Does the Oracle-Siebel Deal Hurt Overall IT Agility?

 
 
By Charles Garry  |  Posted 2005-09-12 Email Print this article Print
 
 
 
 
 
 
 

Opinion: The big question is whether vendors will be tying their future IT capability to essentially a single vendor.

The long expected acquisition of Siebel Systems by Oracle was finally announced today. Somehow I dont expect the same cries of despair we heard from all concerned parties when Oracle was going to acquire PeopleSoft. Perhaps the market had already seen this as inevitable. Perhaps PeopleSoft was just one of those beloved software companies that people hate to see go away. Perhaps enough people by now have actually used Siebels CRM software. All right, I wont go there.
Anyone that has followed Oracle like I have has been saying for years that it desperately needs to diversify its revenue away from the heavy dependence on the database. Database related software has accounted for almost 30 percent of Oracles total revenue and over 80 percent of its new license revenue while its application business has perennially brought up the rear contributing a mere 7 percent of total revenue.
Read more here about Oracle acquiring Siebel. The database business is simply not going to grow enough to sustain Oracle. That space is under constant pressure from larger diversified competitors Microsoft and IBM. They are also under attack from open source software companies like MySQL. Certainly charging more for database software is not likely to be a winning strategy in the future and you can only sell so many options on top of the database before people say enough already. So as Larry Ellison predicted, consolidated software stacks will kill the best of breed players. The consolidated stack is a mantra we have heard from all the major software vendors in one flavor or another. On one hand, users can now put the onus for integrating on the vendor and take it off their plate. Obviously, there will always be outliers that must be integrated but at least the big stuff is handled by the vendor. On the downside, best of breeders will lament the loss of functionality.
As for Oracle, they have announced plans for Oracle Fusion, a supposedly brand new application infrastructure built from the ground up on "open standards". Sounds good in the brochure but does it answer the questions that Siebel users are likely to ask. For example I was speaking with John Van Decker a former colleague and senior vice president and principal research fellow at the Robert Francis Group covering the applications space. He mentioned that "Siebel has a number of SAP customers. This deal places them in an awkward position. Will Oracles Fusion enable the CRM portion (presumably Siebels) to run as a best of breed?" Interesting question indeed. One that Oracle and SAP will both struggle with no doubt as these situations of co-habitation will occur rather frequently I would imagine. As for integration, I spoke with a CFO of a $20M customer service outsourcing firm who expressed this sentiment: "I tell my IT people to go ahead and integrate the order entry and CRM systems and anything else, just dont hook it into my financial applications. I dont want an individual order showing up automatically on my general ledger. I just dont trust the software enough and I believe the IT people forget sometimes that there is a people process that must also integrate with the automated process." So I guess users have a great deal of work ahead of them if the vendors want to achieve their vision. Certainly with consolidation comes less choice but will it force companies to be less agile as well. Essentially will an Oracle or SAP customer be tying much of their future IT capability to essentially a single vendor? Next Page: Speaking of agility.



 
 
 
 
 
 
 
 
 
 
 

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