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Siebel deal leaves CRM users wondering

In the wake of the news that Oracle intends to purchase Siebel for $5.85 billion, Siebel's customers are left to wonder about the long-term future of their applications.

In a letter to customers this week, Oracle president Charles Phillips wrote that it was not market share, not technology, not even ego that drove his company to offer up $5.85 billion for CRM market leader Siebel Systems Inc.

"This is a customer-driven acquisition," Phillips wrote. "Our joint customers have consistently recommended this transaction to both companies for over a year."

Time will tell if customers are the real beneficiaries of the deal, particularly Siebel customers who suddenly find themselves in the same boat as  J.D. Edwards & Co., PeopleSoft Inc. and  Retek Inc. customers -- suddenly gobbled up by the whale that is Oracle and its CEO Larry Ellison.

"This was a market share buy," countered Rob DeSisto, senior analyst with Stamford, Conn.-based Gartner Inc.

DeSisto sounded a cautious note for existing Siebel customers. For companies running Siebel 7.5 systems or later, Gartner recommends continuing down that path. However, companies on earlier versions need to look at the implications of moving off of support in the next three years.

"[7.5] was a big upgrade for Siebel," DeSisto said.

However, companies that have made the move to 7.5 can see the benefit of the acquisition. BT Infonet Services Corp., based in El Segundo, Calif., recently upgraded from version 7 to 7.5.3 of Siebel's order management application.

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"This is overall good news," Roger Morrell, vice president of IT, wrote in an e-mail. "Two world-class companies that both BT Infonet and our parent company BT have worked with in-depth coming together to realize even tighter integration of their platforms, will mean that the investment we have made to date is assured moving forward, and we can look forward to greater business benefit."

Siebel customers who have signed on with Siebel OnDemand, the company's fast-growing hosted offering, should consider switching to hosted alternatives until Oracle more clearly outlines its plans for hosted CRM. In a conference call Monday announcing the news, Ellison said OnDemand was a key motivator in going through with the deal and hosted CRM will be an increasingly important part of Oracle's strategy going forward. Further complicating the issue is the fact that Siebel's hosted applications are run in IBM data centers, no friend of Oracle.

The other clear motive for Oracle's Siebel bid was the maintenance revenues from Siebel's 4,000 customers, according to Martin Schneider, an analyst with New York-based 451 Group. The technology was an important addition as well.

"They needed something real for CRM, with a real market presence," Schneider said. "SAP is burning up the charts and winning a lot of CRM business, in North America particularly. With the PeopleSoft technology and with what Oracle had, that wasn't going to hold a lot of weight. They needed something to say we're serious about CRM."

The biggest benefit from Monday's news to SAP may be software buyers who were considering Siebel and may now back off, and customers who have SAP back-office software who may now be less likely to go with Siebel CRM, Schneider said.

Monday's move was expected by many industry watchers after testimony during the  Oracle-PeopleSoft antitrust trial revealed that Siebel had already been targeted by Oracle.

Todd Renaud, assistant vice president - integrated solutions for Security Service Federal Credit Union in San Antonio, a Siebel customer, wasn't surprised. He had once worked at Accenture under George Shaheen, the current CEO of Siebel Systems, and the man who  replaced Mike Lawrie after less than a year on the job.

"I felt he was brought there to prepare the company for sale," Renaud said. "To me, I'd look at the PeopleSoft acquisition as the barometer. If you're not using Siebel on Oracle platforms, long term you need to think about it. Maybe not, maybe Oracle knows they need to offer on heterogeneous platforms."

According to DeSisto, Siebel customers running on IBM's WebSphere or Microsoft's .NET technology should be concerned about how that will be supported in the future.

Yet Renaud wasn't concerned over his CRM vendor being acquired and trusted in Oracle's financial strength.

"Personally, the purchase is not anything we see as good as bad," he said. "They're paying a lot of money for this. Oracle and Larry [Ellison] are rich, but they're not going to throw money around for no reason."

Of course, it's not just Siebel customers who should be wondering what will happen with their product. Businesses running Oracle sales products may see their applications replaced by Siebel's more highly regarded functionality.

In the short term, expect Oracle's competition to offer migration programs to Siebel customers worried about the acquisition. Germany's SAP already has  one under way for PeopleSoft users.

Yet, there was no mass migration of companies away from PeopleSoft, Schneider noted.

"There's always small modules you can patch in and bolt on," Schneider said. "You can get a lot of life out of these large existing implementations. With PeopleSoft, it was kind of 'look at the business case and find what works for you.' Don't feel bullied."

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