Will Larry Ellison be the perfect host?
Siebel's hosted CRM business helped to make it an acquisition target for Larry Ellison's Oracle. But can the duo ever catch up with the market leaders?
Some firms might be wary of investing in technology at the moment, but this certainly isn’t true of IT vendors themselves. The recent rush of mergers and acquisitions continued last week with online auctioneer eBay announcing the purchase of VoIP specialist Skype for around$4bn; while Oracle continued its Pac-Man-like approach to the industry, swallowing up customer relationship management (CRM) firm Siebel.
Oracle has been on a spending spree since the start of the year. No sooner had it succeeded in its long-fought bid for PeopleSoft than it was hunting for smaller vendors to snap up. Identity management software developer Oblix, real-time data management software firm TimesTen, and retail software providers Retek and ProfitLogic were all put in the shopping trolley, and Oracle took a controlling stake in India-based banking software company I-flex.
And then when Oracle finished swallowing PeopleSoft/JD Edwards, it decided to make its move for Siebel. The purchase gives Oracle a new set of CRM applications to add to its ever-growing range.
However, Siebel customers are likely to wonder for how long their existing implementations will be supported as standalone products, on non-Oracle databases, and whether they will be encouraged towards the integrated applications of Oracle’s Project Fusion.
And Oracle/PeopleSoft/JD Edwards users will have questions about the potential integration of Siebel’s CRM systems into future products, and whether this will delay or further complicate the arrival of an integrated suite covering the now four sets of applications.
Meanwhile, Oracle chief Larry Ellison sees potential for growth from the Siebel deal. According to Ellison, one of the main reasons for Oracle’s interest in Siebel is Siebel’s OnDemand hosted CRM business, which he predicted will expand rapidly.
Ellison’s view about the prospects for hosting is widely accepted across the industry. Recent figures from analyst firm AMR Research revealed that revenues from hosted CRM applications grew by 105 percent during 2004, and account for a tenth of the overall CRM market – which grew by 10 percent in comparison.
But are Siebel’s rivals offering more attractive propositions for hosted CRM? On the same day as the announcement of the Oracle/Siebel deal, hosted CRM pioneer Salesforce.com revealed details of AppExchange – an online site through which firms can buy and sell third-party applications and components to run on the company’s platform. This should add to the attraction of Salesforce and means firms may be less tied to a single vendor that digs deeply into their enterprise systems.
The question is, has Oracle been wise to bid $5.85bn for a company that has been lagging behind more established hosting firms such as Salesforce, and one that is a relatively small player in that market at present, rather than going after a better established hosting firm, which would come with a lower price tag?
Siebel’s customer base of around 4,000 firms with 3.4 million users is an obvious attraction. But for how long can the annual maintenance/support/upgrade software model sustain itself in a market where customers increasingly want hosted services and flexibility?