The CRM before the storm

Tom Siebel formed Siebel Systems following a much publicised falling out with Larry Ellison. Now his firm has been acquired by Oracle for US$5.8 billion, reuniting the two headstrong CEOs — but for how long?

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By  Peter Branton Published  September 25, 2005

|~|EllisonLbody.jpg|~||~|Oracle chief executive Larry Ellison’s knack for drama resurfaced once again when, earlier this month, he announced plans to acquire enterprise software maker Siebel Systems (see IT Weekly 17-23 September 2005). Although Oracle’s decision to buy Siebel did not come as a surprise — Ellison has earlier revealed that it was a potential takeover target — it is the history between the two companies, or rather the two CEOs, that makes the latest purchase a bit more interesting. For many, Oracle’s acquisition bid for Siebel is like a reunion of sorts — albeit a very expensive one at US$5.8 billion — for both Ellison and Tom Siebel, the latter’s chief executive. Although analysts do not expect the merger to be as rocky as Oracle’s hostile takeover of PeopleSoft, it brings up the que- stion as to whether or not Siebel, a long-time Oracle executive, will rejoin his former boss, especially since they parted in a less than amicable fashion. The two had a well-publicised falling out after Siebel failed to convince Ellison about the potential market for software that can automate customer call centres. It resulted in Siebel resigning from Oracle and setting up a very lucrative CRM (customer relationship management) software business. Ellison, however, has expressed confidence that Siebel will work at Oracle for a number of years. The buy-out, he said at a conference call with analysts, was a proposal that he had laid-out in the table with Siebel for quite some time. The issues of the mega-merger, however, do not centre on Tom Siebel’s fate alone, but more importantly, on the fate of the CRM vendor’s existing customer base. Once the acquisition is final-ised, Oracle will inherit Siebel’s more than 4000 customers and about 3.4 million users. Understandably, it raises concerns regarding how Siebel’s CRM offerings will be integrated to Oracle’s ever-expanding product portfolio, and how the database big shot will support Siebel’s clients. The majority of the issues stemmed from the fact that Oracle had to face considerable integration challenges with its own applications and those of PeopleSoft and JD Edwards (which had been acquired by PeopleSoft prior to being taken over by Oracle). As part of the integration process, Oracle has embarked on an ambitious scheme, called Project Fusion, to merge best-of-breed solutions from the three entities into a single product line. That project will now have to incorporate Siebel technology as well, with Ellison declaring that it will be the key focus in those efforts. “Siebel will be the centrepiece of our CRM strategy going forward. We will continue to sell PeopleSoft CRM, Oracle CRM, but Siebel will be the centrepiece,” Ellison said. Oracle is confident that the move will present fewer integration challenges than the capture of PeopleSoft did. For one thing, Siebel’s board is backing the deal. Also, a large percentage of Siebel’s software runs on Oracle’s databases, and Siebel’s CRM technology and Oracle’s applications and middleware share a common architecture that favours industry standards. And while Siebel has enjoyed strong market share in the US and in Europe, it has very little presence in the Middle East. But according to Ayman Abouseif, managing director for Oracle Gulf, Oracle’s powerful presence in the region will change all that. “When we are selling CRM here, people will mention Siebel to us as something they have heard about,” Abouseif said. However, he dismissed its regional presence as being “only seen on those dealers who have 15 logos on their web sites, and it is just one of the 15.” “Maybe this is a chance for customers in the Middle East to get access to the technology from a vendor that is committed to the market,” Abouseif added. But in spite having a seemingly concrete plan for integrating Siebel, several companies remain sceptical about it. “Everybody knows that acquisitions are very difficult to get right, both from a technology standpoint and a people standpoint,” said David Brierly, regional manager, Cognos Middle East. “I don’t see how they [Oracle] can expect to digest three companies at once. They would have problems merging the technology they already have,” he went on to claim. Even long-term rival SAP seems unfazed about the multi-billion dollar deal, saying that Siebel has no strategic value at all. “Oracle has chosen the path of growth through acquisitions and, as such, this step does not come as a surprise. Their strategy is to buy customers while ours is to serve customers,” said Peter Kwisthout, marketing and channel director, SAP Arabia. “Because of that we have always made it clear that we were not interested in Siebel and that it held no strategic value for us,” he added. Others, such as analyst firm Gartner, believe that will result in even fewer independent CRM choices, especially for customers in the telecom, utilities, pharmaceuticals and consumer goods space. And while Oracle has pledged to continue supporting Siebel’s CRM technology until 2012, Gartner sees a substantial shift in the CRM product and technology platform that Siebel customers use. “Oracle’s development organisation is not known for good support of CRM applications, and will require changes to keep Siebel’s worldwide user base,” it said in an advisory. Gartner recommends that Siebel customers running version 7.5 or later versions should keep their current deployments, while those with earlier versions should first weigh the implications of moving off support within the next three years. Siebel OnDemand customers have to consider alternative products until there is a definitive explanation of future development, and sales and support plans for OnDemand. But the research firm cautions other Siebel users not to immediately shift to IBM WebSphere or Microsoft .Net until Oracle provides new details regarding the new architecture.||**||

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