Oracle Agrees To Buy Siebel

Gwynne Young
Managing Editor, CRMGuru.com
Member

Posted 12-Sep-2005 09:40 AM

So big news today: Oracle agrees to buy Siebel in a deal valued at about $5.85 billion (or $3.61 billion, taking into account Siebel's cash on hand). Did you see it coming? What do you make of it?

One story on the deal says Oracle will agree to support the existing suite of Siebel products "for some time." It also notes that it was an amicable deal, as opposed to the hostile PeopleSoft takeover. It says Tom Siebel is agreeing to stay with the company for an indefinite period of time.

It says Oracle gets the on-demand CRM business, and Siebel customers will have confidence in the future of the product line.

What do you think?

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Gwynne Young
Managing Editor, CRMGuru.com
Member

Posted 12-Sep-2005 09:43 AM

[Posted for David Rance]

I think it's a marriage made in hell. I am sure it makes sense to all parties. I just worry about the poor customers who were suckered into to buying the stuff in the first place. Oracle doesn't exactly have a track record of understanding CRM. That's why Tom left and went his own way in the first place! And the one thing I have learned over many years is that leopards, particularly large arrogant ones, do not change spots. There, that feels better.

David Rance
Managing Director
Round (UK) Ltd
Improving customer centricity by design
http://www.round.co.uk

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Gwynne Young
Managing Editor, CRMGuru.com
Member

Posted 12-Sep-2005 10:28 AM

[Posted for Dick Lee, High-Yield Methods]

Siebel users should be shaking in boots (and hopefully they're high boots for wading through the bovine waste matter promises they'll soon be hearing about how the deal really is in best interests). Oracle saying it will support Siebel systems "for some time" is a kind way of saying that Siebel users can expect an "invitation" to migrate over to Oracle CRM in the very foreseeable future.

Considering the incompatibilities between the two technologies, Oracle is buying: a) customers; b) market share; and c) intellectual property, very little of which Oracle will ever reapply. These customers will be far less profitable still running Siebel rather than they'll be after migrating to Oracle CRM. Make no doubt about it, Siebel customers are going to fund this deal, or that's Oracle's expectation.

Was the deal inevitable? Yes, because the days of CRM being something applied to the front office alone are rapidly waning. CRM involves the whole enterprise, and that means technology support has to encompass all functions--not just sales, service and marketing, Siebel's sandbox.

But joining Oracle CRM with Oracle ERP and other Oracle back office functions can be agonizingly complex and exasperatingly expensive. Plus, most Siebel users will have to change database platform from IBM or Microsoft over to Oracle--more complexity and expense. So much more that many current Siebel users may wind up migrating--but to SAP running over Microsoft Sequel Server databases. And that could be a fly in the ointment for Oracle.

Oracle has badly misread market conditions and receptivity in the past--the big hoopla introduction of "network PCs" (which utterly bombed) and attempts to discontinue support for pre-11i Oracle technology (which engendered so much user resistance that Oracle had to back down) to cite two examples. If Oracle has miscalculated market resistance to migrating to Oracle databases (as opposed to the CRM migration), Oracle's buyout of Siebel could propel SAP into CRM market leadership.

Come to think of it, if I was significantly invested in Oracle, I might be looking for some of those same boots, myself.

Dick Lee
High-Yield Methods

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Gwynne Young
Managing Editor, CRMGuru.com
Member

Posted 12-Sep-2005 10:30 AM

[Posted for Naras Eechambadi, CEO, Quaero]

The news of Oracle's purchase of Siebel is not a surprise, given Larry Ellison's stated strategy of accelerating industry consolidation and Siebel's declining market position. This deal has long been rumored.

Siebel's investors, including Tom himself, get to walk away with a bit more money in pocket. Oracle's track record on digesting large acquisitions is not clear, so it is not clear that Oracle shareholders will benefit. SAP, and perhaps salesforce.com, might potentially gain, now that another major competitor has been acquired.

