Siebel develops CRM (customer relationship management) software. The company has about 4,000 application customers and 3.4 million CRM users, according to a statement released Monday by Oracle, of Redwood Shores, Calif.
The acquisition of Seibel is the second largest Oracle has undertaken. After an 18-month hostile battle throughout 2004 to acquire ERP (enterprise resource planning) rival PeopleSoft Inc., Oracle succeeded in taking over PeopleSoft last December. Oracle paid $10.3 billion for PeopleSoft.
As part of the PeopleSoft acquisition, which included midmarket ERP vendor J.D. Edwards & Co., which PeopleSoft previously had acquired, Oracle embarked on a major overhaul of its product lines. Dubbed Project Fusion, the effort will combine the "best of" functionality from the Oracle E-Business Suite, PeopleSoft Enterprise and JDE Enterprise One suites.
Oracle will take a similar tack with Siebels CRM applications, according to the company. "We will embrace Siebels best-in-class CRM product and make the features of those products the centerpiece of our Project Fusion CRM," said Oracle Co-President Charles Phillips, in a statement.
Phillips said that Oracle and Siebels joint customers have "consistently recommended" the transaction. A majority of Siebel implementations run on Oracles database.
Unlike the PeopleSoft acquisition, however, its unlikely the Siebel deal will engender much rancor. The addition of Siebels software would be more complementary to Oracles offerings, of which CRM plays a relatively small role to date. Siebels board of directors has voted in favor of the transaction, and the companys founder and CEO, Tom Siebel—a former Oracle executive—has agreed to vote his shares in favor of the acquisition, according to Oracles statement.
The acquisition meets Oracles two key criteria for large deals, according to Larry Ellison, Oracle co-founder and chief executive: Its immediately accretive—for the full fiscal year of 2007 Oracle expects to make more money on a pro forma basis from the acquisition—and its strategically sound.
"This makes us number one in markets in which we already participate," said Ellison, during a conference call Monday with analysts and press. "Oracles acquisition makes Oracle number one in sales and services in North America, and also strengthens our goal of becoming number one globally."
Currently, SAP AG is the number one business applications provider in the world, trailed by Oracle.
The deal also strengthens Oracles relationships with two Siebel implementation partners: IBM and Accenture. Companies rely on strong system integration partner relationships to sell more software. But at the same time, Siebels relationship with IBM brings a familiar technology question to the fore: Which databases beyond Oracles, if any, will Oracle support with Project Fusion? Siebel is software platform agnostic—the next generation of its software currently in the works would be platform portable—so that users are not tied into any single infrastructure.
That will likely change with Oracles development of Fusion CRM, based on Siebels products.
"If you are a person who is trying to make an enterprise strategic decision—and Siebel was your decision—and youre not an Oracle shop, this could be a problem," said Michael Moaz, Gartner vice president and CRM research fellow. "Siebel is not saying, we are going to migrate over to the Fusion platform. If Im not an Oracle shop planning on building my future on the Oracle platform, this is only a tactical decision, one that will have to be revisited," when Fusion comes out in a couple of years.
Moaz also pointed out that Oracles acquisition of Siebel brings an end to the suite market.
"In terms of independent CRM suites, this is the last gasp of the suite market," said Moaz, in Stamford, Conn. "There are no more independents for large enterprises. Its going to be Oracle or SAP."