Oracle swallows Siebel

Oracle’s $5.85 billion purchase of Siebel Systems announced last week is a bold move that may catapult the voracious software giant to the head of the CRM class and squarely into IBM’s megavendor league.

Free IT resource TechNet: More ways to know it, share it, and keep it running. Sponsored by Microsoft Free IT resource Attend the SOA Executive Forum: Breaking SOA Bottlenecks SOAExecForum.com/may2007 Sponsored by InfoWorld

“Where does this put Oracle?” asked James Governor, principal at analyst firm RedMonk. The answer: “Right in IBM’s face. Nobody can argue with Oracle’s scale now.”

Oracle is also gaining a steady revenue stream and a stronger foothold in the hosted, subscription applications business via the Siebel acquisition, said Paul Hamerman, vice president at Forrester Research.

Some see the Siebel buy giving Oracle a better CRM product, but Hamerman said, “this is more about acquiring customers than acquiring technology for the profit stream of maintenance revenues.”

Marc Benioff, CEO of CRM competitor Salesforce.com, took that view as well, telling attendees of his company’s user group meeting last week, “When I was at Oracle, we watched Computer Associates buy all those mainframe software companies and milk them for their license revenue. I never thought that’s what Oracle would be doing one day, and yet, here it is.”

Siebel customers appear to be cautiously optimistic about Oracle’s plans for carrying forward what they consider Siebel’s industry-leading functionality.

WestStar Bank, which deployed 100 seats of Siebel’s Professional Edition for small and midsize businesses last year, hopes Oracle continues to focus on the midmarket with products and R&D.

Rob Verratti, senior vice president at WestStar Bank, said he doesn’t anticipate changes in the short run, but expressed concern about the long-term effects of industry consolidation. “In the long run, as there become fewer and fewer companies in the market, customers could potentially face higher prices and fewer choices,” he said.

Consolidation, however, can also have benefits for users, said American Red Cross Chief Information Officer and Senior Vice President Steve Cooper.

“It’s one less vendor we have to coordinate with,” Cooper said. “It’s easier from a management standpoint.”

Cooper added that he is not yet concerned about how Oracle will handle Siebel’s products and technology, but he wants to work closely with the company to see the road map. One particularly critical Red Cross application, the client assistance module now being used to take in information from victims of the devastating Hurricane Katrina, is based on Siebel.

The Red Cross had evaluated Oracle’s CRM product in the process that resulted in its selecting Siebel, Cooper said. Oracle will now have three CRM products in its portfolio, including Oracle’s own and one acquired when it bought PeopleSoft. Cooper, however, doesn’t seem concerned about which one may be the contender going forward.

“As long as we get the functionality we need, I’m not sure we have strong feelings about what emerges,” Cooper then said.

Analysts agreed that customers should press Oracle for more information about its product plans for CRM but also said the company could be expected to continue support for Siebel’s products in the near-term.

As for Oracle’s next-generation Fusion suite, Ovum principal analyst David Bradshaw said he sees the Siebel acquisition providing clarity for Oracle.

Of the three CRM products now in Oracle’s portfolio, “Siebel is undeniably the highest functionality,” Bradshaw said. “For my money it would be silly not to take the functionality and express it in what is going to be Fusion.”

— Marc Ferranti and Stacy Cowley, IDG News Service, contributed to this story.