One constituency that probably will not benefit is Siebel's customers. This long-suffering group will now have to contend with additional uncertainty around Oracle's CRM strategy as well as its competence in this area.

Naras Eechambadi
CEO
Quaero

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Gwynne Young
Managing Editor, CRMGuru.com
Member

Posted 12-Sep-2005 10:34 AM

[Posted for Paul Greenberg, President, The 56 Group, LLC and Chief Customer Officer, BPT Partners]

I don't like the deal. I think it will pass through the regulatory hurdles and I'm sorry for that. I think that if Oracle decides to eliminate its redundancies with its executives as they always seem to do, they need to do the same with the products.

Frankly, with all my historic Siebel dislike and difficulties, I never had a beef with products and I think they are considerably better in all respects than Oracle's CRM products. I also think that if Oracle has any brains, they will leave the Siebel CRM On Demand unit alone (including its leadership) and let them run the On Demand market. Luckily, this is the one place they may actually get it given stake in NetSuite and the fact that they let NetSuite do its own thing without interference and its led to a highly successful company. Hopefully, Oracle will understand its own NetSuite example and let Siebel CRM On Demand be.

The effect on the marketplace? Well, I think that this will be good for the on demand market, since the only big players left will be Oracle and SAP, neither of whom are known for nimble behavior. With increasing proof that on demand services can scale to large company size (though still a ways to go) this can only help that market. The competition for the SMBs will continue to be fierce and actually even fiercer than it was because with Oracle and SAP going after the SMB with Fortune 500 appetite/approaches--Microsoft, Sage, Onyx, Pivotal and any number of other players will have a lot of places to play. The products here are very good and very competitive, so Oracle/Siebel/PeopleSoft won't have it any easier with the SMBs.

I'm sorry this is happening, though it's nice to see Larry Ellison spending money on something other than his yachts.

Paul Greenberg
President, The 56 Group, LLC
Chief Customer Officer, BPT Partners
Author: CRM at the Speed of Light: Essential Customer Strategies for the 21st Century, 3rd Edition
Blog: http://www.the56group.typepad.com

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Gwynne Young
Managing Editor, CRMGuru.com
Member

Posted 12-Sep-2005 01:26 PM

[Posted for Mei Lin Fung]

Just like old times:

Larry Ellison, Tom Siebel and Craig Conway were all together in 1990 and here they are back again, or at least the companies they headed!

What fun! Oracle was already hiring Siebel people before this happened, but they must have decided that they needed to buy the customers as well.

Larry is buying customers to catch up with SAP--puts pressure on SAP who must be instantly starting to talk about how Siebel's customers will not be supported in the future.

The Extended Value Chain (Global Supply Chain + Demand Chain + Service and Support Chain) race is on and a new lap begins with two front runners: SAP is in front and Oracle hard on its heels--

Many laps to go...

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Graham Hill
Guru
Member

Posted 13-Sep-2005 12:29 AM

Fellow Gurus

If the vast majority of other mergers are anything to go by, short-term value will accrue only to the shareholders of Siebel whilst long-term value will be destroyed for Oracle's shareholders. Over 70% of all mergers fail to create the value originally set out in the merger prospectus.

If Oracle is to create value from the merger with Siebel, it will have to concentrate on the non-financial side of the merger. It will have to:

1. Understand the impact Oracle & Siebel's different cultures & working practices will have on the post-merger organisation

2. Create a new vision & strategy for the post-merger organisation based upon a realistic view of changes to its customers, its combined capabilities and its costs. All of these will change significantly after the merger and not always in the obvious direction

3. Identify, retain and motivate key managers in both organisations, particularly in Siebel

4. Integrate the Siebel & Oracle organisations quickly, promoting the best managers from both to key positions

5. Strengthem the board by bringing in the best C-level execs from both organisations and possibly from outside.

If Oracle + Siebel is not to equal long-term value destruction, then both companies clearly have work cut out. Now is probably not the best time to be a Siebel customer, but excellent post-merger integration could change all that.

