In-Depth

Oracle Ratchets Up the Pressure on SAP

Oracle can now lay claim to best-of-breed database, HR, CRM, and analytic software in its fight with SAP

• By Stephen Swoyer
• 09/20/2005

Will they or won’t they? Last week, Oracle Corp.’s on-again, off-again scheme to acquire customer relationship management (CRM) giant Siebel Systems Inc. finally became a reality, dramatically altering the enterprise applications landscape.

It’s difficult to overstate the importance of Oracle’s move, however. For one thing, the Siebel acquisition makes the database giant the number one vendor in the CRM space—but that’s just the beginning.

That’s because it also ratchets up the pressure on arch-competitor SAP AG, which must now contend with a bona-fide behemoth in an Oracle that has successively digested PeopleSoft, J.D. Edwards, Retek, and Siebel. As a result, CEO Larry Ellison’s company can now lay claim to best-of-breed database, HR, CRM, and (potentially) analytic software in its fight with SAP.

Oracle’s rapid ascendancy could also radically reshuffle the industry status quo in terms of vendor partnerships and strategic relationships. For example, there’s a good chance Oracle’s aggressiveness will encourage SAP to firm up its relationships with other giants in the database and technology services spaces. “Oracle already has a foothold in most of these [Siebel and SAP accounts] with its database,” says Mike Schiff, a principal with MAS Strategies, a Reston, Va.-based business intelligence and data warehousing consultancy.

Schiff, a veteran of the 90’s-era Oracle, notes that SAP and IBM recently notched a relationship to improve integration between the former company’s applications and the latter’s DB2 database. “It’s going to push that [relationship] even closer, because if you’re not using Oracle, the other engine is going to be DB2,” he says. “There’s a chance it could do the same thing for Microsoft, but everybody’s waiting to see what [Microsoft does] with SQL Server 2005,” he observes, noting that Redmond’s next-generation database is due to ship by the end of the year.

Of course, now that it’s finally a reality, Oracle’s $5.8 billion dollar coup has enormous ramifications for Siebel’s users and partners, too

For Users, Outlook Not So Glum

Given the contention that attended Oracle’s grueling PeopleSoft quest, there’s bound to be concern among Siebel’s sizeable customer base about just what’s in store. Ellison—who rarely hesitates to speak bluntly—initially said that Oracle didn’t even plan to resell PeopleSoft’s products, which predictably caused an uproar among PeopleSoft's customers.

By most accounts, however, Oracle has behaved as a model corporate citizen since it concluded its PeopleSoft takeover earlier this year. The company has pledged to continue to develop the PeopleSoft and J.D. Edwards product lines through several additional iterations; has announced support roadmaps that outstrip those that PeopleSoft itself announced; and disclosed an ambitious middleware effort (Project Fusion) to effectively integrate some of its own Oracle technologies with those of PeopleSoft and J.D. Edwards (see http://www.esj.com/Enterprise/article.aspx?EditorialsID=1367).

Indeed, the firestorm that erupted in the wake of Ellison’s remarks might even help to convince Oracle that it must do right by Siebel’s customers. The CRM and analytics spaces in which Siebel is a huge player aren’t exactly bereft of competition, after all. There’s also a chance companies such as SAP, Salesforce.com, and even Microsoft might help keep Oracle honest, lest a sizeable share of Siebel’s customers—and a large chunk of maintenance revenue—should depart for greener fields.

Oracle seems to have learned its lesson. The company has pledged to support Siebel’s CRM technology for the next several years. It also claims that the Siebel technologies will be the “centerpiece” of its own CRM strategy. “We will continue to sell PeopleSoft CRM [and] Oracle CRM, but Siebel will be the centerpiece,” Ellison averred.

It’s unlikely Oracle’s stewardship will be welcomed by all Siebel customers, however—particularly in shops that aren’t also users of Oracle's database software. As analysts Michael Maoz and Lee Geishecker noted in a Gartner Inc. research bulletin, Oracle isn’t exactly noted for the current state of its CRM service and support. “Oracle's development organization is not known for good support of CRM applications, and will require changes to keep Siebel's worldwide user base,” they write.

Both analysts believe Oracle will be true to its word and incorporate Siebel as the centerpiece of its CRM strategy: the CRM pioneer’s technologies could emerge as the blueprint for at least 80 percent of Oracle's next-generation CRM functionality by 2008, they say.

BI Boondoggle

Siebel has long been an indifferent player in the business intelligence space. Late last year, however, the company showed some signs of shrugging off its torpor, convening an inaugural BI Summit and reiterating its commitment to analytics (see http://www.esj.com/business_intelligence/article.aspx?EditorialsID=7244).

In this respect, says Wayne Eckerson, director of TDWI, the addition of Siebel helps refashion Oracle into a more-potent BI competitor, too. “The combination of Siebel Analytics and Oracle's business intelligence tools—which consists primarily of Oracle Discoverer and Oracle Reports—provides an end-to-end BI offering, even if they are not well integrated at this point,” notes Eckerson. “However, Siebel Analytics can provide the engine for Discoverer or Reports to run queries against, if desired, using SQL as a standard interface. Siebel Analytics uses Informatica under the covers to collect and transform data, so presumably the acquisition will enable the combined companies to leverage Oracle Warehouse Builder instead of Informatica and save money on OEM fees.”

The Danger for SAP

During last week’s conference call, officials said that many of Siebel’s customers already have Oracle in-house on the database tier.

Ellison’s company is notoriously competitive once it has its foot in a customer’s door—and therein lies the danger for SAP, some industry watchers say. After all, a staggering number of the German ERP giant’s customers also run Oracle on the database tier. A Deloitte consultant who spoke to us put the number as high as seven out of ten.

With the addition of PeopleSoft, Retek, and Siebel, along with its legendary database prowess, Oracle can position itself as a very credible alternative to SAP. “With what’s going on here, they could more effectively go after SAP customers,” Schiff agrees. “It’s a very clever move for Oracle. They’ve got J.D. Edwards, PeopleSoft, Retek, Siebel. And compared to what [Oracle] went through with the PeopleSoft One [acquisition], it’s like they’ve already proven they can do this [subsume a large competitor]. They’ve done it.”