Dissecting Oracle's Bid for Siebel

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The status of CRM legend Siebel has been the enduring question of the post-Oracle-acquisition-of-PeopleSoft era. I’ve been asked it a hundred times, and have tried to answer it at least that many. So now we know: Siebel is finished, relegated to that increasingly large industry sector known as “Oracle-bait.”

I have to admit I never thought Oracle or any other large vendor (SAP and IBM, primarily) would bother buying this ailing, and drifting, former juggernaut. It seemed a lot easier to just pick off the customers one by one as they figured out that connecting to their in-house Oracle or SAP suite was more important than running last century’s best-of-breed CRM product.

So I admit I was taken aback, again, by Oracle’s brashness. I should realize by now that Larry Ellison takes particular pleasure in bucking the common wisdom, and setting the industry on its ear. Which pretty much describes the initial impact of the Siebel acquisition.

There’s a lot of collateral damage assessment going on up and down the software industry – and the services industry as well – and it’s at least comforting to know that I’m not the only person, or company, quickly redrawing their software industry map as the details of the acquisition unfolds.

Setting SAP and Salesforce.com Scrambling

SAP and Salesforce.com are two of the biggest recipients of the “now what do we do” award. For SAP, it’s clear that nailing disloyal Siebel customers just got a lot harder. The suite-or-die strategy for luring Siebel’s 4,000 customers over (or back to) SAP looks a little less appealing now that Oracle is able to provide the suite Siebel customers have been dying to connect to.

Siebel customers, unlike PeopleSoft customers, aren’t likely to see a vast cultural divide between their old vendor and their new vendor, a divide that SAP has been successfully milking since the PeopleSoft deal was announced. In many ways Siebel specialized in out-Oracling Oracle, and if anything Oracle can exploit this tolerance of an uber-Oracle culture by simply being a kinder, gentler version of Siebel. That shouldn’t be too hard.

Meanwhile, Salesforce.com’s Marc Benioff, who woke up on the morning of his biggest-ever user event to hear the bad news, probably just finished his last comfortable night’s sleep for a long time. The suite-or-die imperative also exists in his market too, and with Oracle On Demand a serious contender in the software-as-service space, and with Siebel’s nascent On Demand initiative now under Oracle control, being a standalone hosted CRM vendor just got even harder than before.

Sitting squarely in the winner’s circle is IBM Global Services, which once again has found another good reason to love Oracle despite an ongoing, and increasingly marginalized, database and middleware competition between IBM Software and Oracle. The IBM connection, always in the background of Oracle’s recent deals, was squarely front-and-center on this one. (See IBM and Oracle: Love at First Fight.)

Easing Customers’ Options

But it’s Siebel’s customers who are really going to win. Unlike PeopleSoft, or any of the other Oracle acquisitions, this was a sale of truly distressed assets. Siebel has been in trouble for a while, and even the arrival of George “I am not an interim CEO” Shaheen earlier this year to take over from short-timer Mike Lawrie couldn’t put Humpty-Dumpty back together again.

The big question on Siebel’s customers’ minds – which was not “will I have to switch, but when” – has now been answered. Moving to Oracle may not have been these customers’ first choice, but now that Larry’s offering, it’s not a bad choice by a long shot.

In the final analysis, Larry has made it clear that he’s willing to do whatever it takes to be the No. 1 vendor in the enterprise software market. And by his own calculations, buying Siebel makes him No. 1 in North America, while still lagging SAP in Europe. And as with the PeopleSoft customer base, Larry will have to work hard to keep his new Siebel customers on board if the current reality is to remain fixed in the market.

But for the time being, Larry has served notice that if you’re not yet Oracle-bait, just wait a little while. This is more and more Larry’s software industry, and the rest of will have to learn to live with it.