Siebel buy puts Oracle in CRM top spot

Oracle stands to gain not only industry-leading CRM functionality but also additional clout as one of the handful of IT giants left standing in an increasingly consolidated industry through its planned acquisition of Siebel Systems for $5.85 billion, analysts said Monday. Meanwhile, Siebel customers appear to be cautiously optimistic about the impact of the news on their technology investments.

"Where does this put Oracle? Right in IBM's face. Nobody can argue with Oracle's scale now," said James Governor, principal with analyst firm RedMonk, in London.

The move is a good deal for Oracle, agreed David Bradshaw, principal analyst with Ovum, also in London. "This vaults them to number one in the CRM (customer relationship management) market," he said.

Oracle is also gaining a steady revenue stream and a stronger foothold in the hosted, subscription applications business through the Siebel acquisition, according to Paul Hamerman, vice president of Forrester Research. "This is more about acquiring customers than acquiring technology, for the profit stream of maintenance revenues," he said. Siebel's OnDemand hosted product was also attractive to Oracle, which has experimented with hosted applications but hasn't gone forward with a subscription application, he added.

The news, announced Monday, was not unexpected by analysts or customers: Hamerman noted that Siebel had been struggling and was in need of a turnaround, and he was surprised only by how quickly Oracle moved. Siebel customer Rob Verratti, senior vice president with WestStar Bank in Vail, Colorado, said the acquisition seemed inevitable.

Verratti, whose bank deployed a 100-seat implementation of Siebel's Professional Edition for small and medium-size businesses last year, said that he doesn't anticipate changes in the short run, assuming that maintenance of the products continues. "I hope that Oracle in its drive to expand continues to focus on the midmarket sector and continues to invest in R&D for midmarket companies," he said. Customers could benefit in the near-term as enterprise software companies continue to make acquisitions, and invest in midmarket companies and R&D. "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.

The industry consolidation of which Siebel's absorption by Oracle is the latest example can have benefits for users, suggested American Red Cross Chief Information Officer and (CIO) 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 acknowledged that most CIOs who have been in the business for many years have had an "up and down" relationship with Oracle, which has fluctuated between being very attentive to customers and losing focus on them. And pricing going forward concerns him: "If I may playfully take a jab, whose pricing structure are we going to be under? The more Oracle gobbles up the tougher it becomes to influence them" as a relatively small customer, he said.

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