Siebel Will Be 'Centerpiece' Of Oracle CRM Strategy After $5.85 Billion Deal

Oracle's acquisition is likely to send ripples through the application market, affecting competitors from Salesforce.com to IBM.



Oracle on Monday disclosed plans to acquire CRM-market leader Siebel Systems Inc. for $5.85 billion, a deal that brings together two of the software industry's largest business-application providers.

The proposed deal already has been approved by Siebel's board of directors, clearing the way for what should be a smoother closing than Oracle's long battle to acquire PeopleSoft, which closed last December. "This is dramatically easier than the PeopleSoft transition," Oracle CEO Larry Ellison said in a conference call to discuss the deal.

In the same way that Oracle was attracted to PeopleSoft for the large installed base of companies using PeopleSoft's human-resources applications, it's Siebel's base of 4,000 customer-relationship-management accounts and 3.4 million user licenses that are driving Oracle's bid this time. The CRM market is expected to grow to $10 billion by 2009, according to research firm IDC. Oracle and Siebel are responding in part to the rapid growth of competitor Salesforce.com and its hosted applications model.

If the deal goes through, Oracle will end up with three different CRM suites in its product portfolio. Oracle already sells and is continuing to develop its own CRM applications in an applications project called Fusion that's under way. In addition, the company continues to sell and support CRM applications formerly marketed by PeopleSoft.

Ellison said Siebel's CRM suite will become the "centerpiece" of Oracle's CRM strategy going forward. Oracle will invest heavily in continuing to move all of the features of Siebel's CRM suite to Siebel's smaller but strategically important on-demand offering.

Ellison disagreed with a questioner who suggested that some significant share of Siebel's customers are unhappy with their Siebel software. "They're certainly not complaining to us" about Siebel's software, Ellison said.

Siebel chairman Tom Siebel has given his blessing to the acquisition, pledging to vote his share in its favor. "What really brought this together was a shift in market dynamics," Siebel said. Businesses are no longer interested in buying best-of-breed applications and now want integrated suites from a single vendor, he said.

Oracle has been on an acquisition binge for the past year. Oracle and PeopleSoft signed a $10.3 billion merger agreement last December, capping a contentious 18-month takeover. Since then, Oracle has acquired or disclosed plans to acquire Context Media, i-flex, Oblix, ProfitLogic, Retek, TimesTen, and TripleHop.

The deal also means that IBM could be feeling increasingly boxed in by Oracle, which is making a habit of acquiring key IBM application partners. Last year it was PeopleSoft, with whom IBM had a number of development, service, and marketing deals. Now, it's Siebel. IBM offers Siebel's CRM software on a hosted basis through its Global Services arm. It also has teamed with the ISV on government projects and a number of big services engagements.

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