RSS feedsThe voracious appetite of Larry Ellison, chief executive of global software giant Oracle, knows no bounds. The latest addition to his growing portfolio – 10 acquisitions in the last year – is the $5.85bn (£3.27bn) purchase of customer relationship management giant, Siebel.
Almost a year to the day after US District Judge Vaughn Walker gave the go ahead for Oracle’s acquisition of PeopleSoft, Ellison has again gone shopping.
When the deal goes through Oracle will “in a single step”, as Ellison gleefully puts it, become the number one CRM applications company in the world.
Of course, the irony of his statement is that if Ellison isn’t careful his company will soon be the only CRM applications provider in the world.
Just days after the acquisition announcement, analysts Gartner released a research note on what it meant for the industry. “The acquisition could alter vendor composition in nearly half of the worldwide market share represented by the top 10 CRM vendors’ licence revenue,” the analyst said.
Based on 2004 estimates Oracle would move 3.5 percentage points ahead of SAP in terms of worldwide licence sales and gain approximately 20.9% of the total market share.
Perversely, however, the acquisition could stall the growth of the sector as current customers take time to work out their strategy.
Experts say that they could go a number of ways, but two are particularly likely: they could either jump ship to other vendors, or they could sit and wait for the integration to take shape. Either way Oracle loses in the short term.
Despite this, the acquisition is, on the face of it, a good one. Oracle will gain 4,000 applications customers and almost 3.5 million CRM users. Siebel will gain a fast-track into the lucrative European and South American markets.
But Siebel will take the number of CRM products that Oracle has in its portfolio to four – all of which must be supported. And while the president of Oracle, Charles Phillips, attempted to allay fears that support for some products may be scaled down by announcing a lifelong support programme for users of the company’s products, faint worries will remain.
Everyone knows that following a major acquisition a period of consolidation follows where potential efficiency drives are recognised. Four separate support networks, for four different product lines that do essentially the same thing, could certainly be seen to be inefficient.
Tom Siebel, the chairman of Siebel Systems, has no such worries, however. “Today is a great day for Siebel Systems’ customers, partners, shareholders and employees,” he said. “The combination of Siebel applications with the development capacity of Oracle to enhance our CRM product set assures our customers’ continuing success.” In the last point he is likely to be proved correct. Oracle has said it will make the features of Siebel CRM the “centrepiece” of its Project Fusion CRM, which is the company’s future software roadmap.
It is certainly very different from Oracle’s hostile takeover of PeopleSoft. Where Craig Conway, the former CEO of PeopleSoft, who was eventually fired during the height of Oracle’s takeover bid, would have preferred to stick hot needles in his eyes than sell to his old adversary, Larry Ellison, Tom Siebel has clearly taken a different view.
Whether he had his customers best interests at heart, or whether he saw dollar signs is difficult to speculate on, but clearly personalities did not have as much influence over the deal as it did with PeopleSoft.
Regardless of motivations behind the acquisition, one thing is certain and that is that the business software space is a very different beast than it was just a few years ago. Back then JBOPS was the term used to refer to the top-tier ERP market. It stood for JD Edwards, Baan, Oracle, PeopleSoft and SAP.
Three of those companies have now become one, a fourth has been swallowed up by SSA Global (now the third largest ERP vendor in the world, behind SAP and Oracle), which leaves only Oracle and SAP by name.
Much like the auditing profession has consolidated to such an extent that Grant Thornton is now a Big Five firm, the software industry is unrecognisable from what it was just a decade ago.
One can only hope that customers and users aren’t perplexed by the never-ending consolidation and understand how everything fits together.
