Oracle and Siebel: What Does It Mean for Customers?
Oracle in September prepped the industry for a tectonic market shift when it unveiled plans to acquire Siebel Systems for $5.85 billion. The deal, which is expected to close in the first quarter of 2006, will bring 4,000 customer companies to Oracle, making it the world's largest CRM vendor. While customers stand to benefit from the product line synergies and Oracle's financial strength, questions abound: What steps should current Siebel customers take to prepare? What are the risks? How should existing Oracle customers, especially those acquired by PeopleSoft and J.D. Edwards, proceed? Answers to these questions are not simple, but may not be as uncertain as they appear. Customers are basically left with three choices: commit to Oracle, wait and see, or move to something else.
For the Faithful Siebel User
Oracle CEO Larry Ellison has stated his intent to make Siebel's CRM products the center of Oracle's future CRM strategy, while continuing to enhance Oracle, PeopleSoft, and J.D. Edwards products. The 3.4 million Siebel end-users should be relieved by the promise, but analysts warn of potential pitfalls.
Siebel applications and technical support will carry over into the Oracle family, but Rob Desisto and Michael Maoz, Gartner vice presidents, predict that Oracle's "lifetime support" offer likely will service from version 7.5.3 onward, and that extended support for Siebel v. 7.8 will run out in 2013. In their research note on the topic, they advise customers to ensure they are on version 7.5.3 or later, providing stable support for the next three to four years. Siebel v. 6 customers may need to band together to strike satisfactory support terms with Oracle, according to the analysts.
"Do not expect significant enhancements to versions of Siebel earlier than 7.5.3, because you are using a product that is inferior to the later releases," they say. "The Siebel sales configurator and incentive compensation features, for example, are least likely to advance. This is consistent with Oracle's decision to only sell Oracle Sales Configurator and Oracle Sales Compensation to new customers versus the legacy PeopleSoft products in those areas."
The issue then becomes whether to upgrade Siebel deployments now or wait until things are more certain. The partial answer is for those businesses to adopt product upgrades where practical. "Don't put off product upgrades that make sense for your business based on acquisition uncertainties," says Bill Band, consulting analyst at Forrester Research. "Maintaining a current version will ensure ongoing support and leave options open for future upgrades and migrations."
Band also suggests proceeding with caution when it comes to things like hidden fees and contract language. "Customers should demand written assurances on support of existing releases if not planning upgrades," Band says. "Take the opportunity to protect against future maintenance price increases, because Oracle is likely to eventually standardize at 22 percent of net license fees for all products. Try to lock down maintenance fees, because by consolidating the market Oracle can hike those fees even higher." Band does not think Siebel customers are at risk in the short term, because Oracle is interested in acquiring them. "Customers are in position to negotiate," he says. "Be proactive."
Siebel customers that move support to Oracle should ask contract lawyers to examine the Oracle lifetime support promise to determine what it means and whether it is sufficient for their business, the Gartner analysts say. "We have not seen a precedent anywhere in the software industry for any company to execute on time, simultaneously, against so many deliverables."
PeopleSoft and J.D. Edwards Customers
In January Oracle finalized a 19-month takeover battle when it acquired industry rival PeopleSoft. With the acquisition, however, came J.D. Edwards customers, as PeopleSoft acquired the company in 2003. If Oracle plans to align its CRM strategy behind Siebel's, what will happen to existing PeopleSoft and J.D. Edwards customers? Because Oracle will align its CRM strategies behind Siebel's existing product line, PeopleSoft and J.D. Edwards customers have more challenges, with the bulk of the concern going to J.D. Edwards. Oracle previously tried to resell Siebel products to its customers, but that didn't work for some, because Siebel's functionality is complex.
For those customers the best bet might be an on-demand vendor like NetSuite, RightNow Technologies, or Salesforce.com, because there are no complex installation requirements and they can be up and running quickly, according to Desisto.
Some Oracle products--sales configuration, incentive compensation plans, electronic commerce platform, and field service parts management--are likely to survive, but PeopleSoft has not received many upgrades other than some of Oracle's business intelligence features since it was acquired.
"PeopleSoft customers need to ask, 'Am I getting business value today?'" Desisto says. "If I don't need a lot of extra enhancements I could probably live on that platform for four or five years." Those that need capabilities not currently available should wait and look at Siebel's upcoming offerings. Or, they can prioritize needs of specific departments to focus on things like call centers or SFA and look at smaller best-of-breed solutions--Click Software, Entellium, Jacada, or NetSuite. "If an on-demand vendor can handle your issues with a minimal risk of capital investment and infrastructure, use them as interim solutions to let the market play out," Desisto says. Pivotal and Onyx are options for slightly more complex deployments, and SAP is the lone remaining large vendor to eye.
Many customers turn to SAP for ERP and Siebel for CRM systems. Some customers are asking if they should migrate to SAP altogether. The answer depends on the industry. Users should not expect as well designed a user interface from SAP for sales, mobile field service, marketing, or customer service during the next two years, according to Gartner. But industries like consumer packaged goods, energies and utilities, and manufacturing should look at speeding up SAP CRM extensions, because the company is strong in these areas.
Bill Wohl, vice president of product and solutions public relations at SAP, acknowledges that customers do not switch solutions easily, but they will have to change solutions anyway, and so are looking to weigh alternatives. "Companies don't operate in a vacuum," Wohl says. "Business needs change. Companies are very rarely, if ever, willing to wait. This is why the pressure is so great to evaluate what is [their] situation. Very few of them are willing to hold their system stagnant."
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