Enterprise-Apps Market Squeeze

Some say that Siebel might want to rethink its strategy of staying within its market, however. If Oracle's bid for PeopleSoft goes through, even though PeopleSoft's board rejected the offer last week, "Siebel could buy J.D. Edwards. It would be an interesting combination because Siebel has been looking at ways to get into the midmarket," Shahnam Roche says. "They're looking for a way to compete with SAP, Microsoft, and Oracle." What Microsoft will do is anyone's guess, though some analysts say it also might look at J.D. Edwards if the PeopleSoft deal falls through, as it tries to build out its enterprise-applications strategy.

Regardless, everyone is closely watching what Siebel will do. "The big issue right now is going to be how Siebel responds and if it takes this as an opportunity to do something big," Shahnam Roche says. "Whatever it does will set the tone for the little vendors in this space."

Companies that provide call-center infrastructure--such as Aspect Communications, Avaya, Cisco Systems, and Genesys Telecommunications Laboratories--might also be on the prowl for midmarket players in the self-service and E-mail-management arena, such as Kana or Right-Now Technologies, Johnson says.

But odds are no one will acquire E.piphany Inc., which specializes in marketing-automation tools. "They've never gained market acceptance on sales and service products, and while there might be some synergies with other companies out there, the acquisitions we're seeing at the high end of the market aren't about capabilities, they're about installed base," Johnson says. "E.piphany doesn't bring that to [the table to] get larger vendors more interested." Interest in such an acquisition would come from vendors such as NCR Teradata, SAS Institute, or other large analytical software companies. "E.piphany has a history of acquiring companies and not leveraging them well, so they probably won't be out there making acquisitions themselves," he says.

One possible CRM merger: Pivotal Corp. and Onyx Software Corp. "One $125 million business is better than two $75 million businesses, and there's safety in numbers," Johnson says.

Bernie Campbell, VP and CIO at Sonoco Products Co., a $2.8 billion global industrial and consumer-packaging manufacturer, says the outcome is interesting only to the degree that it affects customer relationships. "I'm more interested in the stability and continued levels of customer satisfaction and customer support," he says.

While that may not be assured in every case, at least in the short term, many analysts say that having fewer vendors ultimately will be a good thing. "The net result is healthy, because you will have more stable companies and more secure companies," says ARC Advisory's Moore, "and companies will be better able to support the software for the long term." --with Eileen Colkin Cuneo

Illustration by IPS/Photonica
Photo of Siebel by Bloomberg/Landovs