Graham Hill
Independent Management Consultant

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Gwynne Young
Managing Editor, CRMGuru.com
Member

Posted 13-Sep-2005 09:11 AM

[Posted for Michael Lowenstein, Customer Management Center of Excellence, GfK NOP]

At the end of the day, this appears principally about Larry Ellison's laser-like focus on keeping Steve Ballmer and Bill Gates marginalized in the software and database elements of CRM along with, for good measure, a backhanded slap at Marc Benioff of salesforce.

Siebel will quickly become a vague memory. The final score: Ellison everything, Siebel customers ? .

I've commented before, I think, on the analogies of the effects of Ellison's CRM orchestrations on customers to Frank Norris' 1901 novel, The Octopus. The novel's theme was how the California railroad monopolies were driving wheat farmers out of business by constantly increasing the prices of short-haul and long-haul wheat transportation services as they took over more and more independent rail lines.

It was a book about the social evils of capitalism. Railroads had an octopus-like strangle-hold on the farmers, caring only about own profits, little to nothing about the fate or fortune of customers.

From my perspective, the comparisons to the Siebel purchase are clear. Increasingly, CRM customers are finding less and less choice; and, through no fault of own, they are left to the devices and choices of Ellison who, increasingly, moves through the customer relationship management world like the ancient Samurai lords he so admires.

Michael Lowenstein, CMC
Senior Vice President Customer Management Center of Excellence
GfK NOP

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Gwynne Young
Managing Editor, CRMGuru.com
Member

Posted 13-Sep-2005 03:07 PM

Major CRM players are reacting to the proposed acquisition. CRMGuru.com received the following release from Onyx Software with comments about the deal by Onyx Chair and CEO Janice P. Anderson. Here, with permission of Onyx, are Anderson's comments.

"Oracle's acquisition of Siebel seems to be based on the premise that customers want fewer choices, rather than more. We're finding just the opposite. Many enterprise customers are looking to increase business value with solutions that easily leverage existing IT environments.

"Mega-vendors tend to integrate within own product suites and not with the diversity of processes and systems that customers have to deal with today.

"Many customers don't want to buy another massive solution suite in order to advance business goals. In general, we believe enterprises prefer flexible solutions that enable business agility in the face of dynamic market conditions as well as integrate existing investments quickly and cost effectively," said Anderson.

"Onyx has had success listening to enterprise customers and delivering solutions that are flexible and powerful enough to address biggest challenges, whether it's increased competition, regulatory requirements or changing customer needs," Anderson continued. "We believe this acquisition announcement is a catalyst for enterprises to re-evaluate existing Siebel Enterprise or PeopleSoft CRM implementations."

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Bob Thompson
Founder, CRMGuru.com
Member

Posted 13-Sep-2005 03:25 PM

This closes a chapter in the CRM industry, but let's remember that CRM did not start with Siebel, and it won't end because Siebel's customers are served under a different brand.

Business strategy is not just about customers. Give Ellison his due, this deal makes sense for an industry that's consolidating, and buying Siebel pre-empts potential competitors (IBM, Microsoft, SAP, or even Yahoo!). In software, size does matter.

And the investors/owners of Siebel apparently lost patience. Who can blame them?

Remember when the banking industry was consolidating and everyone was wailing about lack of choice? Sure enough, customer satisfaction dipped for a couple of years. But the giants that emerged (e.g. Bank of America and Wells Fargo) have steadily improved. Life goes on.

I find it interesting that on the one hand some customers want integrated suites, including back office. I agree with Dick Lee that CRM is not just about the front-office. But, on the other hand, so-called CRM "point solutions" such as offered by RightNow, Salesforce.com, and Unica are doing quite nicely.

In the short term, I think this merger is more good news for SAP and the on-demand pioneers. But if Oracle can digest PeopleSoft and Siebel, in a few years this will be but a faint memory. And Oracle will still be big.

Some of the current crop of pioneers will no doubt be consumed by Oracle or another company trying to catch the next wave of innovation in enterprise software. That "no software" symbol that Salesforce likes to show could well be turned into a bulls eye for a hostile takeover. And that would bring another Ellison protégé back home.

