the intrapreneur and the team ought to think and act like a start up. To be successful, you must leverage all the significant assets of the larger company and a start up does not think that way. You must align the initiative with the personality of the established company and a start up never has that limitation. You must be humble and build collaborative bridges with the other resources within a large company, reusing as many existing ‘channels’ as possible.

3. Give yourself time to do something big. It has to be relatively big or it is not worth doing. Nobody is going to pay attention to a $10 million dollar business within a $4 billion company. Engage with customers and create a road map that ends up being something big and ends up spanning the time necessary to accomplish that. I think the intrapreneur is trying to do something much larger than the entrepreneur and has a longer time horizon. The entrepreneur can do something smaller scale and still be labeled a success and the time horizon can be quite short. And I don’t think that was necessarily only the case in the so called “boom years”. The entrepreneur can do anything and can change that thing ten times. In fact the entrepreneur’s success depends on it.

Enterprise Software

Can you tell me a little bit about what BEA’s major revenue streams are?

We sell enterprise application infrastructure. WebLogic server, often times referred to as the app server constitutes the majority of our business. Tuxedo is also a very vibrant product. The growth areas increasingly are such things are portal and integration. These are horizontal layers above the so called app server and these are very exciting solutions for customers as the customer is increasingly dealing with integrating things.

Are you talking about Enterprise Application Integration (EAI) when you are talking about integration?

Well I think the customer speaks of integration to include EAI, business process management, and then B2B. Business process management and the integration of business processes are fundamentally important to many customers. Portal is seen as the intersection between User Interface and multiple apps. I believe these are all integration phenomena. The customer looks at large platform vendors to provide the core elements of that and we are one of those players.

So you need plumbing? We have the best, most scalable, most trusted plumbing. There is some inordinately high percentage of all online transactions that go thru either WebLogic or Tuxedo… it is an incredible statistic. So we are talking here about plumbing and we are talking about frameworks that can be very valuable to a customer trying to extend and flex the plumbing. And there are tools on top of that and are similar in theme to what IBM and Microsoft put forward.

What are you doing in terms of strategic moves to outflank IBM and Microsoft?

At E-world in February we announced groundbreaking products that allow the masses in the developer community to get involved with our entire platform. This is the first time ever that any IT developer can be put to work on all the elements of what the customer is trying to do: portal, construction of web apps front to back, etc. This creates a developer community effect that will be tough to follow. Customer reaction has been enormous: they are now saying they can bring all their application developers, not just professional J2EE developers, into the action of enabling their business. This is the first time in the history of computing that standards based infrastructure, integration frameworks, and tools for application developers have all come together into a seamless development/deployment environment.

Microsoft is good at this – at the tools and frameworks that allow every developer to participate. But they are weak at the server and deployment side of the equation. IBM is good, albeit more slowly, at the deployment side, and lag even further behind on the application developer side. So here, we are taking the lead. We have the leading app server, the best plumbing and we’re ahead of Microsoft in terms of bringing in the entire developer community to bear, not just the J2EE developer community.

And what are you doing in your intrapreneurship project?

Regarding my project, we have identified a very large trend around the core infrastructure having to do with application security and are building a business around that and making investments in that. The timing on it is not that far out, but I will wait until launch to talk about it further.

I saw an Oracle ad on the back cover of the Economist that said their app server beats BEA and IBM in terms of business operations per second or something along those lines.

Oracle is a masterful company when it comes to marketing and FUD. That will never change. They have regular movements when they play the marketing music… they are usually well-timed… and they are very effective in creating fear, uncertainty and doubt, but there is rarely much behind it. They had success that way with their database and that is the formula they play. They dropped the ball in app servers… they really aren’t a competitor in that space. The value proposition in app servers, plumbing, and integration is the play of BEA, IBM, and Microsoft.

Startups

What is the most compelling startup out there and why?

Datapower [ed: DataPower is a Seed Capital Partners portfolio company]. I measure this by the amount of money and/or time I put into the startup.

XML is everywhere. Growth of XML traffic is an inevitability. I’m not talking about Web Services traffic because that is an over-hyped and abused term. XML is not. It is the basis for so much of the standard glue that binds different systems. The bet that DataPower is making – and it is a strong one – is that over the next 3-5 years, the sheer volume and complexity of XML flowing through the enterprise and between enterprises is going to grow very steadily. I think it is a great bet, the question is: how do you capitalize on that? DataPower is helping customers deal with the securing, transformation, and routing of that traffic.

How many startup acquisition calls do you get a week?

No one calls and says “buy our company”. We get a lot of calls about partnering and listening to pitches. I think start ups should be careful not to spend too much time and resources serenading gorilla players. This is a trap that a lot of startup management fall into. The best way to get a gorilla’s attention… in order of least effective to most effective:

1. Show a case study with a customer of the gorilla.
2. Show a case study with a customer of the gorilla’s competitor.
3. Hire a strong sales rep from the gorilla.

How many headhunter calls do you get a week?

I don’t keep track, but it has been growing, so it must be a sign the economic position is improving. Either that or someone is looking to hire a particular type of philosopher.

What startups are out there now that are getting funded but shouldn’t be?

There are far too many startups going after Web Services. In the security space, there is over-funding in the spectrum of products that aspire to “keep the bad guys out”. The amount of funding is unbalanced in the security space. It should be more focused on products aiming at “enabling the good guys”. Everyone is focused on keeping the bad guys out.

Enterprise Security

How do you enable the good guys?

The good Chief Security Officers will tell you that there are basic protection and prevention schemes that are essential and you have to have those. But they will also state really the CSO’s job is really about business enablement and continuity.

Here’s one way to think of it: if I deploy an app, I have the legitimate user community that I want to have use that app and those are the good guys. It could be an enormous community – say ten thousand to one million users – that I am deploying the app to. Now imagine that the application’s value is fairly detailed and granular, in other words, you need to secure more than just its URL and high-level parts. If I don’t solve the authorization challenges for that app as it is deployed or the authentication or auditing challenges then I am effectively not enabling the good guys and I am going to deploy apps with potentially many of the features unavailable or with inappropriate levels of risk. Nowhere in that equation were there necessarily any bad guys, but if a user sees somebody else’s account, this is a real disabler!

This is just one example. I think VCs need to look at their portfolios and ask themselves: what in our portfolio is in line with the CSO viewpoint?

What do you think of Cisco purchases of Okena and the Network Associates purchase of Entercept. Why are they happening at high multiples?

Many sharp companies realized about 18 months ago that security is a top priority trend in IT and would constitute spending growth. Cisco is no exception. The really sharp companies went beyond the “bad guys protection” that I mentioned before.

In the Cisco case, intrusion prevention for network equipment undoubtedly aligns well with what they are trying to sell and no doubt they are looking for differentiators when they are at the sales table. This week’s CNET news about Cisco unveiling their security products shows that this Okena deal is the piece of a larger movement there.

With regard to the high multiple question, my view is that this is effectively part of the formula for some of these companies as M&A. They swoop in, pay high multiples and grab the deal. The size of the deal can make it easier to execute it; the challenges in executing an acquisition are inversely proportional to the amount of money involved. The real investment is not the size of initial deal, the real investment are the resources required to grow and develop the new business over time.