Best of Breed

By John Pallatto  |  Posted 2005-09-12 Print this article Print

He also said he didnt believe SAP would raise strong objections because its product line includes integrated CRM components. Speculation that Oracle and Siebel were talking about an amicable buyout have swirled since last March.
A number of analysts, including Richardson, expressed strong doubts that Oracle would spend billions of dollars to acquire Siebel after spending more than $10 billion to acquire PeopleSoft/J.D. Edwards.
Richardson said he reiterated this view to a financial analyst just 48 hours before the deal was announced Monday. A Siebel acquisition made more sense for Oracle than a PeopleSoft acquisition did a year ago, said Sheryl Kingstone, a CRM market analyst with the Yankee Group in Boston. "I would have preferred that it had happened sooner rather than later," Kingstone said. When the two companies failed to announce a deal in April, Kingstone said she assumed that it was unlikely that it was ever going to happen. Click here to read John Pallattos commentary on recent market moves by SAP to chip away at Oracles Project Fusion. "Oracle should have bought Siebel before it bought PeopleSoft," because Siebel would have provided best of breed CRM applications that it acquired from PeopleSoft, she said. "They really didnt need both companies. Siebel has a lot more strength in CRM. They are a leader in the industry and they have a lot more components, not just in customer service and support, but a marketing application" that is a market leader as well, she said. executives, lead by CEO Marc Benioff, were exultant about the news of the Siebel buyout, saying it provided further evidence of the success of the on-demand business model. "Oracle put Siebel investors out of there misery today. We have been doing that for Siebel customers for years," Benioff said in a statement to his companys employees Monday. "Oracles strategy is simple. Instead of innovating, buy as much installed software as possible, call it all Oracle Fusions, and make sure it uses Oracles database," Benioff said. This will also it to try to maximize the revenue it generates from maintenance, license fees and potential upgrades, Benioff said. To read Scot Petersens column examining the challenges Oracle faces in wringing real value for customers and investors from its buyout binge, click here. In this way, Oracle is following the same strategy followed by Computer Associates International Inc., which bought up a number of mainframe database and application companies to milk the maintenance revenue for as long as possible. However, Benioff suggested that this strategy will backfire because rather than keep paying maintenance fees, "customers will look for new solutions and new providers." Benioff also predicted that Siebels On-Demand CRM product would be an early casualty of the buyout because it is the result of a joint venture between IBM and Siebel and runs on IBMs DB2 relational database. "Oracle will kill it. Oracle does not sell DB2," Benioff said. Next Page: Solving the integration problem.

John Pallatto John Pallatto is's Managing Editor News/West Coast. He directs eWEEK's news coverage in Silicon Valley and throughout the West Coast region. He has more than 35 years of experience as a professional journalist, which began as a report with the Hartford Courant daily newspaper in Connecticut. He was also a member of the founding staff of PC Week in March 1984. Pallatto was PC Week's West Coast bureau chief, a senior editor at Ziff Davis' Internet Computing magazine and the West Coast bureau chief at Internet World magazine.

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