Who knows, maybe that was his plan from the beginning.

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Bob Thompson
Founder, CRMGuru.com

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Posted 15-Sep-2005 08:41 AM

Think of the poor customers who've done considerable development using Siebel Tools. I assume Oracles "Fusion" plan is to keep Siebel's processes but re-deploy them somehow on Oracle's technology Stack. There's no way this will provide any upgrade path to the many cusomers who've done any development work during implementation!

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RichBohn
Member

Posted 15-Sep-2005 08:49 AM

In all the noise about Oracle's Siebel acquisition announcment, people are forgetting that Larry Ellison was also the co-founder and original investor in Netsuite. For my money, Netsuite is far superior to Siebel OnDemand (and, Salesforce.com, for that matter!) So, where do you folks see Netsuite shaking out in all of this?

Rich Bohn
Host, SellMoreNow.com

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Posted 15-Sep-2005 09:12 AM

The merger will work out. There will be cuts at Siebel, but key employees (product knowledge) will be kept. Let's face it—there aren't many alternative employers to run to these days in the software world.

Phase 1 will be to make lots of noise in the direction of the "fusion" vision of integrating all these components. This will never reach its full potential.

Phase 2 will be product rationalization as the modules with lowest number of users find that they are given the chance to migrate or stagnate.

Phase 3—about 2 years from now—there will be a big push to move as many Oracle customers as possible to the latest—rationalized—version.

There won't be much movement between SAP and Oracle (combined) customers. After all, most projects take a couple of years from inception to completion and are horribly expensive. There may be some losses during transition, but the game has now moved on from a short race to a marathon as the industry has matured.

In the interim, Oracle would be crazy to drop any "On Demand" or Salesforce.com killer type apps. This is where the fierce fight in the market will be in the interim. Any product and industry knowledge they can bring to bear in this space from Siebel will be where they can reap dividends.

I would also discount what Janice Anderson at Onyx has to say. Ask anyone who had to work with her during the disastrous set of CRM acquisitions that were made while she was GM at Lucent. Painful does not describe adequately the subsequent death-throes of the acquired companies.

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Gwynne Young
Managing Editor, CRMGuru.com
Member

Posted 15-Sep-2005 01:47 PM

Already, companies are positioning to try to capture unhappy Siebel customers. Salesboom.com, provider of hosted CRM, SFA, ERP and CLM solutions, announced it would offer 100 percent credit for the remainder of any existing contracts and free data migration services.

"Siebel OnDemand is unarguably a sinking ship as of this moment," Rami Hamodah, Salesboom president, was quoted as saying.

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Posted 15-Sep-2005 03:45 PM

I would not discount what Janice Anderson from Onyx has to say. Organizations looking for a Customer Management solution will want alternatives to an entire technology and application stack from a single vendor. The opportunities for software vendors who can scale to the enterprise level and provide strong integration capabilities will still exist.

One other interesting comment about the "noise" around fusion. Microsoft will be very dubious now about the Siebel product—remember it was always the Siebel strategy of fusion—to keep MS, Oracle and IBM happy.

Back on Janice—it seems she is doing a great job at Onyx—2 quarters of profits—and the Process Management (integrated or stand alone product XML web services) and Performance Management (leveraging Cognos ReportNet) suites are very powerful offerings in the CRM space.

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Posted 16-Sep-2005 09:11 AM

Um, regarding Janice Fan's post—that would be 1 quarter of profits—unless the post is a pre-release announcement.

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Graham Hill
Guru
Member

Posted 19-Sep-2005 12:06 AM

Before we get dragged too far into a pointless discussion about the success of CEO A vs. CEO B, it is good to remember that Oracle's acquisition of Siebel is really only a sideshow. It is a sideshow because it is about the hype-prone "CRM Business" rather than the much more down-to-earth and valuable "CRM in Business".

It is also good to remember that in the only three robust, independent studies of CRM to-date (by CRMGuru, Wharton Business School & Insead Business School), all showed that the choice of CRM software was NOT a critical success factor when implementing CRM.

