Oracle-Siebel Deal To Shake Up Enterprise Software Market

Solution providers say the blockbuster deal puts pressure on existing Siebel agreements with Microsoft and IBM. It also promises to be what Oracle is calling a "major beachhead" against ERP giant SAP.

Oracle Chairman and CEO Larry Ellison, for his part, played it cool in a conference call discussing the deal, claiming existing agreements to develop next generation Siebel products that work with Microsoft and IBM middleware will not be impacted. In fact, Ellison went out of his way to say the deal strengthens what he called Oracle's partner network including "IBM and Accenture."

"We've always been promiscuous from the point of view of technology," said Ellison, noting that Oracle will continue to support .Net, Microsoft's next generation platform, and Java, which IBM has backed heavily, as it builds its next generation Siebel product.

Touting Oracle 's next generation Project Fusion, Ellison said Oracle has always planned to build Fusion using the Java programming language, but at the same time had expected to fully support and operate with Microsoft's .Net environment.

Solution providers, however, argued that the deal will throw into question the Siebel agreements with Microsoft and IBM. "I am always skeptical of Oracle's claims particularly when they go out and buy a company like this, making them the biggest competitor to Microsoft and IBM in this market segment," said David Tan, CTO of Chips Computer Consulting, a 12-year old Lake Success, N.Y., solution provider. "Ellison has always been looking to compete against these guys. He views the CRM space as his to win. That is his his bottom line agenda."

"The first thing I thought of is Microsoft is going to have to change course with its relationship with Siebel immediately," said Tan. "I don't believe Ellison when he says everything is status quo. And if that is true, I can't see Microsoft and IBM dealing with their biggest competitor in this market."

As for SAP, Tan said, the deal is clearly aimed at making Oracle a bigger player in the midmarket against SAP. "Oracle has always had a tough time reaching midmarket resellers," he said. "That is one of the things this move is aimed at. By buying Siebel, Oracle becomes a bigger company overnight. It is obvious they are going after SAP market share."

Tan noted that Microsoft is the farthest along in working with midmarket resellers. He said Chips' midmarket sales will be up 50 percent to 75 percent this year powered by Microsoft Operations Manager (MOM) and Microsoft Systems Manager.

Ellison did not address whether Oracle would expand the Siebel partner network, which has been relatively small. The Oracle chairman, however, did say Oracle will have a "separate dedicated CRM sales force" in addition to the company's regular applications direct sales force. "With the addition of Siebel, it is very important," he said of the separate sales force. "We have so many more customers in CRM and a dramatically improved product that we will have a specialized CRM sales team pursuing this market separate from the rest of our applications sales teams and our ERP sales team.

Oracle Co-president Charles Phillips, for his part, left no doubt who was target No. 1: SAP. "The sales management at Oracle has been pushing for this for some time," said Phillips. "They see this as a major beachhead against SAP." Phillips said Oracle will detail more details surrounding the combination at OracleWorld next week in San Francisco and at Siebel's customer conference in October in Boston.

As for whether one time rival Siebel Chairman Tom Siebel will continue to work with Oracle, Ellison said he is not sure of the details but noted that Oracle has a contractual agreement with Siebel for a number of years. "We think one of the great assets is their many many years of experience in the CRM business and that experience is housed in their employees who we want to retain," he said.