Oracle, the 800lb gorilla of on demand

Oracle, the 800lb gorilla of on demand

Summary: Siebel CRM OnDemand combined with Oracle On Demand looks set to be a powerful force in the on demand sector.

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TOPICS: Oracle
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Following on from today's acquisition news, a successful merger of Siebel CRM OnDemand with Oracle On Demand ought to create a powerful force in the on-demand sector. Certainly, Microsoft and SAP's meagre efforts now look puny in comparison, to the extent that SAP is probably already taking a serious look at acquiring on-demand CRM vendor RightNow Technologies, rather than relying on its upcoming launch of a home-grown offering to get in the game.

What about Salesforce.com? Founder Marc Benioff has already given David Berlind a great quote about dinosaurs mating, and has written at greater length to his own staff, as David reports here. The timing of this announcement couldn't have worked out better for Benioff, with his company's annual Dreamforce conference in San Francisco this week giving him a timely platform from which to excoriate his new competitor, as well as giving lots of extra publicity to today's AppExchange announcement, which I discussed on Friday. He has probably been preparing his response to this widely predicted merger for quite some time already, and no doubt relishes the opportunity to take on his former employer head-to-head in the on-demand enterprise applications market.

I know that David Berlind has been suggesting that someone might step up and buy Salesforce.com, but I'm not sure that Benioff is ready to sell yet (although he might to the right buyer — Amazon, Google or eBay, for example). That doesn't, of course, rule out the option of a hard-fought hostile takeover battle against other potential acquirers, should anyone come along with the stomach for that kind of behavior.

Oracle boss Larry Ellison recognised the importance of the on-demand sector as early as 1998, and not only personally instigated the creation of Oracle On Demand (under its original name of Oracle Business Online) but also personally invested in both Salesforce.com and its smaller rival NetSuite. As David Berlind notes in his earlier posting about the Oracle-Siebel merger today, Ellison still owns a majority stake in NetSuite, but has less of a say in Salesforce.com, having departed the board several years ago once he realized Benioff intended to compete directly with Oracle for enterprise accounts.

It would be wrong, therefore, to dismiss Oracle's on-demand efforts as just so much SoSaaS (Same Old Software As A Service). Oracle has done more than any other established vendor to re-engineer its software to deliver hosted applications, and the Oracle On Demand team have fed back a lot of valuable requests to product development, particularly in relation to server virtualization (aka Oracle Grid). Siebel, meanwhile, although it started later, has been working hard to achieve the same, and claims to have invested more than $2 billion dollars into developing its own on-demand architecture.

In theory, therefore, putting those two units together ought to create a player capable of dominating the on-demand market. But of course there are quite a few practical and cultural obstacles to overcome first, so it's too soon just yet to write off salesforce.com and some of the other leading on-demand applications players (yes, there are others, even if SAP follows my advice above and removes RightNow from contention).

The first practical problem will be extricating the Siebel CRM OnDemand infrastructure from hosting partner IBM's data centers. (You can just imagine Ellison's views on the desirability of running on WebSphere and DB2).

Then there's the question of merging the two codebases. There's a fairly clear statement from Oracle's Charles Phillips in today's press release about the merger: "We will embrace Siebel's best-in-class CRM products and make the features of those products the centerpiece of our Project Fusion CRM." True to form, Oracle plans to port the features but not the underlying code. In following that path, it may miss out on some useful technology that has been put into Siebel's on-demand platform under the direction of Keith Raffel, formerly of UpShot, who I interviewed the other week, and drawing also on IBM's on-demand expertise.

The final stumbling block is a question of culture. Although Oracle has taken some strides in re-engineering its architecture for on demand, it hasn't done anything yet about its business model, which is still cast firmly in the SoSaaS mold. Oracle OnDemand customers don't pay an all-in monthly fee, the way Siebel CRM OnDemand or Salesforce.com or RightNow customers do. Instead, they buy conventional software licences for the applications they use, and pay monthly hosting and services fees on top.

The biggest test of how serious Oracle is about the on-demand software market is whether it regards Siebel's $70 per-user per-month pricing as one of those "features" it intends to become a "centerpiece of Project Fusion CRM." If it does, it has every chance of becoming a force to be reckoned with. But if it misses that opportunity, its size won't be enough to prevent it from getting sidelined from the mainstream on-demand market.

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Topic: Oracle

Phil Wainewright

About Phil Wainewright

Since 1998, Phil Wainewright has been a thought leader in cloud computing as a blogger, analyst and consultant.

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