Oracle/Siebel Systems

 

 

Synopsis

The biggest challenge with Oracle is where to start.  Siebel had a good business going primarily in the on premises market for CRM before it was acquired by Oracle, but the company also had the foresight to initiate an on demand product as well.  Now, as part of Oracle, Siebel people have a lot of things to figure out and the best advice may be to let things settle out for a couple of quarters.  Some things to look for:

Siebel ascendancy

Whatever you decide to call it, he former Siebel Systems is the primary CRM product in the Oracle barn.  The R&D investment in Siebel is truly large and Oracle will capitalize on it.  Together with Oracle’s ERP offerings, Siebel products when fully integrated will provide a formidable competitor for SAP.  SAP’s CRM market leadership is razor thin and helped by favorable exchange rates and SAP’s unique way of counting seats.  And on a cumulative basis the former Siebel has more total seats deployed than any other CRM company.  Oracle kept some good people from the Siebel regime to help run the new CRM group and we expect for them to continue (with Oracle’s blessing) executing on a plan that Siebel had built pre-merger.  The key will be how fast the new company can pull it all together.

On Demand

On demand might be the most worrisome part of the whole scenario.  On demand is Oracle’s future, and it is the future of the software industry.  What could lead many to worry will be how aggressively Oracle goes after this market in CRM.  We have seen SAP waste no time in announcing an on demand product which we believe is inadequate for numerous reasons, and we suspect the only reason for this action at this time was to attempt to re-balance the enterprise space.  Now SAP has an on demand product so its sales people can check it off in sales discussions, but the product is weak compared to Oracle’s which is one of the best in the business.  So the question becomes how aggressive Oracle wants to be in this sector.

Classic disruptive innovation theory suggests that companies like Oracle, SAP, and even Siebel, only get into these innovations in vain attempts to disrupt the market and that their true ambitions may be more of the bait and switch variety.  Why would one of these companies want to disrupt their revenue streams with an on demand solution?  The truth is they do not want that and if they can secure new customers with on demand and “upgrade” them later to “real” software, they will be happy.  The problem though is that the customers you attract with on demand really want that style of solution.  In the end, as a vendor you end up cannibalizing yourself so that others won’t have the opportunity.  SAP has not figured that out yet but we hope Oracle has and that they move as aggressively as possible in the on demand market.

Platforms

Another area where Siebel seemed more prescient than most was platforms, specifically, on demand application development that disrupts the markets of companies like Microsoft and Oracle.  Salesforce.com has made platforms the next thing, eclipsing even on demand and if Oracle is smart they will compete aggressively here.  Siebel’s component assembly solution sits the need in many respects but again the key will be whether Oracle reaches for this new market or is content to milk the on premises model a while longer.  The later path will be tragic. 

Conclusion

We think Oracle has a chance to take on SAP and many of the new comers and win if it exhibits a technology and marketing strategy that is bold and innovative.  Now that the company has bought up so much of the established enterprise vendors, it will be easy for new comers like Salesforce.com, RightNow and NetSuite to make headway.  The only way the Oracle will do that is to excel at their game.  There’s less concern in our minds about SAP at the high end of the market.  That sector will wither slowly, like the mainframe market before it.  We believe that even at the high end, companies will be looking for lower cost on demand solutions to enable them to compete with more nimble rivals.  It is time for Oracle to move into the on demand market in a big way and it has so far positioned itself to do so.  We’ll see soon if it has the gumption.