So whilst the various CRM Business CEOs and ex-CEOs battle it out for superlative supremacy on the airwaves, the real CRM in Business will quietly continue adding value.

Graham Hill
Independent CRM Consultant

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Gwynne Young
Managing Editor, CRMGuru.com
Member

Posted 19-Sep-2005 09:27 AM

[Posted for Sampson Lee, President, GCCRM]

The New Game

The super premium-priced software won't be able to survive, anymore.

The History--Clients were taught and persuaded to pay sky high figures for a super CRM software, with all super functions and features embedded that were supposed to bring ultimate CRM Success. Software vendors used to have overwhelming power to influence the process, with the support of major consulting firms who acted as technology partners throughout the game. The loop is so well closed that who dares to tell enterprises they just see the tip of iceberg in CRM?

The Truth--We rarely found any successful cases that could justify millions dollars of investments on a single software. CRM success is never ever achieved by a single software, no matter how sophisticated or how complicated the software system is. It's an integrated set of efforts on one's Customer, Strategy, People, Process and Technology.

The Fate--Software vendors, especially those giants, won't be able to survive on old business models. They would either lower prices by launching so called "OnDemand" or using ASP platform, or they are going to bundle CRM offerings into whole software suite. But neither of them could improve the rate of CRM success.

The Change--Software vendors are no longer the captain or anchor. They are part of the loop but certainly not the foremost. The concept of upstream and downstream is going to change. Independent advice and professional evaluation parties take the lead. Consulting firms come into play, and enterprises will go for the ones who can really help them to work out a CRM solution.

But business opportunities are wide open.

If you are a Software Vendor--partner with others to complete the missing parts in the puzzle. Complement others who can add value for client's overall strategy, people and process.

If you are a Consulting Firm--redefine your positioning. Are you a system integrator or technology partner mostly? Work out a business model that can help you to sustain and help enterprises to success beyond software.

If you are an Enterprise Client--go back to basics. Take a look on where you are, where to go and how to get there in your own CRM roadmap. Make sure you set the track right before your marathon starts.

It won't be the same game, anymore. It's a new game.

Sampson Lee
President, GCCRM

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Posted 19-Sep-2005 03:06 PM

I think that what is being said here is that CRM is being commoditized. I wholeheartedly agree. As with any market where you have complex products that are also commodities (and there are many—especially in financial services), the role of the consultant will come to the fore.

One other issue—all the major CRM players used to use one particularly large club to beat customers to sign large contracts—the "bulk discount". i.e. buy a lot of licenses now and you will be able to get them much cheaper. As long as software is not a "service" this will be a problem. Roll on the service offerings as fast as possible please!

Also—I apologize for my comments re: Janice Anderson earlier. I hope I did not offend anyone—they were not intended to offend.

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Gwynne Young
Managing Editor, CRMGuru.com
Member

Posted 22-Sep-2005 04:18 PM

[Posted for Per Lind, CEO, The Little Mermaid Group]

Yes it is true that the demise of Siebel is very interesting, especially since I have come to celebrate my 10-year-plus row with Tom Siebel about why CRM was not the full meal deal. Where is the beef? you might ask!

Well, as CRM has only always been the way the company sees relationships with various stakeholder groups from point of view (navel gazing, if you will!), they have always missed out on the most important views, namely from the stakeholders into the company.

Now to the positive part. OpinionLab has now extended OpinionCollector into the Portable Document Format, so you can solicit feedback about anything you put into PDFs these days...and at last glance, that is quite a bit.

The refreshing thing is that the sender/author can get instant feedback and the reader can offer opinion the instant they think about what they are reading. How refreshing would that be when you read the online version of Harvard Business Review ...or your own newsletter (as O-Mail can be embedded into your email campaign or newsletter!)? Cool eh?

What is the point and why should you care?! Well first of all, leave Larry alone to deal with his digestion problem. He is bound to gag, and look at all the unique ways we are moving away from the CRM conundrum, anyway!