Oracle-Siebel: A Capital 'E' For Enterprise Play

And make no mistake, Siebel is indeed an enterprise play with a capital “E”—boasting 4,000 big-business customers and approximately 3.4 million active users. Now the question that begs answering is this: Why would Oracle, which already offers Oracle CRM, PeopleSoft CRM and J.D. Edwards CRM, shell out $3.6 billion (after deducting Siebel&s own $2.24 billion in cash) for a company Siebel&s own shareholders called “damaged goods?”

“Among the Enterprise Global 2000, Oracle needs to bulk up—even though this market is saturated,” said Forrester Research analyst Ray Wang. “Oracle&s acquisition of PeopleSoft and Siebel is not only about building its maintenance base in applications, it&s also about becoming the vendor of choice for everything in the IT spending stack. Oracle needs enterprise applications to support an ecosystem that promotes more IT spending. If they don&t have the right set of applications, they can&t build out that IT ecosystem. At the end of the day, apps help Oracle sell more databases and middleware.”

That&s integrated apps, to be precise, as in big, honking ERP suites that tie corporatewide business processes to a coherent data model. This is where San Mateo, Calif.-based Siebel stumbled, a fact that even Siebel Chairman Tom Siebel acknowledged during his conference call with analysts last week. “Some years ago there was a market preference for best-of-breed applications. Now the customer and partner community is communicating quite clearly, in voting with their dollars, [that] they are looking for an integrated family of applications that minimize their cost structures going forward,” he said.

Which brings up an interesting irony. Despite the fact that Siebel fell on hard times because its big, complex software doesn&t tie naturally into big, complex back-office systems, Oracle&s new flagship CRM software will continue as a stand-alone product for the next few years. Oracle, Redwood Shores, Calif., will even maintain a separate CRM-focused sales force.

“Oracle can&t wave a magic wand and integrate the Siebel product into any of its existing ERP systems,” said Jim Shepherd, AMR Research analyst. “So for a period of time, it will exist as an independent line and have the benefit of not being a stand-alone CRM vendor even though Oracle is selling a stand-alone CRM product. The objection in the marketplace was to the independent vendor.”

Perhaps. Opinions vary on that aspect, especially since Siebel actually brings three code bases with it: Siebel 7.7, Siebel CRM OnDemand and Nexus—the service-oriented architecture development effort that would have become Siebel 8.0.

Chris Rapp, for example, can&t wait for the acquisition to close. Executive vice president of Oracle/ PeopleSoft integrator Apex IT, Minneapolis, Rapp sees new opportunities coming Apex&s way. “As a consultant partner, I now have another suite of products I can implement, where before Siebel was kind of taboo,” said Rapp. “I see more, and larger sales, coming down the pipeline. I also believe software prices will go higher, now that the industry has consolidated so much. And really, if you are an Oracle back-office customer, you will choose an Oracle product.

Of course the flip side can be said about Walldorf, Germany-based SAP, which still commands the enterprise applications lead.

“Organizations don&t want to manage integrations,” said Brad Nicolaisen, president of et alia, a Milwaukee-based SAP partner. “It costs about $100,000 a year to maintain just one interface. By the time you augment an application to provide a competitive advantage, you&re looking at considerably more money. Which is why companies that are evaluating a major enterprise package like SAP are rarely considering Siebel as well. As far as I&m concerned, we couldn&t be in a better position.”