I spent the morning at the salesforce.com event, but much of the discussion in the hallways was about the implications of Siebel getting acquired by Oracle. Ray Wong, senior analyst at Forrester, categorized the acquisition as a battle about IT spending consolidation. Best of breed isn't where the action is anymore. "Enterprises want to rationalize who they buy from as well as licenses, integration and service costs," said Wong said. "Bringing Siebel into the fold allows Oracle to expand its footprint in verticals."
The challenge for Oracle now is to rationalize four sets of CRM products (Oracle’s own product, J.D Edwards, PeopleSoft and now Siebel). Bruce Richardson of AMR Research said that Oracle is the Computer Associates of the client/server world. In the 1980s and 1990s CA rolled up all kinds of companies in the mainframe space and other areas, developing a poor reputation for some products and service in the process of executing its acquisition binge.
Salesforce.com's Appexchange is a new do-it-yourself model, and represents where software is heading in the next decade, Richardson said. "What salesforce.com is doing with Appexchange is more in tune with Larry Ellison's vision of where software is headed than Siebel," said Richardson . He also said that SAP hasn't jumped into the hosted, subscription-based software space because the company continues to believe that there is another round of $10 to $20 million deals. Maybe Oracle's move will wake up SAP to changing business models. SAP has NetWeaver has similar capabilities to Salesforce.com but it is far more complex and costly for customers and developers.
Maybe Ellison bought the wrong company, but he has shown a preference over the last year for acquiring users rather than a new technology base. It's a land grab, but it is happening during a time when users are looking for less complexity. Oracle wants to be the vendor of choice, but it now has too many choices. Sorting out which Oracle CRM product for which customers will keep the sales force and customers in a state of uncertainty for a while. Oracle will likely steer customers to Siebel in the areas that it already has market leadership, such as the service industry. In any case, Siebel will be another distraction for Oracle as it gets on with digesting yet another big company, Richardson said.
At the same time, salesforce.com will continue its bottoms up approach, seeking to enter new application areas via its ecosystem of developers. Salesforce.com will help developer sell and market software through Appexchange, but I would guess that won't prevent the company from acquiring or building applications that compete with the development community.
Wong said the battle comes down to the strength of the partner networks. "The ecosystems will differentiate the vendors," Wong said. "The trick is to build an open source-like network without being open."
Salesforce.com CEO Marc Benioff quipped that with all the CRM products, Oracle is building "Cold Fusion" (Project Fusion is Oracle's future product platform). Benioff said he interviewed the architect of Oracle's Project Fusion recently and asked how the company was proceeding, and he said he had no idea. I'll bet that architect is clearing out his or her office at Oracle.