TMCnet News
Analysis: Will Siebel Customers Benefit?
By ROBERT LIU Customers of Siebel Systems may be breathing a sigh of relief today, thanks to Oracle. Larry Ellison and Tom Siebel have explored a merger for a number of years, the two CEOs confirmed on a conference call Monday morning detailing Oracle’s $5.8 billion acquisition of Siebel Systems. But what’s driving the two sides to come together now is pressure from Siebel’s customers – a base of 3.4 million customers that has long had to endure questions surrounding the company’s future viability, lack of direction and a Customer Relationship Management (CRM) tool often criticized as needlessly complicated. In fact, big customers like General Electric have been encouraging both companies to merge, the key executives told investors and the media. “Customers have said this would bring them value. They are looking for a strategic relationship across their major enterprise applications,” Oracle President Charles Phillips said.
In previously exploring the strategic combination, customers of both companies have hoped a deal would bring about consistent enterprise application agreements, greater visibility on pricing and upgrade cycles and 24/7 global support, executives explained. And customer demand is the clearest evidence that market dynamics have shifted for the entire enterprise resource planning (ERP) space. “Years ago, there was a preference for best-of-breed applications in each of these categories. Now, customers are looking for an integrated family of applications that minimize their cost structures going forward,” Siebel said. But while the Oracle deal does remove the cloud surrounding Siebel’s long-term viability and leadership, it also introduces new questions about maintenance pricing, release support schedules and next-generation migration plans, analysts said. “There’s a lot of work to do,” stated Paul Hamerman, VP at Forrester Research’s Enterprise Applications practice. During the conference call, Ellison did his best to allay fears about the future product roadmap. While Oracle will introduce a CRM suite to its Fusion brand line of middleware (which along with Oracle’s flagship database competes directly with IBM’s Websphere and DB2), it will continue to maintain support for Siebel’s product line. “We continue to support the existing suite of Siebel products for some time to come. Not unlike PeopleSoft, we say we are going to support the products for many, many years,” Ellison said. But the deal comes at a time when upstarts like salesforce.com and other on-demand CRM companies are making strides by touting their ease-of-use, integration and customization abilities. In fact, salesforce.com today kicked off a developer confab called “Dreamforce ‘05” in
In an internal memo sent to his employees, salesforce.com's always boisterous CEO Marc Benioff seized upon the opportunity to slam the Oracle-Siebel combination. “Oracle's strategy is simple. Instead of innovating, buy as much installed software as possible, call it all Oracle Fusion, and make sure it all uses Oracle's database. Now, the same thing that happened to Peoplesoft will happen to Siebel, it will die. Customers will look for new solutions and new providers. Employees will look for new employers,” Benioff wrote. And analysts generally concur that if Siebel customers are hoping the enterprise CRM tools can be more easily integrated thanks to closer ties with Oracle, they had better not hold their breath. “Siebel had its own strategy to go to a ‘Service-Oriented Architecture.’ It involves breaking the application into pieces that can be integrated more easily. Once it comes to fruition, it could benefit customers but that could be a long ways off,” Hamerman said. Of greater concern is what Oracle plans to do with Siebel’s on-demand initiative. In vehement defense to one analyst’s question about Siebel’s low customer satisfaction rates, Ellison told listeners that Oracle will continue to embrace Siebel’s on-demand business, which has been an important growth area in recent quarters. “Siebel already has strong initiatives in the on-demand space and their on-demand business is growing very, very rapidly. Of course, every year we try to make these products easier to install, easier to use and easier to run and on-demand is a portion of that effort. And we'll be pursuing and extending Siebel’s on-demand efforts,” Ellison said. But Benioff explained that it’s not in Oracle’s best interest to continue to support it. And analysts actually believe Oracle will eventually scale back its commitment to Siebel’s on-demand initiative to the benefit of companies like salesforce.com and Rightnow Technologies. “Siebel onDemand, a joint venture between Siebel and IBM, will be the first to be buried. Siebel onDemand is written exclusively on DB2 and Websphere and runs in IBM data centers. Oracle will kill it. Oracle does not sell DB2,” Benioff reasoned. “We see this as a positive for salesforce.com and Rightnow as we believe Oracle will likely invest less (with the potential to significantly reduce or alter its offering) in Siebel onDemand. Recall that Oracle immediately suspended the launch of Peoplesoft’s on demand offering which was expected to be launched within one quarter,” said Thomas Ernst, analyst at Deutsche Bank. To be sure, Forrester’s Hamerman explained the Peoplesoft analogy may not be completely accurate because Peoplesoft hadn’t yet invested to develop its own on-demand initiative. “Peoplesoft didn't really have an on-demand effort. Oracle has been experimenting with it. The on-demand biz that Siebel has was attractive to Oracle. It gives them a play to get into the space,” Hamerman said. ---- Robert Liu is Executive Editor at TMCnet. Previously, he was Executive Editor at Jupitermedia and has also written for CNN, A&E, Dow Jones and Bloomberg. For more articles, please visit Robert Liu's columnist page.
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